Blindspots and Rationality

Victor Niederhoffer is a brilliant man, no doubt, besides being immensely capable in many other fields (he was US national squash champion, for example, quite a few times in a row). But as I read his book, "The Education of a Speculator", I thought to myself, why would someone so rational and bright take the kind of speculative risks he seemed to routinely gamble with? It would be understandable if he was in it for the thrills and the excitement, if the very essence of bone-chilling risk propelled him down the slippery slope he took. But no, it appears that he genuinely believed in the infallibility of his trading strategies (despite his faux-humility and the picture of the Titanic hanging in his office).

Given the utter unpredictability of the kind of leveraged derivatives trading that he specialized in, it should've been obvious that sooner or later he'd blow up like a primed case of dynamite. And he did. Not many years after writing the book, he lost his shirt, his house, and everything he owned. He had to borrow from his own children. A man who managed in excess of a 100 million dollars was reduced to penury in a matter of hours.

I believe all of us have our blindspots where the exacting knives of logic and reason suddenly go blunt. I see people who are extremely smart in many areas not apply the same level of intellect and scrutiny to other, often more critical, areas of their lives. It's a shame we're wired this way.

(Speaking of rationality, this isn't to say that I don't believe in the inherent absurdity of life a la Kafka, Camus, et al. I have my own ideas on this, based on a stochastic view of life , but I'll save that for another day)