Narratives are often capricious: Do you think Bitcoin is a pyramid scheme, digital gold, or an alternative currency system?
Original Title: “On Reflexivity and Imitation|| Deribit Insights”
Written by: Matti
What is the difference between a game and a financial system? When will the game become real finance? Software-based speculation has swallowed the world, and the line between reality and gaming may become blurred. Imitation and reflexivity facilitate this process.
This article hopes to introduce several philosophical frameworks to readers in an interesting way and provide different analysis of the current market situation. The results of this investigation even surprised the author and need a new perspective to point out: this may be describing some form of oracle attack.
The first part introduces the basis of reflexivity and imitation theory, and the relationship between them. Readers may think this is an interesting thought experiment, discussing why in more detail:
- Some subjects are more reflexive than others.
- The amount of currency in the system affects the reflexivity of financial assets.
- Memes and markets are very similar – both compile information. They are both machines that reduce nuance, and there are contradictions between them.
- Consciousness tells the market how to move, and the market tells how to bend.
- Asset prices can be masked by memes; “prices become news 2 “.
- Assets subject to a high degree of reflexivity Simulation.
I want to use this poem by Lucretius to start thinking about the nature of things:
Nothing is set in stone, everything is fluid.
The pieces stick together; things grow because of it
Until we know and name them. gradually
They have melted and are no longer what we know.
Reflexive and reflexive assets
Soros believes that thinking has two functions:
One is to understand the world in which we live; cognitive functions or belief states of consciousness.
The second is to change the situation so that it is beneficial to us; to manipulate the function or the preference state of consciousness.
The two functions connect our consciousness and the world in opposite directions.
- In terms of cognitive function, reality determines the participants’ perceptions; the direction of causality is world → consciousness
- In the manipulation function, the intention of the participant has an impact on the world. The direction of causality becomes consciousness → world
When these two functions are running at the same time, they can interfere or interact with each other. The views of the participants influence the progress of the event, and the progress of the event influences the views of the participants.
The impact is continuous and cyclic; this turns it into a feedback loop. Therefore, there is the famous flywheel metaphor. Price drives desire, and desire drives price.
Anything that needs to be described, in addition to physical attributes, is a reflexive subject. Highly reflexive things require a narrative to be understood. In addition, reflective assets are prone to volatility because the narrative is often capricious.
Are you seeing shoes or coconut shoes?
Do you think it is a pyramid scheme, digital gold, or an alternative currency system?
Are you seeing a pre-planted scam or a world computer?
Let me demonstrate reflexivity with the following statement:
Bitcoin is a revolution. (Highly reflexive) → We will see that (expensive inquiry)
It’s raining outside. (Non-reflexive) → I can easily verify now (cheap exploration)
If I think Bitcoin is revolutionary, then the costs associated with verifying this statement include time, money, and perhaps other resources. The assertion about reflexive assets will take time to resolve. Such inquiry is costly because the results are inherently malleable.
And if I’m in a room with windows, checking my assertions about the weather is relatively simple. To judge whether my statement is true, you just need to reach out the window, which is cheap (and not malleable).
Memes and markets
In a recently circulated video, Jeff Bezos (Jeff Bezos) defined an information attribute with high potential for viral transmission:
- Eliminate nuances
- Add emotion (preferably conflict)
The above is the secret to creating successful memes. Memes measure the distribution of information.
Dawkins was the first to describe memes. He defined memes as an evolutionary aspect subject to the selection process, “expressing the concept of a cultural communication unit or a unit of imitation” (Wikipedia 4 ).
Memes have similarities with the market. The output of the market is also very concise. It appears in the form of price.
Both the market (Hayek term) and memes compile information by eliminating nuances and provide us with a concise output, a very special message. Memes are similar to price tags. Memes and markets are machines that reduce nuance.
Considering that they operate in a similar way and both help to expand the scale of information, these forces may be in competition. The output of the market will be physically limited (eventually). Meme just described, because the mold does not have a physical boundary 5.
In the context of market reflexivity-prices should represent the belief state of consciousness, and memes are more of the preference state of the consciousness category because they can distort facts or obscure reality. As Hasu 6 pointed out; in the oracle attack, the boundaries become blurred. Distorting market prices can trigger behavior in the real world.
Price is a coordinated data point that tells us the true state of the world. Although memes measure the distribution of information, they do not necessarily convey the true state of the world. This misrepresents the feedback loop. Preference to pretend to be a belief (just like real performance).
When does an asset (and its price) become a meme
Tesla is a meme. But $TSLA has the price.
