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The Draft Copy of My Theory of Everything

November 18th, 2012 by dimpledbrain

The following are three broad concepts that I have been toying for some time now and I think it’s just timely to combine them into a bigger piece of framework:

(1) The Objective Reality

  • Can our perspective of a chair shed light to the objective reality of what a chair really is?
    • The common sense perspective will give us an idea what a chair is, successfully differentiating it from say, a table.
    • The physics perspective tells us that at the quantum level, the chair is nothing but atoms which are also made of of almost nothingness and somehow at a mysterious level, the atoms transfigured into this chair I’m staring at.
    • The chair in our mind’s eye perspective will individually give us a mental image of what a chair is (and each of us will have a slightly different image of a chair)
  • The question then is can any of these perspectives shed light to the chair as it is in itself, i.e. the objective reality?
  • My faithful readers will recognize where this is heading, i.e. the ultimate question every man must decide for himself or herself, does God exist?
  • Indeed as it turns out, this has more far reaching implications, more that what I initially suspected.

(2) Karl Popper and the Unity of Science

  • The main difference between natural sciences and social sciences is that in the former, natural phenomena, once theorized, will continue to happen regardless of what everyone thinks. E.g. the natural science theory ‘the sun rises in the east and sets in the west’ will always be true regardless of what you and I think.
  • But in social sciences, theories about human behaviour can and do influence human behaviour. This is what makes it hard to generalize. So when Karl Popper proposed that the same standard of natural sciences be applied to social sciences, the distortion in reality creates a problem for everyone. Efficient market hypothesis is still taught in universities although it’s wrong in all ways and what Buffett mocks as “Flat Earth Society”.
  • If you are still with me, I’m just wondering if the best way to theorize social sciences is to establish all parameters and to think in term of a swinging pendulum or a spectrum if you like, between two or more opposing ends. E.g. The Broken Window theory (click here for the post) will not be so broken through the passage of time, i.e. when the participants learn and modify their behaviour. The window of the explored delta will shrink through time.

(3) Randomness, Game Theory and Soros’ Reflexivity

  • The other thing that influences my thinking a lot is randomness. (click here for the previous post). Why do people see patterns in totally random events? (click here for the previous post).
  • A related field in my mind is game theory. What’s the optimal response when one party’s action is dependent on the other party’s action, only that we don’t know what the other party is thinking! (click here for the post).
  • And when I think that’s the end to it, I’m introduced to Soros’ Theory of Reflexivity that seems to be a natural extension of game theory. Reflexivity basically talks about the circular relationships between cause and effect. This is related to # 2 above, i.e. in social sciences, participants can learn and modify their behaviour and so invalidate the theory.

If you have watched Looper starring Joseph Gordon-Levitt, you may appreciate some of the points above. The movie offers powerful messages about thinking and reality and that reality is path dependent. To consolidate your thoughts on the above, you may also want to check out Godel’s theorem, Heisenberg’s Uncertainty Principle and Zip Lock Theory of History, i.e. ex-ante expectations and the ex-post outcome…

What’s the use of all these you protest silently? All the pointers above serve as a framework to the business of prediction, which I think will be or is the next big thing. Everything is about predicting or anticipating, from capital market to businesses. And we need a proper framework to do just that.

Sources/suggested readings:

(1) Point 1: The Fire in the Equations: Science Religion & Search For God by Kitty Ferguson
(2) Point 2: The Alchemy of Finance by George Soros
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