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I've been told tht Putting ‘ ‘ into an RSS reader did the trick.

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I'm not quite certain how you set up an RSS feed to the Reuters blog, but once I know I will post it on the blog

Hello I Must Be Going …

This is likely my last blog post at I'd be glad if you continued reading me


For a good many years I have been blogging at

Paul, a friend as well as a colleague with whom I wrote The Financial Modelers' Manifesto, and someone whose taste in finance I admire, invited me to blog there and I probably wouldn't have done it if it hadn't been him. I think I'm one of the few really regular bloggers there though, and recently Jim Ledbetter and Felix Salmon invited me to blog on Reuters, here and I decided to switch.

I also write on Twitter @emanuelderman

What follows, for continuity's sake is roughly the contents of my first blog on Reuters, who use Wordpress which allows a little more format flexibility.

A bit about myself and my interests:


I grew up in South Africa, came to the US to study physics, got a PhD from Columbia in 1973, worked in academia doing theoretical physics for seven years, worked at Bell Labs for five, worked at Goldman Sachs for about 17, where I ran several quant groups and was eventually head of quantitative risk management. I left Goldman in 2002 and have been a professor at Columbia University since then, where I run the financial engineering program, and am also  a principal at Prisma Capital Partners, where I co-head risk management. Needless to say, but important to stress, this blog and anything in it is entirely mine, and has nothing to do with Columbia or Prisma.

In 2004 I wrote a book called My Life as a Quant which introduced the quant world to a wider public. I also have a website at

Being labeled a quant used to be a pejorative in the geeky sense, but now  it's become trendier, but also occasionally pejorative in a harsher way. Ben Zimmer in the NY Times wrote an article about quants here and the NY Times Science section had an article here. But quant means something different now from what it used to, and many people who now call themselves quants wouldn't have qualified as quants in the old days, something I will write about later.


is the name of a new book of mine, to be published by Free Press on Oct 25 2011 in the US and Canada, and by Wiley  in the UK. It's prelisted on Amazon but not really available yet -- I'm still waiting to see a cover design from the publisher. It's full title is Models.Behaving.Badly: Why Confusing Illusion with Reality Can Lead to Disaster, on Wall Street and in Life

It's about metaphors and analogies, about the nature of modeling and theorizing, the difference between them,  why financial models will intrinsically and always at best be very limited approximations to reality, and what to do as a consequence.

What I'm Interested In

Though I started blogging as a quantitative financier, I found myself writing about many other things, which I intend to do here too. If you want to get an idea, you can look at my old blog site at

I'm interested in

• Models, and in particular models behaving badly. The first chapter of my forthcoming book is called A Foolish Consistency and is about models behaving badly in personal and political  life -- I grew up under apartheid.

• Finance and financial theory, and what it can tell you about the wider world, since many financial models deal with volatility, omnipresent in human life. I was going to call my current book Time Decay rather than Models.Behaving.Badly, and wrote a novella to illustrate the idea of Time Decay in human life, but that will have to wait for another attempt.

• Ethics, particularly in the financial world.

• Philosophy, but only as a guide to living.

• Literature. One of my favorite authors is Nabokov; another is Flaubert.

Some Topics I'll Write About Eventually

• Options models and how to understand them

• Finance

• Financial engineering, computational finance, etc

• The volatility smile

• Physics sometimes

• The benefits of shallowness vs deepness in financial modeling

• Sophisticated vulgarity, an approach I like to financial modeling etc

• Plus random things I notice that interest me …


I like Spinoza, a deep theorizer (not a  modeler)  and part of my book is about him too. Spinoza regarded all emotions as derivatives of pain, pleasure and desire, just as all options are derivatives of equity, fixed income and credit. Here above is a part of a diagram that illustrates Spinoza's theory of emotions. I originally drew it in color but Free Press, suitably frugal in these hard times, won't print it in color and so I had to convert it to b&w, also reproduced below. That was quite a job, because in b&w you have to use shape and font to convey similarity and dissimilarity that can be more easily conveyed with color.

More later … at

Strange Fables: 1. A Recursive Story

Once upon a time a man had a small daughter that he was crazy about. Everything she did seemed like a mark of genius. Her vocabulary grew by leaps and bounds; she had beautiful blond hair; her drawings were Matisses and her piano playing, even though she was but two years old, was Mozartian, or so it seemed. Everyone said she was wonderful and he was overwhelmingly proud of her. No other child seemed comparable and he laughed inwardly when people told him of their children's smart sayings, and even resented them, because he knew his daughter was much much better. There was no one like her.

Eventually she grew up and she was still wonderful. Then she married, and in no time had a daughter of her own. And when she told him how wonderful and clever her daughter was, he resented her for comparing her daughter to his.

The Shapes that Corresponds to Colors

I have spent a day battling a problem that actually turns out to be kind of interesting.

In my book there was supposed to be a figure illustrating Spinoza's theory of emotions, a large figure I once drew in color and included in an article I put on the internet about a year ago, here.

My publisher, not keen to waste money on frivolous things like color printing and foldouts, had someone transform it into black and white, split it into two halves, and fit it onto two pages. In the process, the significance of the colors and shades I had chosen was lost, and the morphology of the diagram disappeared. I would have preferred it if they simply printed my original drawing in black and white, but they claim it won't reproduce well in the limited number of shades of gray they allow. Also, the size is wrong.

I decided to redraw it myself in black and white, and perhaps a few shades of gray. I had used red to indicate pain, blue to indicate pleasure, and magenta for desire, and the derivative emotions were combinations of these colors. Now I faced having to do it all in black and white.

So, I spent the day and evening figuring out how to transform colors into shapes and fonts that carry the same emotional significance. Desire, instead of a magenta square, is now a black diamond with Desire written on it in white. Pain is weird gothic type in black on a greyish diamond. And Pleasure is elegant belle epoque double letters in caps inside a cloud. And so on.

