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5/31/2005
The Iceman, by Victor Niederhoffer

Oetzi the iceman was freeze-dried about 5300 years ago near Northern Italy and discovered by a German tourist on a walking expedition. A replica is in the Smithsonian Natural History Museum and the original in a refrigerator in an Italian museum. His clothes, with nicely layered grass with wood seams, show evidence of a tailor. Perhaps an ingeniously developed snowshoe or backpack is visible. His copper weapons, his bow and arrow, and his fire-making tools (including a flint, an axe and knife) show considerable ingenuity, use of mechanics, and know-how. His grain diet and many other wondrous aspects of his life have been reconstructed from the remains.

What would a similar reconstruction of a trader-analyst show if he were examined 5000 years from now? I can only speculate -- a book on candlestick analysis, some stochastics (with spurious moving averages), a price earnings ratio (without interest rates), a head and shoulders template, a protractor, perhaps a ticket to a seminar on advanced derivatives analysis, and a magazine story on Buffettology advising staying away from individual stocks because they were too expensive an the beginning of the 21st century, and shorting the dollar because of the trade deficit -- you fill in the blanks.

I wonder if we all will fare as well, as archaeologists recast the tools and know-how of traders of today.

Sushil Kedia replies:

5000 years hence might be roughly 20 times bigger a chunk of time than the roughly 250 years history that the exchange markets and organized trading has seen so far. Assuming that the growth function is a non-linear, arithmetico-geometric kind of function the degree of complexity in the tools of the trader then might at this moment appear like one which is not even captured in the most verbose sci-fi movies of our times. Letting imagination run loose for a while, here's my visual of Oetzi2005 in 2007:

1. The nano-computing devices being in vogue by then and ones that would be embedded in the palm-tops (may be thumb-nail-tops by then) that might be soliciting mega-servers scattered in distant corners of the universe with less lethal versions of gamma-ray-type connecting carriers would still be driving delight on the archaeological find from the huge desk-top size servers being accessed by the laptop in the hands of the Oetzi2005.
2. The debate about history being created by victors or not existed in 2005 AD would be accessed from one of these digital archives connecting to reverse engineer the architecture of the laptop so found and a reference to Mr. Sogi's argument on recency being found so valid even then would cause the archaeological find to drive further excitement. For the debate would still be relevant. Because despite the development of all tools in 2005 like the fax and the SMS devices becoming absolutely cheap then even in 7005, "The public would always remain behind the form." The relevance of the Fifth Discipline being still there in 7005 would be exciting then that the dilemma was identified as long ago.
3. Returns would still not be sought without assuming some risk then and the discovery of scanned pages from the Prac Spec on the hard disk of the laptop would corroborate the understanding of the man of 2005 to have caught the idea sufficiently early. Man would possibly till then be living with the equation that, Certainty = probability + uncertainty and will continue to debate the degree of accuracy in the philosophy in the equation above being contradictional to the very definition of uncertainty. Language that would continue to have the same limitations as have been identified by now would make Oetzi2005 a great find in 7005 proving that the debate existed at least 5000 years ago, but even in those times as in 7005 there will be doers who continued to operate while there would still be skeptics who would chose to abandon doing in the absence of a certain idea of uncertainty. The Oetzi2005 find would corroborate further that it is in doing that all the difference exists.
4. The Rolex on the wrist of the Oetzi2005 and the Gucci adorning his feet would still confirm the prevailing theme in 7005 that perception drives value and that issues like need, want, reality is different for different people. Branding and super-value would be found then to be ideas that are 5000 years old. The voodooistic "world's number 1 trading system" rankings of 7005 would find their origins and confirmations from the Rolex and the Gucci. Value being different for different people making the same price attractive for buying and selling for two different traders would be confirmed from a "trans-planetary-debate" on the possible implications of the Rolex and the Gucci names printed respectively on the two objects and certainly a credit-card slip payment found in the coat-pockets of the trader would confirm the perceived value of the same because two different cards, each exhausting the remaining credit limit from each of the purchases would corroborate that.
5. A voters' slip would possibly be found on the Oetzi2005 proving again to the archaeologist in 7005 that the struggle to control the creation of money is at least 5000 years old and not a recent phenomenon of the 7000s.
6. The under-garments of Oetzi2005 with markings such as, "Made in China, Child-labor free, 100% natural" would corroborate to the mankind of 7005 that emotion sells and that scarcity motivated purchase decisions than any advantages of natural ingredients and that global trade had 5000 years ago achieved such glory to have been able to incentivize the manufacture of under-garments in one corner of the globe, labeled in another and sold in yet another.
7. A compilation of e-books on a CD spanning from the Hebrew Kaballah to Buddhism on one hand and from Japanese Candlesticks to Statistical Inference on another would be in addition to a detailed psychometric testing report on mind-body profile ensconced on a dat-tape would prove beyond doubt to the audience sitting before a blaring C#BC even in 7005 that traders would allow themselves to be as confused and as bewildered as much as the % drawn-down tolerated by the risk-management desk of the hedge funds they work for right since 2005.
8. A post-it note affixed neatly inside the Oetzi 2005's wallet reminding about the deadline for the 'returns-finalizing' meeting with the tax-attorney, visit to the dentist and an over-due visit to the monthly get together of the Parent Teachers' Association meeting are all on the same day would confirm that time management is a challenge for the trader that is about at least 5000 years old.

