Investment strategies, portfolios, risk and requisite attention

Investing Attention Essential to Viable Growth (Part #9)

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Engaging in a field of play: The argument can be taken further by recognizing a periodic tabular pattern as a form of "field of play". In terms of a financial perspective, various instruments come into play for a period at particular locations in the table. The metaphor of play, as in "playing the market", is well recognized, whether or not it is deprecated as high-risk trading transactions made by inexperienced traders trying to make a quick profit (Peter Lynch on Playing the Market, Investopedia, 16 November 2011; Playing the market down the middle, Financial Post, 27 February 2014). How the terrain is variously envisaged by the players is another matter.

In terms of a more general perspective, such a field of play is usefully framed through various board games. Leela (of Hindu origin) is a prime example, as the origin of snakes and ladders; chess and go suggest other patterns of insight. Of potential relevance, in the light of the strategic significance attributed to them, are the number-based dice games of the Mahbharata (Gilles Schaufelberger, Dice Game in Old India -- from the essay of Heinrich Lüders Das Würfelspiel im alten Indien, Berlin, 1906).

It is somewhat extraordinary that playing the market has been variously described as a "numbers game" -- in the light of the earliest numbers game known in the West as Rithmomachy. Known also as The Philosophers' Game, it is a highly complex, early European mathematical board game (Ann E. Moyer, The Philosophers' Game: Rithmomachia in Medieval and Renaissance Europe, 2001). A literal translation of the name is "The Battle of the Numbers". The game is much like chess, except most methods of capture depend on the numbers inscribed on each piece. It is alleged to have served as a practical exemplar for teaching the contemplative values of Boethian mathematical philosophy, which emphasized the natural harmony and perfection of number and proportion.

The game was undoubtedly an inspiration to the magnum opus of Nobel Laureate Hermann Hesse, as noted by Todd R. Harris (The Interplay of Opposites, the Language of Experience, and the Geometry of Ascent: a comparison of Hermann Hesse's "Das Glasperlenspiel" and Nicholas of Cusa's "De Ludo Globi", 2001).

With respect to the interplay between attention, misdirection and illusion, a fundamental question at this time is what other illusions are being deliberately and strategically cultivated -- and with whose complicity (Playing the Great Game with Intelligence, 2013).

Investment strategies implying distinctive forms of attention: Whether framed as a game or not, there is clearly recognition of styles and preferences of investing. These can be more usefully discussed with respect to developing and managing an investment portfolio (below). The concern here is how this might be related to a more general understanding of the strategies for investing attention. This might be explored through a general theory of strategic options, notably those inspired by military philosophy.

It is in this sense that the considerable reflection relating Asian martial arts with both philosophical frameworks and business is potentially fruitful (Gregory Beyer, Why Business Leaders Are Obsessed With Sun Tzu's Ancient Military Guide, "The Art of War", The Huffington Post, 24 March 2014; Chin-ning Chu, The Asian Mind Game: Unlocking the Hidden Agenda of the Asian Business Culture - A Westerner's Survival Manual, 1991; Troy Bonar and Brian Tracy, Bushido Business: the fine art of the modern professional, 2011).

As might be expected, there are numerous references to the philosophy of BaGua and feng shui in relation to business -- in Asia. Despite reference to strategic treatises like The Art of War and The Book of Five Rings, it is not clear whether the implications for engagement of attention extend -- other than by implication -- to the codification offered by the BaGua pattern considered so fundamental, as separately discussed (Clues to Movement and Attitude Control, 2002)

The BaGua pattern suggests that its 8 constituent trigrams are indications of distinctive modes of engagement -- of strategic investment of attention. These could of course be seen as potentially related to to the asset classes highlighted with respect to financial investment. There is the additional advantage that the BaGua pattern can be further elaborated into a set of 64 hexagrams indicative of more detailed conditions -- traditionally considered to be fundamental to the decision-making process with respect to any form of investing attention. It can of course be seen to be a form of periodic table which might be mapped into the design of the pattern explored above (Associating metaphor with formal representation: the I Ching of Chinese culture, 2009).

The value currently attached within the business world, to such previously deprecated insights from Asia, reinforces the arguments made by Susantha Goonatilake (Toward a Global Science: mining civilizational knowledge, 1999). He stresses the competitive advantage of those cultures in deriving insights from their own metaphors. As discussed separately, this suggests the merit of marrying metaphors across cultures (Enhancing the Quality of Knowing through Integration of East-West metaphors, 2000).

