The Awesome Science of Chinonomics

Is the  blue-dress/gold-dress frenzy  officially over? Good. It was getting crazy for a moment. The way that photograph made people realize that "reality" is nothing more than a construct concocted in our brains opened the door to the collective realization that what we see is actually just an interpretation that allows us to function in the world. We see colors under different shades a different way (the "white" tile under the table vs. the "black" one to its right) because the brain gets confused between perceiving colors during day and night. The "reality" is that they are exactly the same color once you apply the same light intensity. This differentiation needs to occur in our brain; a  mental shortcut  happening in our left hemisphere (the one that connects the past with the present ) tells us that colors look different under the shadows, and shapes  our perception mechanisms to make better decisions in the environments we live in...

We live in an unstable world. The probability of what used to be thought as improbable is becoming more and more likely. The old definition of a statistical outlier as a "1 in a 100 years" event has morphed into the now famous " Black Swan " event. Using Didier Sornette 's term, " Dragon Kings " are now becoming more likely. Put it probability distribution terms, the distribution of all possible outcomes is becoming more bimodal (tails are "fatter", as shown in the graph below). It appears that reality is abandoning the familiar Normal probability distribution shape, depriving us of the standard tools we used to rely on to estimate the future. The comfort of saying that there is a 95% probability that an event will be within 2 standard deviations from its mean is gone, leaving analysts and futurologists clueless. Sornette (2011): Scaled Distribution of Runs of Gains (Right) / Losses (Losses) for 30 major US stocks.  Notice the f...