Day #323: The Backstory

It’s no secret that I am a pretty big sports fan.  The thing is, except for my beloved Blazers and Tigers, I rarely watch an entire game.  I often get distracted at some point and start ‘Googling’ the players.  For example, I was watching the Mavericks/Thunder game and my mind started to drift . . . What’s the story on James’ beard?  What percentage of NBA players have visible tattoos?  Are there even five NBA all-stars with no ink?  How old IS Jason?  It’s these backstories that I find more interesting than the sports themselves sometimes.  I look at these athletes and see bulging knuckles and telltale scars and instead of turning away, I wonder about the story behind the bumps and bruises.

Maybe this fascination with learning everyone’s backstory is just part of the researcher in me.  I’m trained to realize that people as well as the ‘markets’ in which they interact are complex and dynamic.  You can’t pretend to fully understand them through casual observation.  You have to take the time to learn and understand the backstory.  It is these backstories that create complexity.  This is a new research area of mine that I’m trying to wrap my head around.  The idea is this — you can think of any team, market, community or organization as a ‘system’.  The players, market participants, residents or workers in that system are all ‘agents’.  These agents are always changing.  As they change, the agents with whom they interact also change — both independently and as a result of the changes they, in turn, encounter.  Sometimes, these changes can be sudden and unexpected and lead to crisis (think market crashes).  Other times, the changes are gradual and progressive and move the system forward (think industrial revolution).

Nassim discusses these ideas at length in his book, The Black Swan.  He describes a black swan as having the following characteristics:

  1. It comes as a surprise to the observer;
  2. The event has a major impact on the system and the agents within the system; and
  3. After the fact, we rationalize it away.

Many folks are now tracing all of the ‘black swans’ through history and trying to identify mechanisms to predict or forecast the next black swan.  In fact, I’m in the process now of editing a journal issue on the topic and organizing a panel discussion on how we might operationalize such a ‘black swan watch’ — without sounding as if we are trying to predict the rapture.  For what it’s worth, I think it’s a matter of getting a better understanding of the backstories of the agents.  What drives folks to do what they do?  I’m truly a behavioralist at heart and therefore I think that a better understanding of decision-making and biases will help us in this context.  If we spend all of our time focusing just on outcomes, we are only getting half the picture.

Let me try to be a little less abstract for a moment.  An example is the stock market.  I don’t think it is enough to just to study stock price histories.  I want to know who is buying/selling what, when and why.  To what stimuli do market participants respond?  Are there any inconsistencies?  This type of focus has led us to uncover all kinds of interesting phenomena like ‘herding’ (investors sometimes follow the crowd when making buying decisions), ‘momentum’ (the speed of price changes may be indicative of future price trends), and others.

Can we study agents to get a better sense of how they tend to adapt to various situations and how that might affect other agents and the system as a whole?  That’s not all that different from an athlete trying to get a greater understanding of the psyche of his or her opponents in order to outsmart them at their next meeting or a coach developing a series of plays in order to be prepared for any situation.  Did you notice how the Thunder imploded after James fouled out?  The team didn’t adapt well to the removal of one of their agents.  I’m hoping that they work that out before game five.  I have a friend who says Dallas will go all the way.  I’m still going with James and his beard (kind of like Chaka— and her hair).

P.S.  If you were wondering about the answers to those questions I posed earlier, here they are:

  • James grew out his beard during a winning streak in his last year at Arizona State.  It (the beard) now has six fan pages on Facebook.
  • Over 70% of NBA players have visible tattoos.
  • Kevin, Dwight, Chris Bosh, Dwayne and Chris do not have visible tattoos (as far as I can tell).
  • Jason turned 38 on March 23rd.

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