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RE: Certainty is an illusion in a universe of probability: 1 or 0
Decision making is a necessary part of life and the certainty of a decision to produce the needed result is based on the template used in it's analysis. Nothing is 100% certain in life but with the right analysis, we can choose the decision with the highest probability of success. Though, the analysis is where the work is in decision making and only a very few people will be willing to go through such stress. This is a well written piece. Thanks
A responsible person seeks to make the best decisions possible with the available information they have. The processes and methods of making precise decisions are quantitative rather than qualitative. That is to say that the numerical style of decision making is based on exact methods (mathematics). The problem I highlight in my post is that there is a time scarcity problem where to do a complex calculation might cost years while the decision has to be made in days. This means in many cases the cost of using the exact methods may outweigh the benefit.
To overcome this we have heuristics which are simple rules. These simple rules offer optimizations which work most of the time in most situations. So I used the example of rule: 1/N. This is an asset allocation rule which is super simple but also highly effective in practice.
Understanding of this rule has massive implications because it might provide insight onto the behavior of crypto investors.
References
Naive diversification
Naïve diversification is a choice heuristic (also known as "diversification heuristic"). Its first demonstration was made by Itamar Simonson in marketing in the context of consumption decisions by individuals. It was subsequently shown in the context of economic and financial decisions. Simonson showed that when people have to make simultaneous choice (e.g.