Aug

31

George Pólya, from N. Humbert

August 31, 2025 |

George Pólya came up with the term Inventor Paradox.

Basically, if one thinks about a problem more deeply, something else may open up. And one can achieve extraordinary results! Plenty of examples in finance, engineering, medicine.

Steve Ellison writes:

From the Wikipedia link about the inventor's paradox:

When solving a problem, the natural inclination typically is to remove as much excessive variability and produce limitations on the subject at hand as possible. Doing this can create unforeseen and intrinsically awkward parameters.

Very interesting idea with applications in many fields. As one example, I recently told my daughter, who is a partner at Boston Consulting, that I was reading a book about strategy by a professor at Harvard Business School. She told me, "Boston Consulting literally wrote the book on strategy": Your Strategy Needs a Strategy.

I ordered that book and so far have read the first chapter. One of the key questions is how predictable the business environment is. Another is, how much can you influence the environment? "Classical strategy" as taught in business schools generally assumes that the environment can be forecast and that the company has very limited influence over it. A case study was the Mars candy bar company.

But if you cannot forecast the environment, a very different approach is called for, with heavy emphasis on learning and iterating. And if you can in fact shape the business environment, you might want to find some partners and create an ecosystem.

As a footnote, the book I was originally reading, which I also found informative, was by Richard Rumelt: Good Strategy, Bad Strategy.

Asindu Drileba offers:

Optimize the Overall System Not the Individual Components, interview given by Edwards Deming. Excerpts:

The results of a system must be managed by paying attention to the entire system. When we optimize sub-components of the system we don’t necessarily optimize the overall system.

Optimizing the results for one process is not the same as operating that process in the way that leads to the most benefit for the overall system.

Applied to markets:

- It's easier to do well on the S&P 500 index (the general market), than do well in a single stock (picking).

- Attributed Mark Spitznagel, we should judge the buying of far OTM puts based on how they help the entire portfolio. Not the individual PnLs of buying the far OTM puts.

- Attributed to Roy Niederhoffer, many traders turn off trading strategies once they start loosing money, but different trading strategies make money at different times.


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