I am constrained, by my choice, to what Omnigraffle gives you to work with, and by the number of hours I'm willing to spend on it. I'm also constrained by the fact that the production editor informs me that more than one or two shades of gray will be indistinguishable from each other.

I could do better, but life is short. What I have now is better than the simple transposition to b&w of the original colored diagram, but far from perfect. I'm also having to make the boxed emotions kind of large -- they jumble up the page -- so that there is will be a chance the text in the 50 or so boxes will be legible when reduced to book page size …

How to Win Friends and Influence People

Man on Columbus Circle handing out flyers. Everyone sidesteps him. Closer look: his polo has a large Tinactin logo.

Qualia vs Correlates: Who's Right?

The NYR of Books has a bit of an exchange, here, in an argument between a neuroscientist and a philosopher.

Personally, I'm on the philosopher's side. McGinn writes:

Philosophers want to know whether free will is possible in a deterministic world and whether qualia are reducible to brain states (among many other things): these questions are not going to be resolved by discovering the neural correlates of such things.

But I'm not 100% sure. Maybe if you discover enough interesting things about correlates, you suddenly find one new piece of information that leads you to the qualia? If you study the properties of oil paints long enough, do you learn something about the nature of paintings? I don't think so, but maaaaybe.

So far, no sign of how that would happen.

50% Perspiration + 50% Inspiration

I have finally finished reading "How The Hippies Saved Physics" by David Kaiser. It made me admire again people who have a passion for something and don't give up, no matter what people advise them. Doubtless there are many, perhaps most, people for whom that strategy doesn't work, but I've seen a bunch of them in physics or allied fields, and it's inspiring.

The hippies book discusses John Clauser, the experimentalist who first tested Bell's theorem in quantum mechanics. He was a grad student at Columbia in the late 60s, someone I knew of rather than really knew. After years of neglect by most of the academic community, he received the Wolf prize a year ago, together with Zeilinger and Aspect who did related work after him. He could never get an academic job.

Another was Steve Wiesner, also a student at Columbia the same time, who invented quantum encryption.

Two more people this brings to mind I remarked on in My Life as a Quant -- Doug Hofstadter (Godel Escher Bach) and Mike Green (string theory), whom I knew better, and both did it Their Way to ultimate success despite people's discouragement.

Nice to read about and ponder.

Titillatio (Latin)

I have been spending a fair amount of time reading the first pass proofs of my forthcoming book. One paragraph I came across reminded me of Weiner et al.

Spinoza is not naïve about pleasure; he knows that it is not an unmitigated good, and that it is best when it is balanced. He distinguishes pleasure from stimulation (Latin titillatio), a pleasure that is focused more on some parts of the body than others. Localized pleasure, he writes, can exert an obsessive power “that can overcome other actions of the body, and may remain obstinately fixed therein, thus rendering it incapable of being affected in a variety of other ways: therefore it may be bad.”

Oh Dad, Poor Dad, Momma's Hung You in the Closet and I'm Feelin' So Sad

Who gets the software?


I used to skeptical, but I could be convinced that there is something to be said for self-publishing.

If you are good at word processing, you can do the typesetting yourself, probably as well as they can if you take the time. Douglas Hofstadter did all his own. It's fun if you have the right tools. I always liked that kind of stuff.

With enough time and software you can do the figures you need or find them in stock on the internet. Or hire someone to do them -- illustrators have a hard time these days and are happy for work.

You can get literate friends to help you edit, though that may be the end of the friendship.

So what's left? Distribution and PR. And encouragement of course. Are publishers good at that? Their life is a lot tougher in a world where dueling media vie for your attention in multiple ways.

Honky Tonk Women

Although people lump them together, there is a difference between Anthony Weiner and DSK.

Assuming that what you read about them is true, this is my take:

Weiner's behavior stems from a neediness; what he needs is something other than what he has; if he gets what he needs he may be cured.

DSK behavior stems from a neediness too; what he needs is exactly what he is doing. There isn't a cure.


I'm sure I'm saying nothing new, but having FB'd and Twittered for a few weeks, I can see that it can easily drive you into a state of perpetual low-key mania that resembles exhilaration.

It's (Google)^n. You use your fast-twitch muscles all the time, and God knows what happens to your slow twitch ones. Zadie Smith recently wrote in the NYR of Books that she finally swore off FB, and I can see why.

Progress, Portability, Autonomy

What we call progress is often linked to portability and the autonomy it appears to bring: spears to daggers to guns, pendulum clocks to watches, computers to cellphones, vegetables to vitamin pills or Power Bars, movie theaters to videos on phones. All the formerly big things end up being carried on our body wherever we go. And so we become autonomous, able to act independently, apparently self-sufficient despite the environment. The increasing cerebralization of everything.

But the autonomy is only partial; the cost of portability is a dependency on technology and miniaturization and you end up with devices you can't create or fix yourself, and most people don't understand how they work. More autonomous in the short run, but probably less stable over time.

Not quite sure where cloud computing fits into this: it's a giant server farm rather than a miniature, it makes you more autonomous wherever you go, but nothing belongs to you.

Risk and Reward for Weiner Processes

Once upon a time when I first came to work on Wall Street a young colleague of mine liked to flirt, no more, with the PAs. One day he asked me to come out after work for a drink with a couple of them, instead of going home. I didn't go and half jokingly said that if I was going to have to lie, it'd better be for something worthwhile. He went without me, and a couple of hours later when he hadn't come home his significant other called me at home to ask me where he was. I said I didn't know. She said he'd told her he was going out with me. I said that wasn't the case. Etc etc. In the end, it was me she didn't talk to for a while.

I am reminded of this because I missed all the hubbub involving Anthony Weiner while I was in Europe, and have now been catching up. The most astonishing thing is the apparent discrepancy between the risk and reward of Weiner's actions. His expected Sharpe ratio had a very low numerator of reward for a very big volatiity.

