What if some people don’t learn from losing money?

I heard a belief on September 10, 2023 in Singapore:

~”When people lose money, they learn, they become more intelligent.”

And I thought – huh. That’s kind of neat. I want to believe that. Is that true? Why do I want to believe that?

I want to believe that it’s true because that would be awesome! It would mean diminishing returns for the wolves. Sure, a sucker is born is every second, but maybe a hundred are converted into skeptics every minute? If it was true, the world become progressively better. The population vulnerable to raiding, to fraud, to injustice, would be diminishing all the time. Sure, collectively, we would never get to zero, but it would approach some asymptote, and it would become progressively less lucrative to grift. Most wolves would go hungry. Wouldn’t that be great?

On the walk back through the air conditioned malls I thought about what would have to be true for that to be true.

Well, wouldn’t it have to be true that everybody is in a state to accept feedback? Losing money is feedback. And there are at least two states: you’re either open to receiving and integrating feedback, or you aren’t. You’re either in a receptive-integrative state, or you’re in a closed-reactive state. It’s possible that there are other states – that maybe they aren’t fused, or there’s a centre-state. I’m not sure. But, for the sake of simplicity, let’s go with two.

In my own internal world, I can feel myself flicking between the two states. Maybe you can too?

I tend to be in a closed-reactive state when I’m tired. And the awareness that I’m in such a state comes when I’m no longer curious about an inbound idea, and the complete lack of curiosity about anything else. I need some sleep and exercise to get into a receptive-integrative state. I need to do something incurious.

There are probabilities that inform whether at given second, I remain in a given state, or I transition to the other. These can be summarized as a state transition matrix. For instance, right now, as I write this, I’m closed off to the idea that the probabilities in that state transition matrix are static. They can be modified. If I get more sleep and exercise, then the likelihood that I both pop into the receptive-integrative state, and stay there, increases. Depending on how brutal the day was, I might go to bed in a closed off state, with the probability of 0.99 that I’ll stay there and the corresponding probability that I’ll pop into receptive is 0.01. These are nights marked by a reduced amount of reading.

When I wake up, the probability that I could pop into the receptive might be five times higher: 0.05. A one in twenty chance that in any given moment I’ll become open isn’t great. But there are a lot of moments in the run of a morning. And I’d like to be there all time.

Unlearning a belief is harder work than picking up a new skill or acquiring a new belief. Speaking only on behalf of myself, that organ in my skull likes to conserve energy. It takes effort to integrate feedback. There’s a reason why bias-affirmation feels great and dissonance feels awful. Bias-affirmation is rewarding because it’s energy efficient.

So, if we’re wired for energy conservation, then is the reactive coefficient is likely to be high for most people, most of the time? How many people are getting enough sleep, enough to eat, enough time to reflect, enough stimulus to be curious – to integrate feedback?

Alright, so you lose some money. You lose it playing craps. You lose it on a stock. You lose it meme coin. It doesn’t feel great. Are you in state to challenge your beliefs? Do you control your fate more when the dice are in your hands and you’re tossing them? Is it really in your best interest to buy a stock when its appearing a lot in your newsfeed and to sell it after a 50% retreat? What is it about hot neon pink that makes you want to buy a meme coin?

Loss hurts. It stings. It’s negative feedback.

What happens to our relationship with negative feedback as we get older? What happens to our relationship with negative feedback as we accumulate more of it in our squishy mass of fat riding in our skull?

Because when you were a toddler, you got a lot of negative feedback, didn’t you? Do you remember learning how to walk? Do you remember how many times you hit your head on the edge of the table on the way down? How many times you bashed your gums against the floor? How sore your knees were from all the times you heard your body slap against the kitchen floor? Probably not, right? You don’t dwell on any of that. You took the feedback and you updated your beliefs about your neck, spine, head, hips, legs, feet, and got on with it. And you probably don’t even remember a fraction of all the times your palms stung from falling. Do you really pay attention to any of those things anymore when you’re walking through a mall? Or are you thinking about how to write a sufficiently common experience that’s relatable and visceral?

I’m not sure what happens as you age and how it affects your relationship with feedback. When you’re young, you’re a sponge. You soak it up and you squeeze it out. Data goes in, data goes out. Water goes in. Water goes out. Sure, maybe you stain, but you’re still taking in more water. And then, maybe, you have to start squeezing harder? Maybe you aren’t as absorbent? What’s going on with that? Why do coefficients in the state transition matrix become more extreme? Why does avoidance increase?