Portfolio of investments -- of attention: There is of course considerable insight into the nature of investment portfolios. Any given portfolio, selected as a consequence of a pattern of preferences, could be considered as a sub-set of the full range of possibilities of investment -- perhaps framed most generally by the BaGua pattern. Preferred selections bear some resemblance to opening moves and playing styles in board games like chess and go.

There is a well developed literature on modern portfolio theory and post-modern portfolio theory from a financial perspective. Such theory does not appear to highlight (or explain) the distinctive types of portfolio encountered in practice -- or to predict the existence of others:

• Investopedia distinguishes 5 Popular Portfolio Types (26 January 2013): aggressive, defensive, income, speculative, and hybrid.
• Investment Consulting Services offers an Explanation of the Different Types of Investment Portfolios: short-term, conservative, balanced, growth, aggressive growth, most aggressive,
• InvestingForMe distinguishes Categories, Approaches, and Styles: cash and cash equivalents (sometimes referred to as capital preservation), income (sometimes referred to as conservative), income with growth (sometimes referred to as growth with income or balanced depending upon the portfolio's asset mix), growth, aggressive growth, international growth, alternative (or hybrid)

Examples might include investments in asset classes according to the following percentages, depending on interpretations.

Investment style	Asset classes				Investment preferences
	short-term	bonds	domestic stock	foreign stock	return/yield	tolerance of risk and value fluctuations	time horizon
short-term	100%
conservative	50% (5-15%)	30% (70-75%)	20% (15-20%)		maintain real value, or protect against inflation.	risk averse	shorter
balanced	45%	10%	45%	5%
growth	25%	5%	60%	10%
(moderately) aggressive growth	10% (5-10%)	(35-40%)	70% (50-55%)	15%
most aggressive			80%	20%	highest possible	high	longer

As the table implies, it is a generally accepted principle that a portfolio is designed according to the investor's risk tolerance, time frame and investment objectives. A portfolio's asset allocation may be managed utilizing any of the following investment approaches and principles: equal weighting, capitalization-weighting, price-weighting, risk parity, the capital asset pricing model, arbitrage pricing theory, the Jensen Index, the Treynor Index, the Sharpe diagonal (or index) model, the value at risk model, modern portfolio theory and others.

With respect to this argument, the question is how a "portfolio" might be generalized to encompass the investment of attention in all its forms. This would then relate to some concerns and methods of:

• time management (ABC analysis, Pareto analysis, Eisenhower Method, POSEC method, Implementation of goals, Task list organization). Various software applications are used to assist this process. [see time budget data by country from Center for Time Use Research, Access Time Use Data; Towards a New Science of Everyday Life]. However, in addition to the conventional relation of time management to any business model, there is a case for reframing this with respect to attention in terms of a "busyness model" (Developing a Busyness Model, 2009)
• attention management. Tools are designed for supporting attention. These are often adaptive hypermedia, and may rely on profiling the user in order determine how to better support attention.
• lifestyle design (Timothy Ferriss, The 4-Hour Workweek: escape 9-5, live anywhere, and join the new rich, 2007; Mary Catherine Bateson, Composing a Life, 1991; Composing a Further Life: the age of active wisdom, 2010).

Expressed as a circular pattern, this could be understood as combining the characteristics of a pie chart (often used in representation of contrasting portfolios) and a mandala -- appropriately subdivided and coloured as a sub-set of the full spectrum of possibilities. The complex multi-level form of the mandala is indicative of the multi-level subtleties of investment of attention -- in contrast with much simpler form of the pie chart typical of financial investment portfolios.

The argument might be illustrated by examples such as the following -- raising the question as to how "return/yield" is to be interpreted when it is not purely quantitative or financial. Similarly "risk" may be nebulously understood in terms of disappointment. "Time horizon" may then even relate to a sense of aesthetic closure, as with poetic justice.

