Quote from Ghost of Cutten:
If there is no link between present reality and future events, then +EV cannot imply reliable or predictable profitability (future profits may occur, but purely by chance). It would be irrational to take risk to make +EV bets in this case.
For +EV to imply future profits, then +EV must be linked to future events.
Oh, lordy.
The philosopher David Hume once argued, for the sake of hypothesis, that we can't be certain fire is hot. All we know is that all the fires within the realm of observed human experience are hot. It's possible that somewhere, in present, past or future, a fire burns (or has burned) that is not hot, making the presence of fire and heat a persistent but not universal correlation.
Hume wasn't trying to be an ass. He was making a point about causality and uncertainty.
From a technically and semantically correct point of view, all scientific laws are actually "predictions" -- claims on the future based on observations of the past, e.g. "Water froze at 32 degrees fahrenheit yesterday and today, so it will also freeze at 32 degrees fahrenheit tomorrow and the day after."
If we want to get even more obtuse, we can expand Hume's point to mathematics. Two times two equaled 4 yesterday, but will it do so tomorrow? We can't know for certain -- who knows how the universe might change tonight -- we can only "predict" that yesterday's math will be tomorrow's.
And yet, it should be obvious to any common sense individual that using the word "prediction" in such instances is unhelpful.
It is clearly useful to distinguish between 1) probability assessments based on mathematics and scientifically confirmed hypotheses, and 2) expectations of a future event not based on hard math and rigorous parameters.
Quote from Ghost of Cutten:
You are +EV only if probability tells you something about the future. Whilst I and everyone else believe this to be true, it is clearly logically inconsistent with your claim that +EV is "an observation of the present that makes no meaningful claim on future events."
If you say the odds are X%, for example, then you are claiming something about the likelihood of that scenario occurring in future (i.e. when the cards are revealed at the showdown). You are saying the outcome is expected to occur X% of the time. That's clearly a claim about the future.
If there is no meaningful claim on future events, then one cannot say that there are any odds at all - rather, the outcome is totally unknowable.
Yes, but now you are sitting atop Hume's donkey.
If I say that "water freezes at 32 degrees fahrenheit" or "the sun rises in the east," and then I say "these are observed statements of reality, not claims on the future," you would be within technically correct grounds to argue with me.
All probablistic, mathematic and scientific observations have some "claim on future events" in the sense that we are forced to assume past, present and future are a logical continuum.
But a refusal to distinguish between this kind of situational assessment and straight up prediction -- "casino foot traffic will be up substantially this year; the Patriots will win the Super Bowl" -- is obscurantist. There is gray area here, but that's also part of the original point. The trading mindset that seeks to minimize predictive factors and the trading mindset that embraces predictive factors are poles apart.