$BTC owns the price. Bitcoin is also a meme.
When asset prices become memes, or memes become prices, a very powerful Schelling point is formed. Schelling point is the result of imitation.
What is the difference between meme and imitation?
Memes compile information to provide a concise narrative. Mimetism (discussed in detail later) describes the process of memetic replication; you want something because others want it. Memes spread through imitation.
Money printing and reflexivity
From a market perspective, the preference state of consciousness is an innovative mechanism. The belief state of consciousness is a coordination tool. Our assumption is that the two serve their respective purposes and should achieve a delicate balance in order to make the market and society function normally.
We coordinate through price feedback and create new things by introducing our preferences for the status quo. When we flood the market with money, we are actually launching an oracle attack.
As the monetary base expands, the central bank is distributing assets. The market has become more free to define what is desirable and valuable. In other words, when the coordinated signal becomes weaker or less precise, the output of the market is distorted.
Participants began to freely manipulate the world around them because it became more malleable due to lack of corrective signals. Memes replace prices.
When the output of the market becomes vague and the definition becomes vague or vague, we not only lose the ability to effectively coordinate, but also the ability to truly innovate. If we don’t know what we really need, how can we build what we need?
In this system, more soft currency allows us to expand the definition of things, and the desire aspect strengthens as the number rises. Desire and malleability are closely linked, without any basic factual signal, they can hijack consciousness.
Shoes have become coconut shoes, and $TSLA has become more than just a car manufacturer – the narrative aspect is more important than the surface value. The manipulative function of insanity leads people to yearn for things that become valuable on the market because of the lack of corrective signals.
When the number of soft currencies increases, people are willing to conduct more expensive exploration of highly reflexive assets. Intensified desire. The overwhelming state of conscious preference (over the state of conscious belief) gives market participants too much power to define what is desirable. So they allocate the money to reflexive assets.
$TSLA is almost unprofitable. Does it matter? Is it a car company? Is it a technology company? Is this a genius idea or a lunatic idea?
Do you see automakers, scams, or “the future”?
Ultimately, it is the sum of active observers that determines what reflexive assets will become. But physical limitations will come into play. Bitcoin has abandoned its original peer-to-peer payment network narrative because its (physical) attributes, such as low transaction speed, do not allow it to support this narrative.
As far as the market is concerned, soft currencies seem to exacerbate the reflexive effect. In a highly reflexive environment, the value of things is not what they are, but how good their memes are.
With more money, the vision will be projected into the far future, and few people care about what the future is. Many people (and money) care about what might happen. Memes blur reality and shape the vision of the future. The price becomes a meme.
Reflexive assets as a side effect of imitation
Gillard describes humans as lifelong children who long for toys that others have just picked up. People who cannot choose what they want, turn to others to find.
Gillard’s theory of imitation 7 points out that desire arises from the contemplation of others who desire something and assign them to others. Another person now thinks this object is desirable.
There is a triangular relationship between the following things (see the figure below): (i) the speculator (or subject), copy (ii) his desired model to obtain (iii) the object.
We imitate the desires of others, but when we all desire the same object, conflicts arise, because the desired object exists in subjective 8 scarcity. Therefore, the imitation of desire can lead to conflict.
People are polarized in what they are after. Once the body realizes that his desire to be imitated, his desire will deepen, triggering reflexive cycle 9. Conflict is a natural result.
The collective evil boiling beneath the surface requires a sacrifice-a scapegoat, to resolve the conflict. According to Gillard’s statement, people need a scapegoat and they killed with reconciliation to unite them 10.
The desire not out of need but out of insecurity will awaken greed. Many people will be greedy interpreted as the driving force behind the market’s 11, or the market interpreted as a productive way to tame the destructive greed of the system, this is not a coincidence.
How is imitation reflected in the market?
The market is a collection of desires. Think of the market as a universal model (in a triangle) that people can imitate. The reflexivity of assets is actually an incidental phenomenon of imitation.
From the perspective of fanaticism and imitation 12 to consider how to start-up companies to become ten horns 13:
- Some people have obviously crazy ideas, such as selling Basic to computer enthusiasts in 1975, or selling books online in 1994.
- They are frantically peddling this idea to investors and early employees-it is common for startups to give sales forecasts in the early stages, but rarely reach the initial numbers.
- The combination of investor funds and talent makes this idea less crazy, although still ambitious.
- On this basis, the founders raised more funds and recruited more talents.
- Over time, either because expectations are diluted and reality catches up, reality converges on these crazy expectations; or exaggeration becomes the only possible way to maintain the company’s survival. The founders continue to deceive themselves and others until they reach critical point.
