I have been thinking about writing this piece for quite some time now. It was Trish’s interesting article Why Universality Trumps IQ that inspired me to roll-up my sleeves and get down to business. You might have probably heard the name Immanuel Kant somewhere, either in a philosophy class, in an online article, or on 9gag (I want to stop philosophizing, but I Kant).
So who was Immanuel Kant (1724 - 1804), and why of all the places in the world did he end up in Wall Street you ask? That’s what I’ll try to answer herein.
Kant was a German philosopher, born in 1724 in the city of Königsberg, Prussia (modern day Kaliningrad, Russia). As is usually common with philosophers that make it to the big league, the life of Kant is overcast by a halo of stories about the way he lived his life, his character, and his social interactions. Some of these stories are indeed true, while others might be exaggerated, and a few more are flat out false.
One of the common misconceptions about him was that he led a very strict, borderline bland life. If you’ve ever read, or heard about, his seminal work The Critique of Pure Reason, which is his first of a trilogy of critiques, you could have probably concluded so yourself; namely, that Kant was a boring philosopher who could barely even understand himself.
Well, most probably hanging out with him was not as boring as watching paint dry. He was in fact a very popular and interesting fellow. Although he did have a daily routine (which understandably acts as a basis for the countless myths about his life), he nevertheless was a very sociable guy.
Maybe it was because of Königsberg’s harsh climate, his hypochondria, or some other obscure reason that he fasted intermittently, and only had one feast-like meal a day, which he often shared with his friends.
Kant was not a fan of traveling, the farthest he got from his hometown was not more than 150 kms (93 miles). And the reason why he got that far was not so much driven by an interest in exploring other towns as much as he was duty-bound as a private tutor, which was his source of income.
Keen on securing a professorship position at his local university, he turned down many offers from all over Germany. But getting the professorship position at the University of Königsberg proved to be more difficult than he had initially imagined, and had to wait until he was 46 before he was finally able to become a full professor.
In his first critique, Kant was interested in delineating the limits of reason. In other words, he endeavored to determine via negativa the things that we couldn’t possibly know for certain because of the limitations of our reason. In order to express this seemingly very simple idea, Kant spent 12 years thinking about the issue, and the result was a 700 page book which he had to edit and publish again because no one could understand his argument.
Kant’s genius account was an attempt at a synthesis of two major schools of thought, empiricism and rationalism. Without going deep into the details of the arguments each camp advocated, I’ll limit myself to explaining the underlying question they were trying to answer.
The philosophers’ main concern was to figure out whether or not we could be certain about the nature of our reality. Is reality different from how it appears to us? And if so, how can we be sure that our subjective experiences are fundamentally the same, or at least similar? This question opens up the doors to a variety of theories that fall on a spectrum whose extremes range from hard core skepticism to hard core realism.
You can probably figure out the troubling implications that could arise from such stances. If there was no common ground in our perception of the world, how can we be sure that what we are experiencing is the same as what other people are experiencing? Worse yet, how can we be sure we understand each other?
Put simply, some philosophers thought there’s no way we could be sure that our perceptions of the world are the same, while others defended a realistic approach where they argued that the world we experience is how reality really is.
Troubled by the possibility that our experience of reality might not be universal, Kant took it upon himself to show that human beings are all governed by a set of conditions (forms) that made their experience of the world not only possible, but also universal.
Kant’s argument established a difference between reality in itself (noumena) and reality as it appears to us (phenomena). And he concluded that human beings only have access to phenomena, of which their experience is universal. That is to say, we are all equipped with the same hardware to perceive phenomena in the same way, despite the fact that our experience of this phenomena is subjective.
It is for this reason that I thought Trish’s article did a great job explaining the subject of universality:
“What Wolfram is saying is that every system that displays non-trivial behaviour — such as the human mind — is equivalent in computational power. In other words, human minds are universal. Every human mind is capable of running exactly the same computations. This means that we are all capable of understanding the same thoughts, emotions, and ideas. And the key to understanding is communication.”
This is at the level of phenomena. According to Kant, The noumenal realm, comprised by things-in-themselves in contrast with things as appearance, is the part of reality which is inaccessible to us, because we are not wired to process it. Our experience of the world is thus conditioned by the limitations of our hardware which only allow us so much insight into the ‘real’ fabric of reality.
What does all this have to do with Wall Street, though?
Well, one day Kant was reading Nassim Taleb’s Black Swan, and was finally intrigued to explore new cities. Especially curious about the NYSE he decided to buy a roundtrip ticket to New York. It was thanks to Fat Tony (who would later on feature in Antifragile) that Kant was able to have access to the trading pit. To say that he was impressed would be an understatement.
He was captivated by humans’ capacity to reproduce the processes of reality in their mundane affairs. You see, after digging deeper into the infrastructure of Wall Street, it became crystal clear to Kant that the dynamics of the financial market mirror that of reality.
Amidst the chaos of traders shouting and making weird signs, the incomprehensible numbers displayed on the screens reminded Kant of the phenomenal realm. Over lunch with Fat Tony, Kant comprehended that not even Harvard professors had any idea about the nature of the stock, much less all the other financial instruments and their derivatives.
Financial instruments eluded the conceptual understanding of even Harvard economists. So much so that many who thought they had a proper grasp of the innards of the stock market saw themselves in ruins in the wake of the market crash of 2008.
Economists, like philosophers concerned with the nature of reality, thought Kant, were concerned with the nature of the financial market. Some were hard core skeptics, and thought that anything could potentially be a financial instrument (e.g. fiat money, no intrinsic worth), while others tilted towards a realist stance defending instruments whose value was tangible (e.g. sound money).
Although Kant was not completely a doer himself, he saw in his new friend Fat Tony a practical Kantian who discerned the limits of reason via negativa. And instead of wasting his time on the thing-in-itself of the financial market, he realized that the best approach would be to figure out a way to make the best out of the phenomenal aspect of the market.
Kant himself was motivated by a strong sense of duty. Fat Tony, while not very big on obscure dialogue, enjoyed the company of the former because each, in a weird way, were advocates of similar stances and philosophies. But more importantly, they both agreed that the best part of the day was the time they sat down to enjoy a good feast, especially one that is shared with interesting acquaintances and friends.