The Icarus Moment

March 21, 2018·5 comments·Money

Markets and politics respond to theatrical abstractions of reality so distorted that they've become cartoons. A single six-minute difference in estimated work hours triggered billions in wealth creation and destruction. Employment data systematically misreported by hundreds of thousands shaped electoral outcomes. The machinery that measures reality has become disconnected from reality itself, yet everyone knows this and acts on it anyway.

Wage growth numbers that drive trillion-dollar portfolio shifts rest on monthly variations in work hours that statistically cannot be distinguished from random error. For six years the variation was less than nine minutes per month. Yet hourly wage calculations depend entirely on this phantom data. The reported numbers bear no relationship to whether workers are actually taking home more money.
Weekly unemployment claims during the 2012 election were skewed toward "good news" with mathematical impossibility. The revisions showed under-reporting by hundreds of thousands, a pattern so biased that chance had virtually zero probability of creating it. After the election ended, the Labor Department suddenly decided to fix the methodology.
We've stopped abstracting nature and started abstracting the abstractions. Newton created models from real hawks. Now we model social influence from the abstracted principles of hawks. Models built on models built on models, each layer further from anything real, yet each determines what gets bought and sold and believed.
Everyone in the system recognizes the game is theater yet must decide whether to play it. Betting on actual wage inflation means fighting the narratives that move markets. Following the narratives means accepting you've abandoned reality. There is no winning position that doesn't involve alienation.
The system holds as long as confidence in the abstractions persists. Once that breaks, once the gap between the cartoon and the actual economy becomes undeniable, the fall happens fast. That moment is closer than most believe.

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inflation topic

notes from the field

Money

Comments

dan-smithover 7 years ago

I’m finding this style of writing and framing the market incredibly compelling having only found the site a few days ago. In regards to this blog in particular, I think I may have a few things I must add of note and/or in need of clarification on.

What happened to Icarus was unavoidable. I fail to see the use in telling any young person to not be Icarus. Such a suggestion implies ignorance is avoidable when it isn’t by definition.
I follow the cartoon characterization pretty well I think and see its use. I may have characterized this phenomenon via another term, “kayfabe” in similar contexts before.
By what means might someone employ to “short abstraction?” I’m interpreting this to say “capture the falling value of “abstraction phenomenon” that is going to take place in some near term future context.” I am fully onboard with “long volatility” strategy though for sure.
Bitcoin isn’t Icarus! Phoenix rather! I assume you prefer Gold. Also BTC not as dependent on Silicon Valley as far as I can tell you might be trying to imply but I think I follow the generally false “tech as always good future phenomenon” you may be trying to get at here.
Though I share your desire for employing more people with comparative lit-type backgrounds to the investment space, I don’t know I share your feeling that too much STEM is employed today. I think too many unqualified people claiming to have a stem background may be too prevalent in the space today though. Maybe you’re saying one section of this website is tackling the more narrative approaches while the other discretely tackles the more commonly known as quantitative. Very much an ongoing fan of this project regardless. - Dan

dan-smithover 7 years ago

Personally see issues primarily dealing with definition inconsistency/inaccuracy and inefficient resource allocation

amoliinger3almost 5 years ago

Dr. Hunt,
Would you please explain to an idiot what Blake is getting at. “could frame they fearful symmetry?” I know what symmetry is but have no idea what the guy is talking about. Should have stayed awake in that class.
“…I think a lot of people owe Jack Welch an apology.” Where did he come from? Please explain this comment.
I understand your points about hubris being the catalyst for collapse, not systematic bank failure. I think you really hit the nail on the head. Hubris and alienation make a disconnect from reality.
I don’t agree with Mr Schiltz’s comment below that what happened to Icarus was unavoidable. Icarus / youth suffer from hubris and push the limits, sometimes to their peril That seems to the point of the myth. Be careful in youth and listen to wisdom. It’s a warning. If it was inevitable, why tell the story?
I assume you mean by short abstraction companies that sell ideas, a world wide pizza delivery company rather than companies that sell something tangible, establish and essential, say oil, copper, software?
Greatly appreciate a response.

rechraumalmost 3 years ago

This note has three comments?!? A well-deserved and overdue bump then my dear sirs and madams! The Notes from the Field series feels more or less synonymous with my ET conversion story and I don’t think I would recognize the thinking of the person who existed before these notes came out.

@kendallweihe I wasn’t sure what note it was that came to mind during your comment today in OH but here it is. This seems like Ben’s OG Living Metaverse note several years before the metaverse idea came together in its own series. Language is dangerous in the nature by which it abstracts.

It seems possible that this is also the first introduction of Neb Tnuh…!? The link in this series between the abstraction embodied by Naming and Language with cartoonification and alienation imposed on us by Fiat World still sticks out in my mind as one of those early profound realizations that ET spurred in me.