1570: Engineer Syllogism

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Engineer Syllogism

Title text: The less common, even worse outcome: "3: [everyone in the financial system] WOW, where did all my money just go?"

Explanation

A syllogism is a logical argument where two or more propositions lead to a conclusion through deductive reasoning. For example, one of the best-known syllogisms is:

1. All men are mortal
2. Socrates is a man
3. Therefore, Socrates is mortal

In this comic, Cueball is an engineer who is attempting to make the following syllogism:

1. I am good at understanding "numbers" (i.e., mathematics)
2. The stock market is made of numbers
3. Therefore, I am good at understanding the stock market

Since most engineers are purportedly good at math, proposition 1 seems to be true. It is also loosely true that the stock market is made of numbers, but only in the sense that every system can be given a post-hoc numeric characterization; the dynamics of the stock market are primarily human-driven. In this comic Cueball thinks that his skill at math will help him beat the stock market. Little does he know that the system can be unpredictable, so he ends up losing money as the financial instrument he's invested in loses value. This is due to the financial markets being largely controlled by humans making emotional decisions and not some calculable reason or logic. The fact that humans make emotional decisions is alluded to in the title text of 592: Drama.

Even if the propositions "I am good at understanding numbers" and "The stock market is made of numbers" were true in Cueball's interpretation, Cueball would still be wrong to conclude that "I am good at understanding the stock market": this would be a fallacy of the undistributed middle (with the first premise being more accurately stated as "I'm good at understanding things made of numbers") and a fallacy of composition (with the implicit third premise "if I'm good at understanding the components of a system, then I'm good at understanding the system"). The problem is that proposition 1 seems to say "I am good at understanding all math". However, the "all" is not present, so Cueball may not necessarily understand the math underlying the stock market.

This comic is also related to the 1998 movie Pi where the main character repeats to himself several times his assumptions that the world is all numbers, and thus he, a great mathematician, should be able to predict the stock market, which is all numbers. He believes that maybe his work on patterns in pi will provide some deeper insight into the patterns in the stock market, a project that drove his mentor crazy and may in fact be making his computer self-aware.

The title text talks of the scenario where Cueball (or any Engineer in this position) does understand the market, and instead of losing all his money makes all the money from the Stock Market leaving everyone else broke.

The release date of this comic makes it highly likely that it refers at least in part to the 2015 Chinese stock market crash which largely affected most other world financial markets, particularly during the week of August 24–28, during which this comic was published.

Two, less likely, interpretations of the title text has been suggested:

1. It could also be understood as if it was Cueball who causes everyone involved in the financial system to lose their money. This could refer to a scenario in which Cueball figures out a way to extract large quantities of money from the stock market, causing a sudden, major decline in everybody else's wealth, or that his involvement has caused literally everyone, including his own, stock market assets to lose their value. This is possible since there is no conservation of value for the stock market. The value of a particular stock is determined by a majority that is willing to trade it at a given price.
2. Alternatively, Cueball could cause a global stock market crash if he is an engineer responsible for vital stock-market-related software and/or hardware. An example of a situation where the action of engineers was implicated in just such a crash is the 2010 Flash Crash. High-frequency quantitative trading, which relies more on financial technology engineering than sophisticated financial knowledge, was heavily involved in this particular crash.

This scenario has been mentioned before, in the title text of 592: Drama.

Transcript

[An white frame with text inside an underbrace and an overbrace.]

An engineer syllogism

[Cueball is at his desk in front of his computer, with his hands on his knees, thinking.]

Cueball, thinking: 1: I am good at understanding numbers.

[Cueball takes one hand to his chin, still thinking.]

Cueball, thinking: 2: The stock market is made of numbers.

[Cueball lifts both arms from his legs, still thinking.]

Cueball, thinking: 3: Therefore I— Wow, where did all my money just go?

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Discussion

Note the link with 592. Halfhat (talk) 11:41, 28 August 2015 (UTC)

The link to 592 is tenuous at best, and is certainly no foreshadow of this comic. Please stop making up connections just be cause it makes the xkcd "universe" loop back to itself. This is clearly related to the events of the past week, August 24-28 2015. This should be included as future readers will not realize the publication date and its significance.173.245.56.140 14:42, 28 August 2015 (UTC)

You need to go read the title text for 592 again. It is far from a tenuous connection. Randall regularly comes back to themes, and engineers diving into the stock market is literally in the title text of 592. The link is valid. 173.245.55.171 19:17, 28 August 2015 (UTC)

Despite all the numbers around it, stock market is actually made of PEOPLE. -- Hkmaly (talk) 12:18, 28 August 2015 (UTC)

But, but... if the universe is made of math... and people are part of the universe... aren't people made of numbers? 188.114.98.214 14:02, 28 August 2015 (UTC)

But that just shifts the fallacy: math is (a lot) more than numbers, and Cueball doesn't have access to most of the numbers describing the world's investors anyway. 108.162.216.157 14:04, 28 August 2015 (UTC)

And even if something is completely described by numbers, it doesn't necessarily have to be predictable. 'Chaos' teaches us this.--108.162.229.210 14:15, 28 August 2015 (UTC)

<pedantry>Well, randomness teaches us this. Chaos just teaches us that you might need near-perfect information to make decent predictions.</pedantry> 108.162.216.157 02:02, 29 August 2015 (UTC)

The title text appears to be a pun on the financial and programming definitions of 'crash'. In the same way that an overconfident or unconsciously incompetent programmer might make changes to a complex piece of software which cause it to crash, Cueball has invested so poorly that the entire market has crashed. 141.101.98.219 (talk) (please sign your comments with ~~~~)

Now that you mention the chinese stock market crash, have you considered the chinese political class is made most of engineers [1]? This would explain the tooltip text. 162.158.23.204 (talk) (please sign your comments with ~~~~)

It's worth note that this is also true of economists. Unlike mere mathematicians, economists suffer under the delusion that they directly understand how economic activity works and are able to predict its outcomes. But they fail, as Hayek notes in The Counter Revolution of Science, to understand or even take into account the human action and motivation that actually controls economic activity. This weakness, an unscientific pretense of knowledge, is revealed by the fact that they are almost universally abysmal economic investors. The one famous exception to this was Keynes, who made a fortune off of stocks, but who also was machiavellian enough to advocate for economic ideas he did not believe in. According to his friend and fellow Nobel laureate Friedrich Hayek, Keynes pushed for stimulus spending for political reasons, and was planning to reverse his position when his untimely death intervened. —Kazvorpal (talk) 18:30, 21 November 2019 (UTC)

There is also an element here of the fact that engineers understand mathematics in a framework of science that others have worked out. Solving a problem in mechanics might feel similar to solving a problem in the stock market, except that Newton/Lagrange already worked out the science, so you just have to do the math. For the stock market the science isn't worked out. Scientists can come a cropper because they lack the engineering sense to be practical in a real world application, while engineers come a cropper because they assume a system rather than discovering it. When scientists and engineers collaborate then the result is sometimes some of the most successful investing firms on the planet.