The FacultyThe Faculty · Pythia Edition
Pythia
The lab
10 instruments- INST·190◆Pythia EditionexperimentThe BarA hundred people want to go to the bar, but only if fewer than sixty do. Publish any forecast of the crowd and everyone acts on it, so it comes out wrong. Keep the forecasts private and the crowd finds sixty on its own.reflexivityel-farolminority-gameagentsforecasting
- INST·191◆Pythia EditionexperimentThe CobwebFarmers plant this year by last year’s price. A glut follows a shortage follows a glut, and the price spirals in or out of control depending only on which slope is steeper. Publish a forecast everyone trusts and the spiral collapses to a point.reflexivitycobwebexpectationschaosmarkets
- INST·192◆Pythia EditionexperimentThe RunA sound bank, a rumour that it is not, and a queue that makes the rumour true. Find the point where a published rating starts a run on its own.reflexivitybank-runglobal-gamescoordinationforecasting
- INST·193◆Pythia EditionexperimentThe HerdSixty people choose a restaurant one at a time, each with a private hint and a view of everyone before them. After two agree, the rest stop listening to their own hint. That is why crowds can be confidently wrong.reflexivitycascadessocial-learningbayesherding
- INST·194◆Pythia EditionexperimentThe GuessGuess two-thirds of the average guess. If everyone thinks one step ahead the answer is 33, two steps 22, all the way down to 0. Your guess goes in with a model crowd. Publish last round’s average and watch the crowd descend.reflexivitybeauty-contestlevel-kgame-theoryforecasting
- INST·195◆Pythia EditionexperimentThe BubbleOne asset, one honest fundamental value, and two kinds of trader: those who buy value and those who buy the trend. Hide the chart and the price hugs value. Publish the chart and the trend-followers build bubbles, crashes and the fat tails of a real market.reflexivitymarketsstylized-factsfat-tailsagents
- INST·196◆Pythia EditionexperimentThe FlashEvery trade can trigger more trades. Below one trigger per trade the cascades die out; near one, a single order can set off a crash. Measure the market’s reflexivity from its own tape.reflexivitymarketshawkesbranchingcriticality
- INST·197◆Pythia EditionexperimentThe ProxyMeasure something you care about with something you can count. While you only watch the number, it tracks the truth. Make it a target, and the harder you push the further it drifts from what it was measuring.reflexivitygoodhartselectionheavy-tails3d
- INST·198◆Pythia EditionexperimentThe ScoreTrain a model to predict who repays a loan, publish its rule, and people move to the right side of it. Retrain on the new data and the rule moves too. Whether the two settle down depends on one ratio, and the place they settle is not the best one.reflexivityperformative-predictionretrainingstrategiccredit
- INST·199◆Pythia EditionexperimentThe ProphecyCan a published forecast ever stay true? Yes, if the world responds smoothly to it: then there is always a forecast that predicts its own effect. Here are the nine worlds of this edition, each with its own curve, and the bar where the curve breaks.reflexivityfixed-pointpollsbrouwerring