Source: Frank H. Knight, Risk, Uncertainty and Profit (1921)
- Uncertainty is the inherently unknowable, impenetrable by increasingly refined analysis.
- The rewards of engaging with true uncertainty is the source and justification for entrepreneurial profits
- It is a mistake to treat induction and deduction as exclusive methods. Rather, both are insufficient and yet, both are required. Over-indexing to induction favors concreteness at the exclusion of principled reasoning. Over-indexing to deduction favors generalization at the expense of supportive evidence.
- Perhaps, one must realize the interaction between inductive and deductive lenses is endless & paradoxically stable only in its instability.
- Analogy is the animating force behind reasoning. The imprecision of analogy means that cold machine-like certainty is a ruse. At the same time, the imprecision is what allows for possibility, serendipity, and tail events (positive & negative).
- Despite the desire to reduce uncertainty, the irony is that our life would be far less appealing without it.
Implications for (My) Crypto Investing & Analysis
In crypto markets, my working hypothesis (inductively & deductively generated) is that there are essentially 3 choices I have *personally* confronted over time: (a) opt-out of the crypto market regime on grounds that it is too uncertain, (b) engage and delude myself with subtle self-righteous attitude to finding the “holy grail” or “Rosetta stone" (i.e., reduce uncertainty to atomic unit of calculable risk), or (c) engage and in a Wu Wei like fashion, "redirect" the uncertainty through humble heuristics and non-concentrated position sizing, combined with putting both skin and soul in the game. I choose c.
In crypto markets, my working hypothesis (inductively & deductively generated) is that there are essentially 3 choices I have *personally* confronted over time: (a) opt-out of the crypto market regime on grounds that it is too uncertain, (b) engage and delude myself with subtle self-righteous attitude to finding the “holy grail” or “Rosetta stone" (i.e., reduce uncertainty to atomic unit of calculable risk), or (c) engage and in a Wu Wei like fashion, "redirect" the uncertainty through humble heuristics and non-concentrated position sizing, combined with putting both skin and soul in the game. I choose c.
