I have thought long, hard, and mostly fruitlessly about whether and in what sense we can be said to go beyond belief and actually know something when we trade. (I’m sure all of you have read ad nauseum that you trade your beliefs, a statement that I have always found shallow at best.)
It turns out that I could have saved myself a great deal of frustration had I read Ernest Sosa’s earlier books on epistemology. But Knowing Full Well (Princeton University Press, 2011), based in part on lectures he gave at Soochow University in Taipei in 2008, provides an overview of his theories. So it’s a perfectly reasonable place to start.
I assume that Sosa doesn’t have a secret life hanging out on prop trading desks. And yet his epistemology seems almost curve-fitted to the trading environment. Today I’m not going to write my usual review but will instead look at some passages from the very beginning of the book to illustrate this point. In a future post (or posts) I’ll milk Sosa’s book for more trading/epistemology insights.
Consider first his central thesis that (1) belief is a kind of performance and that (2) there are levels of performance (what Sosa calls orders of performance normativity), “including a first order where execution competence is in play, and a second order where the performer must assess the risks in first-order performance. This imports a level of reflective knowledge….” (p. 1) The first order is aptness, the second order is meta-aptness. Importantly, either one (aptness or meta-aptness) “can be present without the other.” (p. 8)
An analogy to the performance of the hunter archer (hence Diana on the dust jacket) makes this thesis more comprehensible. Let me quote more extensively than usual.
“A hunter archer’s shot selection and risk taking may be excellent, for example, and in taking a certain shot he may manifest his competence at assessing risk, while the shot itself nevertheless fails, being unsuccessful (inaccurate) and hence inapt. The shot is hence meta-apt without being apt.
“Conversely, the hunter may take excessive risk in shooting at a certain target, given his perceived level of competence (he has been drinking) and the assessed potential for wind (it is stormy). When he shoots, he may still fall just below the level of competence-precluding inebriation, however, and the wind may happen to fall calm, so that his shot is (through that stroke of luck) quite apt. Here the shot is apt without being meta-apt.”
In summary, “A shot is apt iff the success it attains, its hitting the target, manifests the agent’s first-order competence, his skillful marksmanship.
“A shot is meta-apt iff it is well-selected: i.e., iff it takes appropriate risk, and its doing so manifests the agent’s competence for target and shot selection.
“Neither aptness nor meta-aptness is sufficient for the other. They vary independently.” (p. 8)
Feeding into this distinction is the problem of forbearing. When the archer chooses not to take a shot at a high-value target, his forbearing has an aim of its own, avoiding failure. It is thereby apt. But “what if it is a shot that the hunter very obviously should have taken? What if he makes a big mistake forbearing?” In this case, the hunter fails in his performance of forbearing. His “forbearance avoids ground-level failure, but is deplorable nonetheless.” (pp. 5-7)
All I can say is, wow! Epistemologists have every reason to praise this book, but traders with a philosophical bent can do cartwheels.