So what if the sting of losing money isn’t enough to induce reflection, learning, and integration? What if it’s the opposite? What if losing money is an aggravator?

Isn’t it objectively absurd to believe that risking money on craps is just as bad as roulette because it doesn’t matter who is holding the dice or who is throwing the ball? Moreover, the houses’ yield on both games is high. Why are there suddenly these bets with weird odds on the table? Why do some roulette wheels have a 000 instead of just a 0 and a 00? Doesn’t anybody find that weird? It’s as though the games are designed to be stacked against us, but at the same time, give us some sense of control.

Isn’t it objectively absurd to believe that buying high and selling low is in your best interest? Why is there so much valence around some stocks and so little around others? What’s going on with that?

Isn’t it objectively absurd to believe that a yield of 1000% per year on staking…is sustainable…because the website has a lot of neon and it looks cool? Isn’t weird to lose your chicken tendies budget? Doesn’t it seem weird that the first instrument was based on trading, and then somebody came up with staking? Doesn’t staking require less attention? To who’s advantage is that? Doesn’t that seem weird?

And yet…these beliefs persist…in spite of people losing money over, and over, and over again. Controllability doesn’t change the real risk. Emotionality doesn’t change the real risk. Marketing disguising the true source of yield doesn’t change the real risk underlining to return. What’s going on?

It follows, then, that if there is some portion of the population, individuals for whom, cannot enter an open, reflective, receptive-integrative state to understand their own state transition matrix, then, they’re locked into closed-reactive? They’re doubly locked in because they can’t enter a state to integrate the feedback? It not only takes energy, but it hurts because you feel the pain. The pain can be alleviated by simply not thinking about. And alleviating the pain in a way that takes the least effort certainly seems like it is the path of least resistance.

My entrepreneurial side absolutely loves hacking paths of least resistance through the bush. I love that path in the value-add context. I don’t find it nearly as rewarding to imagine using variable rewards to incrementally separate people from their cash.

Wouldn’t it follow then, that all a wolf would have to do is simply repeat the last grift? Appeal to peoples’ sense of overconfidence by offering some degree of an illusion of controllability? Offer a path of laziness as something that is savvy? They wouldn’t need to introduce more extractive offers on the craps table? They could bark the same memes on reddit? They could repeat the exact same rhetoric about something something stablecoin and neon colour meme hodl meme gif the marketing? The wolf wouldn’t even need to learn to get better. They could just repeat it?

Well maybe not…maybe wolves need to be always open to feedback? Maybe the best wolves need to be open to feedback to thrive?

Because if there’s margin to be extracted, more competitors will show up. In fact, don’t more competitors will show up until the margin is gone? Is any new grift-innovation amongst the wolves indicative of more competitive pressure induced amongst new entrants?

If people don’t learn even when losing money, then it would certainly suggest, at best, a steady state society. It would suggest an ecosystem in which there is a group of people are hunted and a group of people that are hunting.

And it seems that it’s more likely that that belief is true. It’s as though there is some game by which, there are some who see the pattern, and want to protect people, and those that believe they have the right to hunt?

The worst part about that long walk back through the mall was drafting this post.

What I hope is evident is the effort over the years to write ever more clearly. To offer more examples. To take more time in chaining the ideas together. To make it more coherent. If I could imagine a way to be more explicit, I would.

And yet, even if somebody doubly-locked into a closed-reactive state understood each statement in this post, even if they understood every word, they still wouldn’t be able to update their state transition matrix.

It’s absolutely, completely, futile – as though trying to wake a coma patient by shaking them. No amount of manual stimulation is going to wake them up because the problem isn’t physical.

No amount of logical explanation of the state transition matrix is going to matter because the problem isn’t logical. It’s something else. It’s certainly emotional. But not exclusively. It doesn’t lie entirely in the confidence-over-confidence cycle, whereby failure and loss is re-branded as a success and manifests as what a reasonable outside observer might call arrogance. It’s certainly related to that. But that isn’t what’s causing the vulnerability.

The problem is related to the nature of consciousness, the sponge, itself.

And it’s absolutely wild.

The statement: ~”When people lose money, they learn, they become more intelligent.” is unlikely to be true for the set of all individuals. It’s likely to be true for some non-zero number. But, there’s some portion of the population for which, no amount of money loss will matter.