A sideways look at economics

The world of economics and finance runs on equations, models, statistics, backtests and predictive analytics. It seeks out objective causal relationships that can be quantified and verified. The mantra “correlation does not imply causation” has been drilled into my head from an early stage. One of my first memories from undergraduate studies is learning about spurious correlations, like the relationship between stock returns and sunny days. [1] No prizes for guessing I was at a British university.

Yet over time, I’ve come to prefer a mantra of my own: “causation does not imply objectivity”. The set of causal links across the social sciences that can meet strict scientific standards is minuscule compared to the countless possible paths a life can take. It may seem obvious, but it took me a while to accept the idea that cause and effect are often dominated by subjective, even random, forces. As a result, I find myself reflecting more on the elusive role of meaning, purpose, spontaneity and happiness in life.

One such reflection arose during a hike with family and friends in the Canadian woods this summer. It was a beautiful, but unusual, hike. We trekked to the wreckage of a military plane that crashed in 1943, killing 24 crew members (read the full story here). On the way back, I could not stop thinking about those men who died, not because of combat during WW2, but due to bad weather and a dodgy map reporting the wrong height of the mountain they were flying over. My first reaction was s*it happens! Small-probability events do occur, we just live our lives hoping that they will not happen to us. However, from the perspective of those soldiers, the plane crash was more than an extreme left-tail outcome. The sequence of cause and effect leading to the crash irrevocably changed the set of future choices available to those men.

Since that hike, I’ve regularly pondered about the very concept of coincidence. What makes something a coincidence? Is it just a chain of low-probability events that we notice for some reason? Or, are there, somewhere in the space between objective facts and subjective meaning, mysterious, spiritual forces weaving together the threads of our reality?

Looking for patterns where there are none is familiar territory for people working in finance and one of the quickest ways to ruin. What I didn’t know until recently is that it also has its own name: apophenia. In psychology, apophenia is most commonly associated with people who are convinced they recognise religious figures on slices of toast or alien faces on rocks on Mars. It also refers to more subtle and more common fallacies like assuming a random event will happen with a higher probability than chance just because it has not happened before (gambler’s fallacy) or a focus on validation rather than falsification (confirmation bias) or the clustering illusion of finding patterns in a random blob of data. In statistics, apophenia is essentially the obsessive pursuit of type I errors,  itself the hallmark of a spurious relationship.

And yet, these explanations seem primarily concerned with explaining away coincidence, rather than illuminating why some recurring patterns in life and memorable events appear connected by coincidence and spontaneity rather than direct causation or repeatability. For instance, it is not uncommon to think of someone we haven’t spoken to in ages only to get a call from them shortly afterwards. Or to hear a song on the radio that perfectly captures our emotional state. The psychologist Carl Jung referred to these as moments of improbable synchronicity. Synchronicity refers to subjective yet meaningful coincidences that reveal hidden connections in our lives.

Jung himself described a famous example that influenced his theories. He was in a therapy session when a patient shared a dream about a golden scarab beetle. At that very moment, Jung heard tapping on the window – a rare scarab beetle had flown into the room. The improbable timing seemed deeply significant. Another case is Paul McCartney waking up with the melody for ‘Yesterday’ fully formed in his mind. Convinced it was a song he had heard somewhere before, he played it on piano. The tune that came to him in a dream went on to become one of the most iconic songs of all time.

It would be easy to explain away these events as statistically inevitable coincidences, given enough time and possibilities. But I find this frequentist perspective rather reductive. We go through so much of our lives in a completely passive way, like extras in a not-so-original movie. Anything that can trigger renewed awareness, meaning and introspection should be celebrated, considered as highly statistically significant, rather than dismissed as irrelevant noise. We should take a pause to identify our own moments of synchronicity.

A common thread in my life has been the outsized role that Canada has played in my story. The string of friendships, partners, and experiences linked to Canada, and even more narrowly to the province of Quebec, seems far beyond random chance. I met a Québécoise in my twenties, she was a spur to learn French and move to Geneva and I ended up marrying her. Another French Canadian drastically overhauled what I value in people and my approach to social interactions. In Geneva my closest group of friends was disproportionally made up of Québécois, some of who I still regularly and actively seek out after so many years. Other than Italian connections and colleagues, my existing London social circle spun off almost entirely out of meeting a Canadian who is also one of my best friends and my daughter’s godfather. My son met his first ‘bestie’ at nursery in London, his dad turned out to be a Québécois, a neighbour and a friend ever since with whom I have shared the joys and worries of being a father.

Canadian music has also been a kind of soundtrack to my life. One band in particular stands out. You might not be surprised to hear that it is a Québécois band. They are called Les Cowboys Fringants, they originate from the same town as one of my friends from the Geneva days who introduced me to their music back in 2001. I have grown up with them as their evolving style in songs matched and traced my evolution from carefree youth to building a social conscience to the joys and worries of fatherhood and midlife. I’ve wanted to see them live for over 20 years, but never got the chance until this summer’s Quebec City music festival.

After thunderstorms forced the cancellation of their massive concert, it was rescheduled after the organisers extended the festival for an extra day, a big relief and building up more anticipation for the event. When the concert eventually went ahead, my wife could not make it, so it became my first concert experience with both of my kids. It was also one of the most emotional moments of my life as the home crowd cheered Karl, the lead singer and flagbearer of Quebec’s music for the past 20 years, who is battling cancer, as he stoically sung through a selection of the band’s most moving and emotionally charged ballads. People around me were weeping and cheering in equal measure, often at the same time. I grabbed my kids and hugged them tightly while basking in the emotion of the moment. I felt the magic of improbable synchronicity – one more memory woven into the thread of maple syrup-flavoured synchronicity this time reinforced by the emotional charge of 100,000 other people. Merci Karl, merci Les Cowboys.

AZ and his kids enjoying Canadian synchronicity


[1] To my knowledge, it was only a few years ago that this relationship was actually formally proven to be spurious. This same study actually shows that the relationship between the number of sunspot events and stock returns is actually significant though of little economic impact.

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