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Joe: Should Logic 101 be prerequisite for managing OPM?ĭisclaimer: No part of the analysis in this blog constitutes a trade recommendation. In my opinion, at least Logic 101 should become a prerequisite for all disciplines.īob: If "this time is different", then prices will continue rising. I was lucky I had some very good teachers in college but I also took a few courses as electives although they weren’t required.
There is not just one system of Logic but many. The more one studies Logic, the more evident its difficulty becomes. Logic is a hard subject with even counter-intuitive results. Maybe passing a test in Logic 101 should be a prerequisite for managing OPM. Unless someone has received formal education in Logic, due to the high entropy of natural language it is often hard to spot informal fallacies and even serious formal fallacies such as an affirmation of the consequent. It may be due to irrational exuberance due to excessive greed as before dot com bust. This is because rising prices has more than one possible antecedent and it may not be the case that this time is different. If prices are rising, the affirmation of the consequent is a formal fallacy. Prices are rising, so this time is different Unfortunately, this type of formal fallacy is also made by professional fund managers. I have some more details on this in Chapter 5 of my book Fooled By Technical Analysis.
The market is too complex to describe with an implication of this form. The formal fallacy arises because prices rising or falling has more than one possible antecedent. Prices are rising (falling), so this chart pattern works In the markets, this fallacy is frequently committed by retail traders using technical analysis in the following form: Affirming the consequent is a formal logical fallacy committed even by professional hedge fund managers.Īffirming the consequent, sometimes called converse error, fallacy of the converse, or confusion of necessity and sufficiency, is a formal fallacy …Ĭonverse errors are common in everyday thinking and communication and can result from, among other causes, communication issues, misconceptions about logic, and failure to consider other causes.
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