Return/yield in relation to risk tolernce and time horizon
	"return/yield"		tolerance of risk (and fluctuations of value)	time horizon (closure/maturity)
Examples	"psychic income"	growth in quality of life
friendship				longer
partner / family				permanent?
one-night stand				very short
party / dinner	enjoyment			shorter
gambling				very short
sport / exercise				longer
prayer / ritual				permanent?
caring for another
charitable activity
psychoactive drugs
social media
humour
democratic protest
hobby	enjoyment	skill development		longer
conference participation	networking? mutual appreciation?	learning career development

Clearly the tagging of "likes", "friends" and "followers" confuses the question in the case of social media -- as with "hits" on web pages. The issue even implies an equivalent to the existence of complementary currencies -- even of so-called "local currencies" (Bernard Lietaer and Jacqui Dunne, Rethinking Money: how new currencies turn scarcity into prosperity, 2013). The issue goes beyond the conventional distinction between nonprofit and profit in that it raises the question as to the nature of the return/yield in the case of an investment of attention framed as "disinterested" or altruistic.

Evaluation of investment risk -- adapted to attention: Emphasizing again the distinction between a quantitative and a qualitative investment of attention, it is clear that there is a degree of familiarity with the sense of a:

good investment bad investment

long-term investment short-term investment

speculative investment risky investment

Less evident in the case of attention is recognition of the "performance of an investment", a "quick killing" or "pay-off" -- or use of language framing a sense of "over-investment" or "under-investment". The financial terms are of course readily used as metaphors -- however controversially this may commodify the investment of attention.

Investment risk is the possibility of loss of the investment made -- and is evident in the case of investment of attention, then typically framed as a "waste of time". Various forms of risk are distinguished (No Investment Is Safe! The Varieties Of Investment Risk, FinanceCritics, 26 July 2012):

• loss of principal, namely the original investment made.
• asset backed risk: risk that the changes in one or more assets that support an asset-backed security will significantly impact the value of the supported security.
• credit risk (default risk): associated with a borrower going into default (not making payments as promised). Investor losses include lost principal and interest, decreased cash flow, and increased collection costs.
• foreign investment risk: rapid and extreme changes in value due to: smaller markets; differing accounting, reporting, or auditing standards; nationalization, expropriation or confiscatory taxation; economic conflict; or political or diplomatic changes.
• liquidity risk: risk that a given security or asset cannot be traded quickly enough in the market to prevent a loss (or make the required profit).
• inflation risk, the danger that you cash can hold less price in the longer term than it does now.
• market risk: standard market risk factors distinguished are equity risk, interest rate risk, currency risk, and commodity risk
• operational risk: arising, in direct or indirect manner, from the people, systems and processes through which a company operates.
• chance risk (marketability risk). This happens when you lock up your money in an illiquid investment, sort of a fixed term deposit with very modest returns, and miss an opportunity to take a position in one thing with a chance of abundant higher returns -- that is the prospect that there will be no buyer accessible when you would like to sell your investment.
• model risk: loss resulting from using models to make decisions, initially and frequently referring to valuing financial securities
• concentration risk. This occurs when you have got an excessive amount of your cash focused in one area, for instance all in one particular stock or all in one industry.
• interest rate risk, which is the likelihood that the relative worth of your investment will decrease because of changes in interest rates.
• currency exchange risk. Currency exchange rates are constantly fluctuating and can amendment the price of your investments. If the bottom currency of your investment is totally different than the currency you're buying with, than the value bf your investment will fluctuate depending on the currency exchange rates.

In the case of financial investment, a risk-return spectrum is recognized. Also termed the risk-return tradeoff, this is the relationship between the amount of return gained on an investment and the amount of risk undertaken in that investment.The more return sought, the more risk that must be undertaken. As noted by Wikipedia:

There are various classes of possible investments, each with their own positions on the overall risk-return spectrum. The general progression is: short-term debt; long-term debt; property; high-yield debt; equity. There is considerable overlap of the ranges for each investment class. All this can be visualised by plotting expected return on the vertical axis against risk (represented by standard deviation upon that expected return) on the horizontal axis. This line starts at the risk-free rate and rises as risk rises. The line will tend to be straight, and will be straight at equilibrium - see discussion below on domination.

Clearly this invites more general interpretation to include the investment of attention.