It looks to the outside world like he messed up a political career and perhaps his marriage for the sake of a few cheap thrills. Either he needed those cheap thrills really really badly, or else he has a very poor sense of risk.

I suspect he needed them really badly, in which case they weren't cheap at all.


My editor had a narrower view of my book than I did, maybe (hopefully) a more commercial one. I'm not sure if she was right. I kind of liked the idea of being discursive, but didn't indulge myself fully. Anyhow, this is a boxed excerpt that didn't make it.

Thanne longen folk to goon on pilgrimages …

And palmers to go seeking out strange strands,

To distant shrines well known in sundry lands

In particular the starre davide lynes

that suddenly appeereth on the pynes

Dis how de pilgrim ride in moderne tymes.

La Tortilla Consecrata Di Liguria …

The Holy Tortilla of Liguria. Well, almost, only better …

Mexico and Texas have their tortillas and pizzas with images of the Virgin Mother.

Turin has the shroud, with an image of the son himself.

But San Remo on the Italian Riviera has the miraculous Pino Marino with a Star of David, as shown in the associated picture.

Believe me, it is real and natural. You can see it only when you face Jerusalem. From other angles it's not a star at all. I walked by it and was stunned: a marine pine with a natural Magen David on its top.

Someone once told me that, as a consequence of the Romans occupying ancient Israel and then being overrun by Christianity, almost everyone in Italy is partially Jewish.

Maybe this explains the occurrence of a genuine miracle. And one that respects the fourth commandment. Scoff if you will. You heard about it here first.

My Proustian Moment

In Italy they are called nespole, in Cape Town loquats. You could not buy loquats in Cape Town, you could only steal them. They grew in people's yards or gardens, on low-ish trees with coarse leaves and thing branches that couldn't support much weight. No one farmed them and they weren't sold in groceries. On my childhood block one tree grew in the front yard of a house owned by an old epileptic lady who occasionally fell on the sidewalk and convulsed, and another in the front of the wedding-cake house, also occupied by a really ancient woman who claimed as she chased us away that she made jam out of them.

In Italy, as in Barcelona and Greece, they sell them in markets. I bought a few and it took me back. You can make a wish when you taste them the first time in the season. God knows who actually farms them; it doesn't sound too productive. They are delicious, the more so for being picked wild rather than cultivated. Mostly sweet, but not very, with a weird tart touch, but it doesn't require any time to get used to them. I recommend them highly if you ever get to some place where you can find them. They will make a fabulous sorbet for Grom, who are already working on an organic version in their lab in Palermo.

The Case Continues …

is the title of a quite good song by Ute Lemperer in her album Punishing Kiss, which came to mind now as I decided to bore you with the latest blow by blow (no that's not true, I don't have the strength to go blow by blow) of my travails in seeking permission to quote.

Re Keynes: I await an invoice for GBP 360 in order to quote Keynes, from the Royal Economic Society. I will consider myself lucky to pay them, when that day arrives. At least they grant world rights. See below.

Re Larkin: after much further work and repeated desperate emails to Farrar Straus Giroux, I received an email telling me that they will eventually, after they reduce their backlog, grant me US rights to Larkin for some unnamed fee, still waiting, but that the Canadian rights belong to Faber and Faber in London. Nicola Cloke, their perhaps appropriately named permissions editor, [Blake: Shame is Pride's Cloke; Derman: Cloke is Faber's Shame] doesn't accept calls -- who can blame her? -- but directed me to a vastly confusing website that demands things I don't have and threatens me with being sent to Coventry if I don't provide them. Very discouraging.

As for Amichai, his very kind wife directed me to his agent in NY, who promptly replied, but told me that THEY have only the rights to the UK, and so I still await a reply from Houghton Mifflin Harcourt, who are miffed at me and won't answer.

I could go on but I won't. Well, maybe I will.

In brief: every publisher is busy and doesn't really want to be bothered with permissions granting. In addition, it's all fractal; no one owns the rights to the entire world. eBook is different from paperback, paperback from hardback. Country from country. They all require different information to grant you rights, or even to consider granting rights. There is NOTHING uniform about this at all. I am amazed at how this state of affairs can continue. You would think they would all get together and reduce the friction.

In the financial OTC world, friction is useful; it gives you a way of concealing what should be public information about pricing, and lets you gouge people a little. Similarly perhaps with real estate. But in the publishing world, I cannot imagine whom this viscosity serves. It only helps them by dumping the work onto authors.

One of the nicer people who replied to me said that if I hunt around i will find there are some people who do this for a living. I replied that I was one of them.

After the revolution it will all change …

Banks as Utilities

I read an article somewhere today about how BNY Mellon had to pay several hundred million dollars for unfairly overdrafting customers, and it struck me ...

How on earth do you cheat people out of several hundred million dollars?

You can't do that easily if you make cars or computers.

But if you are in the business of passing money around, something everyone has to have access to, then you can unfairly deprive millions of people of little bits, and no individual can really do something about it. You have all the power.

Which seems a good reason for turning money transmitters into utilities.

Quote God Damn It Unquote

I am stuck in this endless cycle of trying to get permission to quote.

The poems I want permission to quote, as well as the Keynes speech, are all over the internet. Someone is quoting them without permission, on countless websites, and yet, if I want to reproduce them on paper rather than on the net, I need permission. Something illogical here that needs to be cleaned up and streamlined.

Here is the Keynes speech on Newton.

Here is the Amichai poem.

Here is the Larkin.

So, if I had an ebook, I would simply link to these URLs.

But in print, I need to run around the world searching for someone to authorize what is already available everywhere for free.

Providing Liquidity: An Idea for a Business

In my forthcoming book Models.Behaving.Badly I want to quote more than a sentence or two from exactly three people: Yehuda Amichai, John Maynard Keynes and Philip Larkin.

