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The Game Of Thrones & The Game Of Markets
Submitted by Ben Hunt via Salient Partners' Epsilon Theory blog,
A few brief thoughts on an Epsilon Theory connection between modern capital markets and the NFL (and between Central Bankers and Roger Goodell). The connection is solipsism – a pathological egocentrism where reality is defined by an individual’s mental perceptions and constructs.
For individuals like Goodell and Yellen we’re talking about good old-fashioned individual solipsism. These are people who have never been proven wrong about anything in their professional lives. I know that sounds weird to professional investors and allocators, because we are demonstrably wrong about something every single freaking day, and it’s a hard concept to describe effectively to someone who’s never lived within a sheltered organization where empirical outcomes are either pre-ordained or immaterial. But both Goodell and Yellen have spent their entire professional careers as the modern equivalents of cloistered monks or nuns, the former within the Holy Order of the National Football League and the latter within the High Church of UC Berkeley.
It’s wonderfully pleasant to live within these worlds without external consequence, where your mental constructs and pronouncements receive constant positive reinforcement, but the inevitable result is that you begin to believe that your mental constructs ARE reality. Roger Goodell truly believes that everything he has done and announced, most recently his appointment of an “independent” investigator, is obviously the right and correct course of action, and he has no idea why these actions and announcements are being questioned. He has no idea why his world is crumbling. Similarly, Janet Yellen is not being disingenuous when she talks about her ability to control “macroprudential” outcomes. In her mind (and in the minds of everyone else in today’s academic Fed), these theories ARE reality. Drain the $5 trillion in banking system reserves without market consequence? Sure, we’ve got a theory for that. No problem. As Yul Brynner would have put it in Cecil B. DeMille’s “The Ten Commandments”: So let it be written. So let it be done.
For social constructions like markets or professional sports leagues or any self-contained social world, we’re talking about a different version of solipsism – collective solipsism. I’ve written about this idea in the Epsilon Theory note “A Dogmatic Slumber”, so I won’t repeat all that here. Collective solipsism is what overwhelming Common Knowledge looks like. It’s the annihilation of an individual’s perception of reality in favor of a group perception of reality. It’s an entirely natural reaction of the human social animal to certain strategic interactions, i.e., games. It’s what I mean when I say that we are at an asymptotic peak in the social influence of the Narrative of Central Bank Omnipotence.
When does collective solipsism fail? When does the story break? When it comes into conflict with a larger external social structure, with a larger strategic interaction. The collective solipsism of the NFL crumbles when it runs headlong into the larger political and social structure of the United States, which – amazingly enough – has 300+ million citizens who don’t play Fantasy Football, who have no idea who Ray Rice is, who listen to owners Bob Kraft or John Mara and think they’re from Mars, and who don’t hang on every word of THE Commissioner. But they’ve all seen or heard about the video. They all care about the larger issue of domestic violence. They all think they’re being lied to. And there are powerful political and economic interests in the larger game who see this conflict as working to their advantage. That’s when the story breaks.
The collective solipsism of modern markets is a much bigger game still, and will require a much larger shock and external social structure to unwind the Common Knowledge structure at the heart of all this. I can’t tell you when any of this will happen, but there are only a few social structures large enough to fit the bill. There is no more important task for risk management than monitoring those structures, and that’s what I’m trying to do with Epsilon Theory.
* * *
An invitation to attend a Salient Webinar I’ll be presenting next Thursday, September 18th at 2pm ET, titled: “The Game of Thrones and the Game of Markets”. I’ll be tying together various threads from past Epsilon Theory notes, with the goal of showing how to listen to financial news and analysts to detect Narratives. Please note that the presentation is geared for financial advisors, brokers, and investment professionals, and it qualifies for one hour of CFP/CIMA®, CIMC®, or CPWA® CE credit if you care about such things. Invitation attached and registration link here.
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bread and circuses
bitchez!
well, were starting to run out of bread...
people were starving to death in ancient rome...and still went to the games....when Aleric came to get his money for the pensions for his soldiers...which was promised, and not given...
well, i hope they budgeted paying for Cheneys 'independent contractors'...
It's all going down into the porcelain Thrown.
That's what she said.
I'm very upset. The title of this article promised some sort of Game of Thrones metaphor, yet no GoT metaphor was ever attempted. So I will propose one. A riddle.
A republican, a democrat and a libertarian are in room. A voter enters. Each asks the voter to eliminate the other two. Who wins and who loses?
Answer latter if anybody requests it.
350 MM people don't know 535 Feds but all they want is some responsible govt.....and EBT,
Israel wins -- America loses.
OK, I'll bite. Which one., Varies
Who wins: The bankers.
Who loses: Everybody else.
Who decides: Diebold.
Varys: So when Choomboy was elected who made him president? The democrats? Voters? Diebold? Or was it something else entirely which made the decision? And if the power actually doesn't reside with Choomboy, with whom does it reside?
Sarcastic Dwarf: I've suddenly decided that I don't like riddles.
Some of the ideas that Game of Thrones puts forth about the nature of power, loyalty, and morality are very complex. And Varys is the only character with any balls. Ironic isn't it?
I can stuff 4 olives in my nose...
That's very impressive. Maybe you should make a U-tube video.
Look at what is kept out of sight, to FOOL the people!
http://www.showrealhist.com/yTRIAL.html
http://www.showrealhist.com/RHandRD.html
Worse, these are the bastards that will be incharge when I'm old and fraile. I see another Hitler on the horizon that's going to suicide us all, cuz they love themselves..
According the to DC school system there already was another Hitler.
http://www.washingtontimes.com/news/2014/sep/10/dc-public-schools-homewo...
This only applies if they honestly believe what they say. I don't.
The far, far more crucial realization for any individual is to realize and truly believe that the only way to win, is to not play. Then to step away in whatever way possible, as if your life depends on it, - it does.
+1 Grin.
10mm; so much better than the .40Slow and Weak.
Speaking of the NFL between Ray Rice and JayZ women maybe better off taking the stairs from now on.
Someone please explain what is this deal with the NFL lately.
Rigged games aren't games, they are pantomimes or theater.
Rigged markets = economic theater.
His name was Robert Mueller.
Besides being connected to the NFL in numerous ways, thus reducing his credibility of being impartial ponder the following....
He was the guy in charge of the FBI's drone surveillance program, and when asked about it in congress was less then forthcoming.
Also, and most damning, was that he was the one Bush used to pressure the Joint Congressional Inquiry of 9/11 by having him launch an investigation on the staff of those involved in the Joint Congresional Inquiry.
That's right, the NFL hired one of the coverup-ers of 9/11, to be an impartial investigator.
Goodell is a moron.
If he had nothing to hide, and maybe he doesn't, but hiring Mueller is literally one of the last people should hire if you want it to seem credible.
Posted incorrectly. Sorry!