John Bollinger responds:

Assuming our future archaeologist is a trader, I suspect he would recognize our tools and techniques with little problem. Technician, quant, fundie; all are concerned with the same thing, a proper understanding of the supply/demand curve. While our future observer might think our tools and techniques quaint, they'll be facing the same challenge we face and would likely recognize a kindred spirit. Perhaps he might even find our work of interest, much as we draw inspiration from past masters.

Kim Zussman responds:

Also interesting that Otzi was evidently murdered. Detailed scans reveal a flint arrowhead lodged in his shoulder, so he probably exsanguinated or died of infection. Maybe a margin call?

James Sogi responds:

Modern technological changes are small steps compared to the ancient technology of agriculture, fire, stone blade, metal, wheel, clothing. The phenomenon of recency magnifies recent developments.

Consider that human capital is the amount of production of one person in excess of subsistence. Consider the growth in productivity over the ages combined with the population explosion since Oetzi's time, and its no wonder that the course of human existence is bullish. Growth should parallel the rate of productivity growth and population growth. Until one cancels the other world growth should continue unabated over the centuries.

Phil McDonnell responds:

A true archeologist would make the safe choice. As can be seen from hundreds of years of archeology the safe theory to explain dimly understood artifacts and structures is always to claim they had religious significance. The spurious cycles induced by moving averages could easily appear to relate to cycles of the moon and planets. The dark and light of candlestick charts would document the periods in which the forces of good and evil prevailed. Head and shoulders patterns are easily interpreted as tracking sunspot activity for some poorly understood religious purpose. A protractor would seem indispensable for calculations involving the conjunctions and alignments of astronomical bodies. There can be little doubt that the religious hypothesis would be the safe one for any future archeologist.

Although I believe the religious theory has been greatly overused in archeology simply because it is always safe and hard to disprove, nevertheless in the case cited above it would be the correct theory.

Thomas Miller offers:

In the future, there wont be any trace of these books and indicators with spurious moving averages. When enough people lose more money than "they have a right to," these "techniques" will be thrown away, replaced by the next "holy grail." Future archeologists will find evidence that successful traders, of our day and future, used scientific methods of counting and testing and the latest revelations in psychology. Some laws from physical sciences such as biology will be applied to investing, like they were applied to economics back in the day. Two books that will survive into the future are the Chair's books; his arguments will have been proven correct and finally accepted by the investing community. Don't ask me when this will happen.