Amichai wrote a wonderful poem called "The Precision of Pain and the Blurriness of Joy" which I saw in the NY Review of Books about ten years ago, and saved. John Maynard Keynes gave a speech about Newton in 1946 (after Keynes was dead, delivered by Keynes's brother.) And Philip Larkin wrote a very funny poem called "This Be The Verse." If you belong to the early part of the baby boom wave, also check out "Annus Mirabilis."

In the old days, probably, your publisher would get the rights to quote from these poems, which you have to obtain from whoever owns the copyright. But these aren't the old days, or else my publisher sensibly values his or her time more than they value mine. So, I have spent hours on a sort of scavenger hunt, emailing and sometimes writing one person after the other, as they pass me on, to try to get permission to quote, despite my willingness to pay. I must have spent about 12 hours on this already over a month.

What I have to show for this is

(a) A letter from the Royal Economic Society finally granting me the right to quote Keynes. They are very gracious but it took many many iterations to get to them as the ultimate holder of copyright. Cost 350 GBP and my time.

(b) After many leads, a very gracious letter from the late Amichai's wife telling me she doesn't actually hold the copyright, though it took me many baton passes to get to her.

(c) No response at all from Farrar Straus Giroux who hold the copyright to Larkin (I think).

You would think someone would like to bring liquidity to the rights to quote, like Second Market who bring liquidity to restricted stock etc, by forming a central repository for linking authors who want to quote to the invisible people who hold copyrights, for a fee. If you want to do that, you can use this idea provided you give me a stake in the business for 20% of the equity. Please don't make me do a Winkelvoss on you.

The Klein Bottle

I have been looking at this NYR of Books article about consciousness.

I am inclined to think it's too early in the history of humanity to solve the problem.

Theorizing about consciousness is like trying to nourish your body by eating bits of it.

It's like pretending you don't exist and then setting about engendering yourself.

Plead Insanity

Until he hit the news, I wouldn't have been able to tell you who Dominique Strauss Kahn was. Right now, devoted seducer though he may have been, there is still something about it that's like squaring the circle. It doesn't quite add up.

One can imagine someone hitting on women; one can imagine someone persistently hitting on women and rumors of more than that seem to be coming out of the woodwork now … but forcibly jumping on someone who just happened to walk into your room while you were taking a shower is still a step-and-a-half beyond that. If he did it, he should plead insanity. If he didn't -- well that doesn't hang together either. Be interesting to see the trial.

@EmanuelDerman on Twitter

CBO seeks someone to lead the Financial Analysis Division

I got an email announcing the following position, which sounds interesting:

The Congressional Budget Office (CBO), a small nonpartisan agency that provides nonpartisan economic and budgetary analysis to the Congress, seeks an executive to lead the Financial Analysis Division. I am contacting you in the event that you are aware of individuals who would be interested in this opportunity. People can view this announcement and apply online here.

Our customers are the finest people

Suburbanite that you are, you would think these beautiful trays of organically grown fruit displayed at the entrance to the store, next to the Arabica from Chichen Itza and the scones with Cornish clotted cream are lying there to welcome you at Whole Foods, or at Harry and David's local.

But no, to the left are the Pierre Cardin suits and to the right is the Allegra.

And then you realize, this is new New York City, and you're just in your local Duane Reade.


About a week ago I received an email from someone I don't know asking a detailed question about a table in a 1995 paper I have on my website.

Being busy, I replied that I would reply in more detail a little later. Eventually I looked at the question, couldn't understand it completely, but sent a reply.

He followed up with the same question rephrased, and after an email or so more, I realized that his error came in assuming than a call with strike 120 was worth more than a call with strike 100.

I pointed it out to him and he thanked me and asked another question.

I didn't know the answer to that, since it was more general, and told him so.

Then he followed up with a third detailed question about a table in the same paper.

Being busy with my own obligations, I took a break and didn't reply for 36 hours. Then I received the following email:

You know Mr. Derman, it is pretty clear you're ignoring my message. If you'd prefer not to answer the message and in particular for me not to keep asking you questions about something you publicly published, don't you think a person like you could afford to be more professional and courteous and simply say that rather than ignoring me? I mean are you an adult or a child? When you create a website, publish information on that website, and leave your contact information, people with questions are inevitably going to ask questions … If I were you, I'd try to learn that. Then again,if you haven't by your age, you never will.

The world is a bunch of people all colliding with each other while they try to look after themselves and do the best they can, mostly. If you forget that other people have their own lives, at whose center you don't sit (and I'm guilty of this sometimes too), you have a good prescription for bringing yourself misery.

Twitter: @EmanuelDerman

Don't abandon all hope ye who enter here

If you are an atheist and disbelieve in the power of redemption, you should visit the Duane Reade on 63rd and Broadway. If you know what Duane Reade used to be like, you will be amaze, dare I say thrilled. Croissants, Icelandic Yoghurts, bagels, whipping cream, beer, mangos, avocados, T shirts, gourmet sandwiches, coffee. And available 24 hours a day. I think they may have been taken over by Boulud across the street. Extreme makeover.

If Duane Reade were a single company, I would buy their stock. They are now owned by Walgren's, and are only a small part of it, but someone there knows what they are doing.

Will CVS respond?

Metaphors from the Physical Sciences

I was revising a subsection of my book about the way in which theories of electromagnetism were discovered.

Static electricity was known for ages. The first currents were produced via capacitors that stored static electric charge produced the traditional way, by rubbing. Discharging a capacitor yielded only a brief short-lived current. Then Alessandro Volta invented the voltaic pile, a chemical battery consisting of alternate pieces of metal and brine-soaked cardboard. Voltaic piles generated long-lived currents that opened up the investigation of the magnetic effects of currents, leading to Faraday and Ampere.