Every step is affected by the market. Investors want to join because others join. Activating the reflexivity of imitation helps ideas become reality. Reflexivity is a good thing because it helps change our environment. The problem is when the balance of desire is distorted.
Balance of desire
Eric Weinstein extended the theory of reflexivity. He described the opposite momentum represented by two sets of back and forth equations, implying that this is similar to the description of Einstein’s gravitational field theory.
Wheeler’s interpretation of Einstein:
Matter tells space how to bend, space tells how to move.
Weinstein’s interpretation of Soros:
Consciousness tells the market how to move, and the market tells how to bend.
Questions asked by Weinstein; “What is curved?” Answer: Imitation. Explain these “equations” in Gillard’s terms:
Consciousness tells the market how to move, and the market tells consciousness what is desirable (what you want).
Manipulative functions allow individuals to interact with the market, thereby causing changes in market behavior. Cognitive function works in the opposite direction, which causes individuals to change their thoughts, forming a feedback loop between the state of conscious belief and the state of conscious preference.
The desire to imagine a balanced equation 14 back and forth in two:
Speculators tell the market what individuals want (specific assets), essentially “consciousness tells the market how to move” (conscious preference state).
The market uses asset prices to provide individuals with feedback on what they want. “The market tells consciousness what is desirable” (conscious belief state).
Then the individual changes his initial desire and now injects this changed desire into the market. The cycle continues in an infinite loop. Mimic adjustments to these feedback loops.
This equilibrium should be a delicate balancing act, so that the market will not become a mirror of deception. Usually when things go too far we experience a market crash, we will find a scapegoat (for example, a bank), the market will correct, and a new cycle will begin again.
Reflexivity works in both directions, unraveling in the downward process. The market crash may provide a clear moment. But a clear picture is too naked, because it is impossible that we are all wrong. In order to achieve a new equilibrium, the community will look for scapegoats to wash away their sins, and then move on.
Price tells us the true state of the world, usually when things encounter physical obstacles, and reality (belief) and narrative (preference) conflict. There are barriers to malleability and the community should be notified in time.
These days, price signals have weakened. Narratives or memes are dominating because it is almost impossible to run out of cash. Therefore, the state of consciousness preference stays in misinformation and entangled in escalating imitation.
The price itself became the news and ending. The world has become extremely uncertain in nature. Reflexivity dominates in a world lacking intentions. Everyone participated in the imitation dance.
In an uncertain world, people actually prefer unlimited options; money is more valuable than anything you can do with it. Only in a certain future will money become a means to an end, not an end itself. 15
Speculation is eating the world.
Appendix link
1. Original link:
https://insights.deribit.com/%e5%b8%82%e5%9c%ba%e7%a0%94%e7%a9%b6/%e8%ae%ba%e5%8f%8d%e8% ba%ab%e6%80%a7%e4%b8%8e%e6%a8%a1%e4%bb%bf/?lang=zh-hans2. The price became news:
https://twitter.com/KyleSamani/status/1293384578061787138?s=203. Reflexive assets are subject to simulation:
https://twitter.com/FEhrsam/status/1077298213265190912?s=205. Memes are only narratives, and memes themselves have no physical boundaries:
This is why utopia as an idea is unlikely to die, despite repeated failures in implementation.6. Hasu:
https://twitter.com/hasufl7. Gillard’s imitation theory:
https://www.imitatio.org/brief-intro/8. Subjective:
Imitation conflict does not come from needs and clear scarcity, but from desires that will arouse envy of others.9. Reflexive cycle:
https://macro-ops.com/understanding-george-soross-theory-of-reflexivity-in-markets/10. Unite them:
People cannot live in a state of permanent violence. They need to establish an order that supports permanent communities.11. The driving force behind the market:
Will Durant and Ariel Durant “Lessons from History” (1968): “Insecurity is the mother of greed.”12. Fanaticism and imitation:
https://poseidon01.ssrn.com/delivery.php?ID=054105104066069027103065095089118099056021035048087017065115125113126022090112085103124041097041114016032006101127017028068008118018046086035019111113073011124094073036050073101115011122122076113102009212210085EXT13. How a startup company becomes a ten-cornered beast:
Tony Sheng did an excellent job in his article, describing the role of reflexivity in “turning speculators into users”.14. Desire balance:
Locked in a state, it should be a permanent state that eases violence.15. From:
Peter Thiel, “From 0 to 1”.
Source link: insights.deribit.com