Clues to patterns of investment of attention: If a portfolio is to be understood in its most general sense as potentially involving contrasting modalities of attention, any quest for clues to its design needs to be undertaken by bearing in mind that the distinctions may be made between "7 plus/minus 2" modalities (following the research of Miller, above). The fact that the number of recognized "asset classes" is variable, seemingly from 4 to 10, is indicative of the cognitive constraint. The issue may be informed by understandings of "span of control" and "spreadthink" (as indicated above). Especially intriguing is the sense in which investment of attention may be constrained by "Dunbar's number".

These constraints may be indicative of ways in which investment of attention is partly undertaken through a limited number of what may be compared to "holding companies" -- each controlling investments of attention in a multiplicity of arenas. Curiously, Dunbar's number is of the same order as that of the number of chemical elements in the periodic table. What degree of variety is commonly distinguished in an attention investment portfolio?

Clues to the cognitive feel of such contrasts might then include:

"7 ?± 2"	Examples of sets of distinctions of potential value
5	The Book of Five Rings
6	Six Frames For Thinking About Information (2008) by Edward de Bono, distinguishing: purpose (triangle frame), accuracy (circle frame), point of view (square frame), interest (heart frame), value (diamond frame), outcome (slab frame) Six WH-questions, as variously distinguished by Wikipedia
7	Many 7-fold typing systems Seven elementary catastrophes and their relation to WH-questions (Conformality of 7 WH-questions to 7 Elementary Catastrophes, 2006)
8	asset classes (as variously noted above) BaGua Spiral dynamics and 8 waves of existence of Ken Wilber, distinguishing by colour code: beige (archaic-instinctual), purple (magical-animistic), red (power gods), blue (mythic order), orange (scientific achievement), green (sensitive self), yellow (integrative), turquoise (holistic). This pattern notably features in considerations of integral management.
9	enneagram of the Fourth Way of George Gurdjieff, and as a related system of personality typing

Many similar clues of potential relevance are suggested in a separate study (Examples of Integrated, Multi-set Concept Schemes, 1984). Of particular interest in relation to this argument is the permanent quality of the investment of attention in the categories distinguished within each such system. Categories are typically a form of "fixed investment" in a period when creative fluidity may be required.

Adapting financial investment strategies in terms of attention: Use of insights into financial investment in 4-10 distinct asset classes could be especially fruitful (beyond the quantitative arguments) -- if the sense of the cognitive feel for the preference for one in relation to others could be adequately articulated (John R. Nofsinger, Psychology of Investing, 2013; H. Kent Baker and Victor Ricciardi, Investor Behavior: the psychology of financial planning and investing, 2014; William Bernstein, The Intelligent Asset Allocator, 2000). It is unclear that this could be achieved to general satisfaction, rather than in the light of particular investor biases (Philip Lawton, The Psychology of Contrarian Investing, Research Affiliates, December 2013).

The difficulty, with which many have a degree of familiarity in the case of attention, is how to interpret (and balance) the sense of risk, return on investment, and any desired sense of closure (or permanence). This is most obviously relevant in the case of interpersonal relationships or involvement with a group -- with the expectation of some form of commitment (see The Importance of Committing to Causes, GiveWell, 14 May 2014) .

Potentially helpful in this respect would be an adaptation of the work on axes of bias of W. T. Jones (The Romantic Syndrome: toward a new method in cultural anthropology and the history of ideas,1961), as summarized separately (Axes of Bias in Inter-Cultural Dialogue, 1993) -- especially as an example of other such systems, as reviewed separately (Systems of Categories Distinguishing Cultural Biases, 1993). For Jones the axes are:

• Order vs Disorder: Namely the range between a preference for system, structure, conceptual clarity, etc. and a preference for fluidity, muddle chaos, etc.
• Static vs Dynamic: Namely the range between a preference for the changeless, eternal, etc. and a preference for movement, for explanation in genetic and process terms, etc.
• Continuity vs Discreteness: Namely the range between a preference for wholeness, unity, etc and a preference for discreteness, plurality, diversity, etc.
• Inner vs Outer: Namely the range between a preference for being able to project oneself into the objects of one's experience (to experience them as one experiences oneself), and a preference for a relatively external, objective relation to them.
• Sharp focus vs Soft focus: Namely the range between a preference for clear, direct experience and a preference for threshold experiences, felt to be saturated with more meaning than is immediately present.
• This world vs Other world: Namely the range between preference for belief in the spatio-temporal world as self-explanatory and preference for belief that it is not and can only be comprehended in terms of other frames.
• Spontaneity vs Process: Namely the range between a preference for chance, freedom, accident, etc and a preference for explanations subject to laws and definable processes.