Section Heading: Chemistry is Better Than Friction

The Laboratorio at GROM

On Columbus Circle, in the Laboratorio behind the register
white-coated Dotoressas of science and physiology
mix extracts of fruits and spices
harvested from their Sicilian orchards
combining them with organic milk
flown in from Tuscany
and a few drops of San Pellegrino.
You can understand why even small amounts of GROM are expensive.
They say that late at night,
after they close,
the serious white-coated Dotoressas remove their horn-rimmed spectacles
and put aside their microscopes and loupes
and wet-and-dry bulb thermometers
They empty their pipettes
and autoclave the tongs and spatulas
and apply a few drops of Princess Marcella Borghese from the nearby Sephora
to rid themselves of the smell of vanilla from Agrigento
and turn the Laboratorio into a spa to make extra money.
New York is expensive, even when you sell ice cream at $6 a scoop.
After cleaning the giant aluminum mixing tubs
with steaming jets of distilled Pellegrino
the Dottoressas
health consultations
mineral baths
and prescriptions
wrapping willing customers in hot GROM sheets
as they cool down after immersion in the tubs.
The Dottoressas
have very advanced degrees from Bocconi
and say the traces of GROM
in the tubs
relieve pain and stress
and strengthen the immune system.
At 6am they shut the place and leave
tossing their lab coats into the common laundry bag.
They get a cup of coffee and a glazed at Dunkin Donuts
check their email at Fedex Kinkos
and read about the latest advances in nutrition on the GROM listserv.
Then they go home and try to sleep
before their next shift.

Fluidity and Permeability in 3-D

Last night I saw Werner Herzog's Cave of Forgotten Dreams. 3-D makes everyone look small and doll-like, like the Indians/Native Americans they used to have in panoramas in glass display cases in museums. It's just not worth it.

One of the archeologists in the movie talks about how stone age men 30,000 years ago invented two notions of the world around them: fluidity -- the capacity for people and objects to suddenly change their nature (think metamorphosis in Ovid)-- and permeability -- the linkage between the natural and the supernatural world.

Then, he continued, man shouldn't be called homo sapiens, but rather homo spiritualis, which is what distinguishes us from the Neanderthals, etc; it is our figurative art represents out perceived linkage to the spiritual world that, (I say) shrink though it may, never quite vanishes into oblivion. To seek a morality in the rationality of science is itself a kind of moral attitude.

Meanwhile, through the movie, which was a bit long, I found myself distractedly thinking about ways of knowing the world. In May 1996 I wrote what may have been the first paper on (financial) Model Risk in Risk Magazine (the Goldman version of the paper is on my website at There I wrote

This reliance on models to handle risk carries its own risks. In this report we analyze the assumptions made in using models to value securities, and list the consequent risks.

At that time I classified models into three types: fundamental, phenomenological, and statistical. Since then I've modified this categorization somewhat: in my forthcoming book I distinguish ways of understanding the world as follows: theories, models and intuition. (Not the absence of a serial comma, British style; my copy editor at Simon and Schuster insists on serial commas, and I give up. Americans need everything spelled out for them, and want a comma before the conjunction.)

I've discussed some of this stuff lately with M. Taleb (the M. is the French honorific, not an initial) and I comprehend where we differ. He thinks (as I see it) that models are inferior to heuristics, because he comes from a trading environment where heuristics and common sense matter, and indeed they do. Foolish to rely on models of human affairs rather than common sense.

Heuristics are indeed a way of dealing with the world, a sort of intuitive generalization from experience. But heuristics can take you only so far. That's where scientists come in. I come from a scientific background, and my beef with models is that they are not theories, and one had better remember that.

Theories, I argue, are a way of penetrating to the heart of things, perhaps even to the spiritual heart -- and that requires intuition and a connection to a world of strange notions that emerge, fluidly and permeably, from somewhere unknown and sometimes turn out to be true.

From My Book


… The great financial crisis has been marked by the failure of models both qualitative and quantitative. During the past two decades the United States has suffered the decline of manufacturing; the ballooning of the financial sector; that sector’s capture of the regulatory system; ceaseless stimulus whenever the economy has wavered; taxpayer-funded bailouts of large capitalist corporations; crony capitalism; private profits and public losses; the redemption of the rich and powerful by the poor and weak; companies that shorted stock for a living being legally protected from the shorting of their own stock; compromised yet unpunished ratings agencies; government policies that tried to cure insolvency by branding it as illiquidity; and, on the quantitative side, the widespread use of obviously poor quantitative security valuation models for the purpose of marketing …

People and models and theories have been behaving badly, and there has been a frantic attempt to prevent loss, to restore the status quo ante at all cost.

Where The Wild Things Aren't

The night they killed Bin Laden I was watching the 1986 movie Something Wild, starring Melanie Griffith and Jeff Daniels, made by Jonathan Demme, soundtrack by David Byrne. I first saw it when I went to work on Wall Street, and I watched it now 25 years later. I sort of link it with David Byrne's True Stories, which is more lyrical, but both of them are in part about congenitally mild people allowing themselves to go wild. I liked it at the time, Wall St being an atypical place for me then.

Something Wild has a laid-back reggae version of Wild Thing by Sister Carol over the closing titles. It's also interesting to see what Manhattan looked like in the movie in the mid 80s, grimy and graffiti-ridden, very seedy. It's not quite recognizable any more. And, many times, since the movie is set downtown in the days when the area around Wall Street wasn't gentrified, and since there are automobile trips to and from NJ through the Holland Tunnel, you see the twin towers. Good movies, both.


I have been reading about the "new atheists" -- Dawkins, Dennett, Hitchens and Harris. Hitchens is genuinely funny on any topic, and can laugh at himself. Their passionate longing for rationality and for the rooting out of the so-called spiritual is an attempt to deny the existence of something wild, but at the same time such a passionately irrational kind of wildness itself that it seems to me to contradict its own aim.

