In some sense, markets have a particular built-in interpretability: for any trade, someone made that trade, and so there is at least one person who can explain it. And any larger market move is just a combination of such smaller trades.

This is different from things like the huge recommender algorithms running YouTube, where it is not the case that for each recommendation, there is someone who understands that recommendation.

However, the above argument fails in more nuanced cases:

  • Just because for every trade there's someone who can explain it, doesn't mean that there is a particular single person who can explain all trades
  • Some trades might be made by black-box algorithms
  • There can be weird "beauty contest" dynamics where two people do something only because the other person did it

ozziegooen's Shortform

by ozziegooen 31st Aug 2019127 comments