5/31/2005
The Iceman, by Victor Niederhoffer

Oetzi the iceman was freeze-dried about 5300 years ago near Northern Italy and discovered by a German tourist on a walking expedition. A replica is in the Smithsonian Natural History Museum and the original in a refrigerator in an Italian museum. His clothes, with nicely layered grass with wood seams, show evidence of a tailor. Perhaps an ingeniously developed snowshoe or backpack is visible. His copper weapons, his bow and arrow, and his fire-making tools (including a flint, an axe and knife) show considerable ingenuity, use of mechanics, and know-how. His grain diet and many other wondrous aspects of his life have been reconstructed from the remains.

What would a similar reconstruction of a trader-analyst show if he were examined 5000 years from now? I can only speculate -- a book on candlestick analysis, some stochastics (with spurious moving averages), a price earnings ratio (without interest rates), a head and shoulders template, a protractor, perhaps a ticket to a seminar on advanced derivatives analysis, and a magazine story on Buffettology advising staying away from individual stocks because they were too expensive an the beginning of the 21st century, and shorting the dollar because of the trade deficit -- you fill in the blanks.

I wonder if we all will fare as well, as archaeologists recast the tools and know-how of traders of today.

Sushil Kedia replies:

5000 years hence might be roughly 20 times bigger a chunk of time than the roughly 250 years history that the exchange markets and organized trading has seen so far. Assuming that the growth function is a non-linear, arithmetico-geometric kind of function the degree of complexity in the tools of the trader then might at this moment appear like one which is not even captured in the most verbose sci-fi movies of our times. Letting imagination run loose for a while, here's my visual of Oetzi2005 in 2007:

1. The nano-computing devices being in vogue by then and ones that would be embedded in the palm-tops (may be thumb-nail-tops by then) that might be soliciting mega-servers scattered in distant corners of the universe with less lethal versions of gamma-ray-type connecting carriers would still be driving delight on the archaeological find from the huge desk-top size servers being accessed by the laptop in the hands of the Oetzi2005.
2. The debate about history being created by victors or not existed in 2005 AD would be accessed from one of these digital archives connecting to reverse engineer the architecture of the laptop so found and a reference to Mr. Sogi's argument on recency being found so valid even then would cause the archaeological find to drive further excitement. For the debate would still be relevant. Because despite the development of all tools in 2005 like the fax and the SMS devices becoming absolutely cheap then even in 7005, "The public would always remain behind the form." The relevance of the Fifth Discipline being still there in 7005 would be exciting then that the dilemma was identified as long ago.
3. Returns would still not be sought without assuming some risk then and the discovery of scanned pages from the Prac Spec on the hard disk of the laptop would corroborate the understanding of the man of 2005 to have caught the idea sufficiently early. Man would possibly till then be living with the equation that, Certainty = probability + uncertainty and will continue to debate the degree of accuracy in the philosophy in the equation above being contradictional to the very definition of uncertainty. Language that would continue to have the same limitations as have been identified by now would make Oetzi2005 a great find in 7005 proving that the debate existed at least 5000 years ago, but even in those times as in 7005 there will be doers who continued to operate while there would still be skeptics who would chose to abandon doing in the absence of a certain idea of uncertainty. The Oetzi2005 find would corroborate further that it is in doing that all the difference exists.
4. The Rolex on the wrist of the Oetzi2005 and the Gucci adorning his feet would still confirm the prevailing theme in 7005 that perception drives value and that issues like need, want, reality is different for different people. Branding and super-value would be found then to be ideas that are 5000 years old. The voodooistic "world's number 1 trading system" rankings of 7005 would find their origins and confirmations from the Rolex and the Gucci. Value being different for different people making the same price attractive for buying and selling for two different traders would be confirmed from a "trans-planetary-debate" on the possible implications of the Rolex and the Gucci names printed respectively on the two objects and certainly a credit-card slip payment found in the coat-pockets of the trader would confirm the perceived value of the same because two different cards, each exhausting the remaining credit limit from each of the purchases would corroborate that.
5. A voters' slip would possibly be found on the Oetzi2005 proving again to the archaeologist in 7005 that the struggle to control the creation of money is at least 5000 years old and not a recent phenomenon of the 7000s.
6. The under-garments of Oetzi2005 with markings such as, "Made in China, Child-labor free, 100% natural" would corroborate to the mankind of 7005 that emotion sells and that scarcity motivated purchase decisions than any advantages of natural ingredients and that global trade had 5000 years ago achieved such glory to have been able to incentivize the manufacture of under-garments in one corner of the globe, labeled in another and sold in yet another.
7. A compilation of e-books on a CD spanning from the Hebrew Kaballah to Buddhism on one hand and from Japanese Candlesticks to Statistical Inference on another would be in addition to a detailed psychometric testing report on mind-body profile ensconced on a dat-tape would prove beyond doubt to the audience sitting before a blaring C#BC even in 7005 that traders would allow themselves to be as confused and as bewildered as much as the % drawn-down tolerated by the risk-management desk of the hedge funds they work for right since 2005.
8. A post-it note affixed neatly inside the Oetzi 2005's wallet reminding about the deadline for the 'returns-finalizing' meeting with the tax-attorney, visit to the dentist and an over-due visit to the monthly get together of the Parent Teachers' Association meeting are all on the same day would confirm that time management is a challenge for the trader that is about at least 5000 years old.