Strange Fruit

The intelligence agencies deserve a lot of credit. Nevertheless, I was a little surprised to see people behaving as though it was the the World Series or the Superbowl.

Ultra Vulgar

About a month ago I watched the final episode of The Bachelor, 2011, because it was set in Cape Town and I was curious to see what they showed of my hometown. I've never watched more than a few minutes of any "reality" show before.

Soap operas may be vulgar shows, but they are based on some common human feelings and situations. Telenovelas may be vulgar, but they refer to genuine passions, however exaggerated. The Bachelors was a mass of contrivance: unconvincingly fake drama, fake sincerity, fake passion, fake feeling, fake joy and fake suffering.

The Bachelor, 2011, was nothing like An American Family, the so-called original reality show about the Louds, where the camera interfered with and influenced and modified the interactions of a family by observing it, but at least began with something real. The drama there, if I can believe the movie Cinema Verite, was in the effect of the observer of the observed. But in The Bachelor, there is nothing to modify or observe that wouldn't be there if not for the camera to being with.

It was beyond vulgar.

What Becomes A Ringtone Most?

Most ringtones are either too soft, too irritating, or too disruptive and startling. If you choose one that is a favorite tune, it becomes hummable, a statement, and a topic for conversation itself.

The iPhone (default) ringtone is transparent: it draws no attention to itself; though it clearly consists of musical notes, you can't remember it well enough to reproduce it; nevertheless it is euphonious; it simply draws attention to the fact that the phone wants you rather than drawing attention to itself.

It serves its purpose modestly, altogether a model for human behavior.

My Utility vs. Your Utility

There was an Operations Research seminar at Columbia recently about how to set up additional contracts between individual traders in a firm so as to make their utility functions match the utility function of the firm itself.

This reminded me of when my kids were in high school in Manhattan, preparing to apply to college, and I began to realize something about the relative utilities of the group and the individual.

Your kid might think that he (or she) wants to go to (say) Yale, and that irrespective of where he ranks in the class (say it's in the middle) it' s his right to apply. He wants to optimize his college admission record. The high school he attends, however, wants to optimize their college admission record, and so they try to push your kid towards the best school that is likely to accept him as opposed to the best school in general. You might think you can apply wherever you like, but eventually, you realize, the high school college advisor will not write you a strong recommendation to Yale. They will save their strongest words for the student most likely to get in there, and will have to discourage a weaker student from applying there. College advisors are trying to reconcile all these conflicts to suit the school

This came to mind when I met with my publisher the other day, and I suddenly realized that it is likely that similar constraints apply there. They publish perhaps 100 books per year, or ten per month. In any given month, they can get only so much press for their books. Logically enough, they will throw their resources to the books they judge most likely to pay off. If they have the clout to make one person visible, they will try for the person with the best payoff to the firm. Their utility function is quite different from yours, and rationally so.

My editor said I should tweet and I said

How Often?


A book by Alethea Black

I wanted to bring your attention to a book written by Fischer Black's daughter, who's just publishing a collection of short stories on


She says:

Only one of the thirteen stories features my father in an unalloyed form, but of course I hope his spirit moves through all of them.

I heard her give a reading a some of them about a year ago and they were remarkable.

Capitalist Nonlinearities

It's easy to forget that responses to actions aren't linearly proportional to the force applied, that many situations have a convexity in which just a little more can make all the difference, and a little less does nothing.


1. This letter to the NYTimes on Friday points out one of them.

To the Editor:

If there is an original sin in the Obama administration, it is the fateful decision not to initiate an F.D.I.C.-style takeover of the American banking sector upon its collapse. Had the administration taken that step — taking over the insolvent banks, firing management and recapitalizing them on sound footing — much subsequent history would have been different. Once it lashed itself to the mast of a broken financial industry, however, putting the entire economy at the mercy of people focused on the size of their bonuses rather than the health of the economy, the administration could only hang on, silently and single-mindedly working to recapitalize the banks. Anything that threatened to interfere with that overriding priority — exposing bad debts, reining in the foreclosure mess and, yes, aggressively investigating illegal activity by corrupt financial executives — had to take a back seat.


Montreal, April 14, 2011


2. The linear proportional approach to helping the rebels in Libya is another example of just too little.


3. Re Quantitative Easing 2, however, I don't think any amount of easing will solve the economic problem. The cause cannot produce the desired effect, because easy credit isn't the problem.


4. I don't believe China won't run into social trouble in the long run either, even though so far everything proceeds linearly towards growth without political freedom.


5. As for the US, sooner or later there will arise a successful popular nonlinear response to the linearly increasing concentration of economic power that isn't devoted to popular improvement.

Physics Redux

I spent today at the University of Chicago's James Franck Institute, first giving a talk on finance and then listening to many people tell me about the interesting solid/liquid state physics they are doing, theory as well as experiment.

I had forgotten over the years how interesting active physics is. The most fascinating thing I saw was an experiment in which they let loose from a height a small drop of liquid onto a solid base while taking 1 million photos per second of the collision (camera cost = 100k, 2 cameras). People have known for decades that a drop splatters when it hits the ground and send up a corona of little droplets. These guys discovered, and demonstrated in a video that required no computer analysis but just your eyes, what nobody expected -- that if you lower the air pressure in the tube in which the collision takes place to a fraction of an atmosphere, then the drop doesn't splatter at all; when it hits the ground it spreads out into flat pancake. No air, no corona. Somehow the air is essential for the corona to form. No one knew that before the experiment and no one knows why. They had expected quite the opposite: that the air pressure damps the corona, that the corona would be larger at low pressure. Instead they found that the corona requires the presence of air.

It was inspiring to see postdocs and students investigating phenomena that are puzzling and real, phenomena that will be true for ever, that won't change. I kind of admired the timelessness of it. You could see that they were partaking of a long heritage of careful research, that they were part of a culture. This was about content, not computation or style.


