Ep. 820: Tell Me Something I Don't Know with Michael Covel on Trend Following Radio
Michael Covel's Trend Following
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The Importance of Overexploiting Problems
Many people tend to over explore. So they favor the new disproportionately over the best. The famous experiment in which this comes up was won by Amos Tversky and some of his colleagues back in the 1960s or 70s. It turns out that the optimal strategy in this case is I believe you make 38 observations in a row and then you blindly place a series of 962 bets on whichever light came on more at the beginning. This is not what people do at all. They are much more exploratory. And so there's a real opportunity there to ask well why is that? Is that because people are just stupid or misinformed or kind of poorly done? Are they designed by evolution
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