John Bollinger responds:

Assuming our future archaeologist is a trader, I suspect he would recognize our tools and techniques with little problem. Technician, quant, fundie; all are concerned with the same thing, a proper understanding of the supply/demand curve. While our future observer might think our tools and techniques quaint, they'll be facing the same challenge we face and would likely recognize a kindred spirit. Perhaps he might even find our work of interest, much as we draw inspiration from past masters.

Kim Zussman responds:

Also interesting that Otzi was evidently murdered. Detailed scans reveal a flint arrowhead lodged in his shoulder, so he probably exsanguinated or died of infection. Maybe a margin call?

James Sogi responds:

Modern technological changes are small steps compared to the ancient technology of agriculture, fire, stone blade, metal, wheel, clothing. The phenomenon of recency magnifies recent developments.

Consider that human capital is the amount of production of one person in excess of subsistence. Consider the growth in productivity over the ages combined with the population explosion since Oetzi's time, and its no wonder that the course of human existence is bullish. Growth should parallel the rate of productivity growth and population growth. Until one cancels the other world growth should continue unabated over the centuries.

Phil McDonnell responds:

A true archeologist would make the safe choice. As can be seen from hundreds of years of archeology the safe theory to explain dimly understood artifacts and structures is always to claim they had religious significance. The spurious cycles induced by moving averages could easily appear to relate to cycles of the moon and planets. The dark and light of candlestick charts would document the periods in which the forces of good and evil prevailed. Head and shoulders patterns are easily interpreted as tracking sunspot activity for some poorly understood religious purpose. A protractor would seem indispensable for calculations involving the conjunctions and alignments of astronomical bodies. There can be little doubt that the religious hypothesis would be the safe one for any future archeologist.

Although I believe the religious theory has been greatly overused in archeology simply because it is always safe and hard to disprove, nevertheless in the case cited above it would be the correct theory.

Thomas Miller offers:

In the future, there wont be any trace of these books and indicators with spurious moving averages. When enough people lose more money than "they have a right to," these "techniques" will be thrown away, replaced by the next "holy grail." Future archeologists will find evidence that successful traders, of our day and future, used scientific methods of counting and testing and the latest revelations in psychology. Some laws from physical sciences such as biology will be applied to investing, like they were applied to economics back in the day. Two books that will survive into the future are the Chair's books; his arguments will have been proven correct and finally accepted by the investing community. Don't ask me when this will happen.

More writings by Victor Niederhoffer