Kris surfaced this work and had some excellent notes.
“Impossible things happen fairly often. That doesn’t mean things are actually impossible just that we thought they were impossible. There’s a corollary to this: enough people relying on something being impossible makes that thing more likely in a perverse feedback kind of way.”
Agustin Lebron
We’ve covered this idea: something is always happening. But Agustin furthers the thought. If many people think something is impossible then it is underpriced. Agustin gives the example of the housing crash of 2008. Home values don’t go down, was one impossible pillar. Another was that home values don’t crash across the country. These two impossibles fed certain incentives.
Sports offer a good view on ‘impossible’. There’s always an inevitable team. It’s impossible they lose. Yet the better bettor ‘shorts the narrative‘. The Wharton Moneyball hosts regularly pillory “once in a generation talent” that arrives every other year.
Agustin is a trader but like with Bayesianism, we can adopt the philosophy. Impossible/Inevitable comments are signals of confidence not accuracy, and should be priced accordingly.
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