I was supposed to be pushing for my next talk but ticket sales picked up over the weekend and we’re down to almost single digits worth of tickets left. If you have not bought your tickets, this is your last chance. Click here.

As I’m reading Andrew W Lo’s Adaptive Market, I will begin this post by talking about an mental experiment that some of you might be familiar with.

Which pay-off would you choose ?

Would you prefer a $240,000 pay-off with 100% certainty or a 50% chance of making $500,000 ?

Intuitively speaking, most readers will choose the 100% payoff of $240,000 even though the expected payoff of the second option is $10,000 higher. We are much more interested in a guaranteed $240,000 because we cannot stand the idea of risking a 50% chance of winning nothing. Loss aversion is a natural part of human evolution.

For years, I …