Suppose I start a fund that imposes a 1-day withdrawal lead time, and takes your money and invests it in the S&P 500 on day 0, but then reports the day 0 return as the day 1 return, the day 1 return as the day 2 return, and so on, reporting the return on day 0 as 0. This fund has a return which is a tiny bit less than the S&P, but is completely uncorrelated on a daily basis. It would, however, have an almost perfect correlation on an annual basis, and that's why you wouldn't invest in such a thing. If you only used daily correlations when deciding whether to put this asset into your portfolio, you would have been greatly mislead!

If you optimized for track record Sharpe ratio you would actually invest in this stupid fund. That TYPE of smoothing is worthless though!

EconTalk on regulatory capture and economists: http://www.econtalk.org/archives/2014/10/luigi_zingales.html

Incentives are important to think about, because getting incentives wrong can mean pitting another human against you, and by symmetry there is no telling who would win when that happens.

Immediate material gains are a part of incentives which are relatively easy to understand. What's discussed in this podcast under the label of capture is the fact that there are systematic influences that go beyond immediate individual gain. Regulators tend to come to sympathize with the regulated, because in their shared knowledge and social circles they are closer to each other than they are to the rest of us.

This is a very tasty idea when you think about how any ideology can interpreted as capture. To be ideological is to have an opinion based on a framework, more so than on objective data. Often this is the right thing to do, because data is too noisy in individual cases to be leaned on too heavily (http://xkcd.com/1132/).

I think the solution is not to try and be neutral - that is impossible. Rather, we should declare our roles in order to detach our egos from them. We do so by speaking in such manner, for example about Uber:

• speaking as a libertarian, I think people should have the right to use whatever tools they want as long as it's a transaction between willing parties
• speaking as a consumer, I like that I can call cars that are cheaper than cabs
• believing in the rule of law, I think that Uber is violating the spirit of taxi medallions, and the state should step in to either compensate the cabs for a lost property right, or enforce those rights
• speaking as an anti-monopolist, I think that Uber is getting too powerful

It would be nice to have a list of these tropes, similar to tvtropes.org

As many of you know, I left Katong Capital as of May this year, where I worked with Yishen Kuik and Jeff Ma for the last 3 years. The statistics was fun, the infrastructure building was fun, and I have had the fortune to continue to do those things at my current job with Minus Inc.

I still greatly enjoy finance ideas, the same way I will continue to enjoy electronic structure. I also have a lot more to say about working in small partnerships now, hah. Ideology, can't live without it, can't live with it - it can be difficult to diagnose insanity from the inside!