Replacing Judgment With Models

The transcript discusses the limitations of computational innovation, particularly in data assembly and hypothesis testing. It critiques the over-reliance on diversification in venture capital and banking, emphasizing the need for case-by-case analysis. The text also highlights the misunderstanding of transaction costs in financial models, arguing that mechanistic models overlook long-term credit losses.

What are the flaws mentioned in the underlying logic of modern financial approaches?

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How does diversification serve as a second line of defense in venture capital?

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What is the misconception about transaction costs when using mechanistic models in credit extension?

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In what way do models fail to account for the real transaction costs of loans?

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What is the impact of credit losses on the long-term effectiveness of extending consumer credit?

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