As discussed separately with respect to the set of 7 WH-questtons (where, when, which, why, what, who, and how), these can be experimentally mapped onto polyhedra to provide a greater sense of the coherent context within which decisions are made (Mapping of WH-questions with question-pairs onto the Szilassi polyhedron, 2014).

As with those questions, the biases/preferences above together frame and qualify the investment of attention. They can be understood as patterned by what is known as the Heawood graph (portrayed on the left below). This then offers a framing of the "investment arena" of requisite complexity -- as a container for the complex of processes with which the investment of attention is associated.

Heawood graph (adapted from Wikipedia, adding bias axis labels)	Rotation of Szilassi polyhedron (animation reproduced from Wikipedia)

The Heawood graph is an undirected graph with 14 vertices (of 7 types) and 21 edges (of 12 types). It is a toroidal graph, namely it can be embedded without crossings onto a torus -- potentially of value in offering coherence of a higher order to the pattern of investment biases/preferences. This contrasts with various efforts to frame the investment decision through two-dimensional "investment diagrams" (typically copyrighted by their authors).

As shown in the animation (on the right above), one embedding of this type places its vertices and edges as the set of vertices and edges of a polyhedron with the topology of a torus: the Szilassi polyhedron. This representation, as previously explored with respect to questions, is an effort to frame the "cognitive container" of attentive decision-making in the moment.

Rather than associating each axis of bias with the central lines of the Heawood graph, the polyhedron offers the possibility of transforming each line into a zone -- one of its 7 hexagonal faces. Rather than bias and preference being defined linearly, the implication is then of an area of uncertainty with respect to each of the 7 styles of preference. Each face is then best understood as variegated in coloration -- although the animation below suggests use of Moiré interference effects. Animation of counteracting spirals was more extensively explored in a previous discussion (Convergence of 30 Disabling Global Trends, 2012).

Spirals of opposing direction positioned at ends of each axis of bias using Moiré interference effects to frame the complexity of investment decision-making (indicative) (animation prepared using the Stella: Polyhedron Navigator application)
Heawood graph with spirals added to ends of each of 7 axes (inadequate for indication of preference variability requiring greater complexity or animation)	Rotating Szilassi polyhedron with suggestive indication of contrasting axial bias associated with each face (images added to 4 external faces only)
Design note: In both cases the Moiré interference effects, framing the investment arena as a zone of relative order, could be made more apparent with design improvements, especially in order to highlight distinctive patterns of preferences. This might be better achieved on the polyhedral surfaces by using variegated patterning.

The tetrahedron and the Szilassi polyhedron are the only two known polyhedra in which each face shares an edge with each other face. Given the inspiration of financial investment, there is a case for contrasting the significance of the pyramidal form (figuring on the one dollar bill and on the reverse of the Great Seal of the United States) with that of the Szilassi polyhedron -- of greater requisite complexity to any framing of the Eye of Providence, as noted in the previous discussion (Reframing nothing as a vital focus for sustainability, 2014).

Styles of investment -- of attention: As implied by the examples above from the case of financial investment, the concerns to be distinguished include:

• Allocation between alternatives of investments of attention: This refers to the design of the investment portfolio, namely in what types of interesting attractors has attention been invested, and in what proportions. Basically: in what is one invested?
• Diversification of attention: Clearly this is a requirement of a risk management technique, namely a "healthy" mix of types of investment to minimize the investment risk. Is there imblance, namely over-investment in some classes of attractors and under-investment in others?
• Cost averaging of attention investment: In the financial case, this is an investment strategy whereby an investor purchases fixed investment amounts at predetermined times, regardless of the price of the investment -- as a means of minimizing risk by reducing the difference between the initial investment and the current market value over a long enough timeline. Is an equivalent to be envisaged in the case of attention?
  
• Guided by general context: A "top-down" approach would be inspired by the larger context, including public opinion and fashion, to determine in what mix of attractors to investment attention.
• Guided by specific cases: A "bottom-up" approach would be based on assessment of individual attractors, irrespective of the larger context
• Socially responsibility: In this case attention is invested according to ethical and other values, avoiding investments which are questionable in that respect.

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