Visualising why markets are not casinos
Spent the last couple of weeks trying to turn one of Taleb's ideas into something visual.
The bit I wanted to get across was the difference between casino-style risk (where the odds are known) and market risk (where you're trying to estimate the odds while they're changing underneath you). LTCM seemed like the obvious example to build it around.
I ended up coding the whole thing in Manim using historical market data, including plotting every daily S&P 500 return since 1950 and looking at Mandelbrot's cotton data.
Would be interested to know if people here think it captures the point, or if I've missed something important. Happy to be told where I've got it wrong.
u/Antifragilitee — 10 days ago