On another note: On the plane to Chicago I reread bits of Brave New World on my iPad 1. The book is very impressive in it's humor and in its parody of capitalist consumerism (said he disparagingly as he tapped the keys of his already obsolete iPad 1). One of many excerpts:

"Strange," mused the Director, as they turned away, "strange to think that even in Our Ford's day most games were played without more apparatus than a ball or two and a few sticks and perhaps a bit of netting. Imagine the folly of allowing people to play elaborate games which do nothing whatever to increase consumption. It's madness. Nowadays the Controllers won't approve of any new game unless it can be shown that it requires at least as much apparatus as the most complicated of existing games."


"We condition the masses to hate the country," concluded the Director. "But simultaneously we condition them to love all country sports. At the same time, we see to it that all country sports shall entail the use of elaborate apparatus. So that they consume manufactured articles as well as transport. Hence those electric shocks."

A Quantum of Solace

In my day quants on Wall Street perenially complained about their bonuses, believing that analytical skills should be positively correlated with pay; this was a Quant's Tzuris (link provided for non-Yiddish speakers).

I heard someone introduce a journalist at a round table recently by saying: "He's written better than people who've written more and he's written more than people who've written better."

Now I have come up with what should be a Quant's Solace: "I make more than people who are smarter and I am smarter than people who make more."

It has not escaped my attention that this philosophy of the contingent maximum can be used by many disgruntled people in a variety of fields, personal and professional.

Working for Love

I like the sound of the book Obliquity by John Kay as reviewed in today's WSJ here, because it makes clear what is obvious to anyone who loves what they do.

From the WSJ Review:

The idea here is that the best way for a business to maximize profits is not to seek to maximize profits. Mr. Kay's ­argument, which owes much to the economist Robert Frank, goes as follows. Consumers will purchase from your business, or employees will go the extra mile to contribute to your success, only if they believe that you care about their interests. The best way to establish that you care is to show that you can place their ­interests ahead of your own. In a recession, for ­instance, you take the hit and avoid layoffs. Then your workers will go to bat for you, giving you a 110% effort.

But, as Mr. Kay notes, something more is required. Even if you know that keeping workers on the payroll will elicit their over-the-top effort, the hope of gaining their over-the-top effort cannot be your motive for keeping them on the payroll. If your employees think that you care not about them but rather about the 110%, they won't oblige you by working harder. ­Paradoxically, then, to gain the 110% you must ­demonstrably not care about it.

Noblesse Oblige

I don't know what to say about Bob Dylan's submitting to the fearful Chinese government's censorship of his play list at his concert, but I know what I feel: It doesn't bother me.

I don't like Warren Buffet lecturing people about derivatives. I don't like Swiss banks taking investment money from the Mubarak family office. I don't like the Chinese government kidnapping Wei Wei for 'economic crimes.' I don't like Beyonce performing for Middle Eastern potentates. I admire Bjork shouting 'Tibet' at her concert. Nevertheless, anything Dylan does is more or less OK by me!

I suppose I'm inconsistent, and I try to think of reasons to justify my feelings rather than changing them. Here are a few so far:

1. Dylan is a force of nature: you don't question Him.

2. You could argue that on the scale of contributions to the world since the 1940s, Hibbing MN outweighs the Beijing government: more positive stuff and so much less negative. Therefore, when an inferior asks someone superior to kindly oblige them their insecurities, he does. Noblesse oblige

A Shilling For Your Thoughts

David Eagleman, the author of the naive and self-serving op-ed piece The-human-brain-turning-our-minds-to-the-law.html thinks that

"A brain-based approach (to the legal system) can be more cost-effective, humane and successful. If we desire our medical treatments to be biologically informed, shouldn’t we demand the same from our courtrooms?"

Eagleman's own brain, makes him assume that crimes are as unambiguously recognizable as are physical illnesses, and that they can therefore be treated as unambiguously as he thinks physical illnesses are treated. But illnesses, physical and mental, keep proliferating as committees of doctors and drug company executives refine and redefine them, and ineffective treatments often die out. (For example, there was a slew of tonsillectomies in the early part of the last century.)

As an undergraduate, according to his web page, Eagleman majored in European and American literature, and then turned to a PhD neuroscience, for which he now shills. He obviously never read Suddenly Last Summer or Orwell.

But you cannot hold him responsible for his opinions; his brain made him say them, without his consent.

For literate light relief, I recommend again this.

David Sokol and the Protestant Ethic

There are some articles out there suggesting that insider trading is OK because it gets information into the market and hurts no one.

Insider trading is hard to define, and the definition keeps changing. But its supposed utilitarian value in equilibrating markets doesn't mitigate what's repugnant about it: the ability to make money without hard work.

As with fiat money, the making of a buck without labor and effort, if that's what happened with Galleon and Sokol -- that's the disturbing part, the violation of the work ethic and the benefit of privilege. I suppose it's what Marx found disturbing about capital, but worse.

There are many utilitarian actions that society doesn't allow for moral or ethical reasons.

Quickies: The First Seven Minutes

In Hong Kong last week I watched some of the Rugby Sevens and I found it ceaselessly stimulating without being properly satisfying. A full rugby or soccer match, or even a one-day cricket match, can be majestic at times, with both drama and catharsis. But the Rugby Sevens and many of the quickie versions of formerly deliberate and measured games, even when there are sudden turnarounds near the end of the game, evoke the frustration of watching repeated sitcoms rather than a movie, of serial flirtations without consummation.

In the book I've been working on,I mention that Spinoza's theory of the emotions distinguishes pleasure from stimulation (Latin titillatio), the latter being a pleasure which is focused more on some parts of the body than others. Pleasure is global, stimulation local.

Everyone may want a quickie but how many in succession can you stand?

