Livingstone

The Theory of Reciprocity

In my last post I stated I feel that in the short run, too many people are concerned about beating their benchmarks. In the long run, benchmarks are extremely important.

The theory of reciprocity states that in the long run, every investor will see the same fundamentals in every stock. If you’re a trader, you will see every technical pattern in every stock. If you take the same position as everyone else, you will not achieve abnormal returns. Abnormal returns can only be made when you take an action that differs.

I want to emphasize that I am oversimplifying— this concept can become extremely complex. Empirical evidence shows that capital appreciates over time, meaning investing/trading is not a zero sum game. However, capital can appreciate at different rates.

Although I have a somewhat contrarian point of view, the theory of reciprocity applies regardless of your investing style. Selling too early/late, not honoring your stop losses, etc, all affect your long term ability to produce an abnormal return.

I Need Social Email

I’m not interested in Friendfeed or any other social network aggregator. Although many of them are doing amazing things with the “now” web, I don’t really need to know everything about everyone I follow. I just want to consume the pieces as I see fit.

We all have a powerful version of Friendfeed. It’s called email. Every social network gives you the option to receive an email each time something important happens. I get all of my direct messages on twitter, facebook birthday reminders, messages, wallposts, etc, via email. If you have email overload problems, you probably find this annoying and will most likely disable notifications.

Email is slowly making a shift from conversations to being a data repository of our digital lives. I want to be able to link each piece of data to the right person and build a more complete social graph. We will never realize email’s full potential until we have social mail clients that let us interact with the data in a better way.