Big investors borrowed lots of GameStop stocks in anticipation that the price will drop (they "shorted" the stock). But the price did not drop. The big investors "shorted" further expecting that other market participants would follow suit in selling GameStop stocks. They didn't and then trolls from reddit joined the fray...

No one knows when and how this will end, but some people on reddit will earn a lot. While some big capital investors will hopefully loose a lot and learn a lesson.

Detailed explanation of what is happening in the following video by the TLDR News US.

While my postdoctoral project has already finished (actually it did finish almost a year ago), I still have things related to it I want to discuss here on Physics of Risk. This time let me take an empirical perspective, let me consider parliamentary presence data. Why this data could be interesting to us? Because, it was shown that parliamentary presence in the Brazilian parliament does exhibit anomalous diffusion [1]. And it seems that Lithuanian Seimas does too [2].

Why so many predictions go wrong? In my humble opinion it is because many people fail to understand that complex systems are complex. Namely, there are many variables which can influence the outcome and the relationships between those variables are often not trivial.

In case of predictions for the COVID-19 epidemics, we can't be completely sure how well the social distancing measures will work before they are implemented. We need data, we need some time to observe how the things change after the social distancing measures are implemented. Afterwards we can make a reasonable extrapolations, but they are usually just that - an extrapolation under assumption that things will continue to happen as they are now. In physics such assumption is obvious and justifiable, but social reality might change simply because we made some kind of prediction.

Another excellent point given in the video below by Wisecrack, is that there are two kinds of experts making predictions: foxes and hedgehogs. Foxes are often scientists, who try to be as transparent (explicit about the assumptions they make), open to new data and evidence (which can falsify some of previously held assumptions) as they can. Foxes are prone to changing their mind as they learn from their prior mistakes. Most of the people ignore transparency (because they can't understand assumptions made by a fox) and only notice that such experts often change their opinions. Public appears to favor experts who are adamant about their predictions, because the predictions are often bold and dramatic, yet often backed only by a belief. These experts are known as hedgehogs.

In Lithuania we have a lot of free markets hedgehogs, who often suggest "letting it work" ("laissez faire") as being solution to every imaginable problem. While free markets are solutions to some problems, they are definitely not a solution for all the problems, as free markets are based on theoretical model, which works only when certain assumptions are satisfied (check out our previous series of post on price formation).

So, without any further side points, we invite you to watch a video on Wisecrack. It covers much more than we have written about in the text above.

In the first half of 2020 we kept on posting about the opinion dynamics. Though our focus has drifted towards direction I was working on during my postdoctoral project. One of the main results, compartmental voter model, was presented on Physics of Risk just before the summer holidays.

Obviously my life, as well as yours, was somewhat interrupted by the COVID-19, so I just had to have at least few epidemiological posts. Most of these came after summer holiday, as I tend to prepare lots of future posts in advance. The posts were mostly inspired by email discussions with my colleagues.

All in all, Physics Risk had 41 posts in 2020 (+2 posts in comparison to 2019). 22 of posts were filled under interactive models tag. I was not sure if I will be able to keep the tempo up, but I managed this year by shrugging of some of the extraneous responsibilities. Once again, I start new year with doubts about the future of Physics of Risk, because I still feel that I have too much responsibilities.

Fig. 1:The number of posts written in English and still available on this iteration of Physics of Risk. The wide bars represent total number of posts for each year since 2010, while the narrower bars represent a number of posts with 'Interactive models' tag.

Either way, we will continue with posts on anomalous diffusion by considering it in the voter models. Likely I'll make some new posts on opinion dynamics, too, as I have a few interesting models, which I thought to have already posted about. This will give me a chance to write about the last result from my postdoctoral project, which is related to the Latane's social impact theory.

Santa has a nice red hat, so for our Christmas and New Year holiday gap post we share a video about mathematical hat problems by Numberphile.