Which brings me to the bailout and related matters. You have to admire Neil Barofsky and Irving Picard, who are slow and never give up trying to get things right and continue to call them when they are wrong.

Double Your Pleasure, Double Your Fun

I am in Hong Kong for a few days, and have run into two mysteries, the first major, the second minor.

1. China is long trillions of US dollars. China is poor and its citizens are in need of many things. Why don't they spend the money on their needs? There must be things the US or the rest of the world makes that they could use. I don't get it.

2. I always thought peppermint was a flavor, and have just discovered that it's also a tactile sensation. To confirm this surprising fact, try taking a shower while you wash yourself with Dr Bronner's Peppermint Liquid Soap, an experiment I accidentally performed in Hong Kong, the fragrant bay. You can tell peppermint even when it's not in your mouth. (What evolutionary advantage for our ancestors led to this sensitivity to peppermint's molecules? And what happens to the risk preferences of traders who chew peppermint gum or eat Tic Tacs? Worthy topics for future investigation in neuroeconomics, but for now, believe me, it's strange.)

Vox Pop

Took a taxi ride today and the driver had the radio on what sounded like a Democratic leftish call-in talk show rather than a rightish one.

I'm asking callers to comment on the news that Obama is trying to re-energize his base, said the host.

I was one of Obama's team during his campaign, said a caller. I'm 24, I worked for Obama in college, I went door to door, and now I've been without a job for a year … while he's been in the arms of the big financial companies … When I think of Obama now,, he concluded, I think of Orszag (going to work at Citigroup) and Geithner.

As I prepared to exit the cab I said to the cabdriver: You know, when I think of Obama, that's what I first think of too.

Me too, said the cabdriver. I'm a Democrat, I can never vote Republican, but I can't vote for Obama again.

Strict and Tall

Not having to teach this Monday, I spent a large part of the weekend belatedly reading Peter Woit's Not Even Wrong, many years after it was initially published. It's a very thorough, ambitious and carefully judged history of particle physics and the idea of discovering the laws of nature, culminating in an account of the past thirty years of string theory. I'm sorry I didn't read it earlier.

My active encounter with physics ended in 1980, and until reading Woit's book, though I knew that nothing shattering has been discovered in the past 30 years, I hadn't quite realized with what a thud the sweep of discovery from Planck through Weinberg-Salam ended. When I left physics, people were moving on from the standard model to GUTS, Technicolor, supersymmetry, strings, etc., and all of it has so far remained unvalidated. I'd remembered only the continuous excitement of new quarks and neutrinos being discovered in the Seventies, and somehow imagined that life in physics was still that way.

Woit's approach to all sides of the merits of string theory and its proponents is measured; he doesn't hesitate to give opinions about moral issues, but he backs them up. It reminds me of a verse from a series of English books we loved in high school. They were written by a fictional English public-school boy called Nigel Molesworth, and one of them was called How To Be Topp; I still have it. If you grew up in a quasi-British school system and wore blazers and boaters and got caned sometimes, they were very funny. According to Nigel, the soppy girls at the nearby girls' school sang:

Ho for Bat & Ho for ball

Ho for Lax & Lat & all,

Miss Dennis is strict, Miss Hamilton fair

But Miss Peabody (gym) is both strict & tall!

As any fule kno, Woit's account is strict and tall, but entirely fair, which is quite a feat.

The Pots Calling The Kettles Black

You have to have no sense of irony to read the paper these days.

Today's FT reports that the US is moving to synthetic junk bonds using CDS:

It's funny, the last crisis involved chasing for yield in a low-yield environment which led to a collapse which is being treated by low rates again which is leading to the rush to synthetic high yield bonds which will …


Then in the Times,

Bank of America Rejects Idea of Reducing Home Loans

because "It’s not that we don’t want to help troubled borrowers,” Mr. Laughlin said. “It’s a moral hazard issue.”

Qaddafi & Mubarak Family Office

I shouldn't be surprised, but I am, at the speed with which Western banks and countries that once took Qaddafi and Mubarak "family" money without question have now frozen it without once explaining why they see things differently now.

Na Wewe

Every year before the Oscars the IFC shows the nominated live-action shorts. In 2009, when I went to see them, they were all terrific:

If you like short movies, those were great, and may be available on iTunes.

I went to IFC to watch the Oscar-nominated live action shorts for this year, and the best one was Na Wewe. I was rooting for that -- it was by far the best of them, but it lost. The others weren't great, and none were as good as 2009.

The Upper West Side Retail Report

Best Buy: Doomed. Unknowledgeable salespeople, painfully inefficient checkout. Less people buying anything there than there are kids buying Shuffles in the Apple Store.

Bed Bath and Beyond: A pleasure to enter. Keeps getting better, drug store items cheaper than Duane Reade. So-so sales people but you don't need too much expertise to buy most things there.

Duane Reade: Hard to say. Now owned by Walgrens. Lousy service, but on the other hand they keep stocking more stuff. Half the store is now milk, cereal, rice etc open 24 hours. Eventually they will be selling their own brand of men's suits. Banana Republic, watch out.

Food Emporium: More expensive than Whole Foods, but much worse quality and service. Why would anyone who didn't absolutely have to go there?


And, not really related to the above, but anyway:

Behavioral Finance: It started out a la Kahneman and Tversky with great aspirations, but, from the FEN newsletters I receive, seems to be focusing increasingly on things like gender differences in investing and how growing up in the great depression makes you more risk averse. Interesting, but not a discipline. Better off in a sociology department. And nooral finance isn't going to be its savior, though it may provide fodder for papers and grants.

Serving Two Masters

(thoughts admittedly inspired by the utter smoothness of operation and syncing of my new iPhone)

After double entry accounting (whatever that is) and fractional reserve banking, the third great invention of the capitalist system must undoubtedly be advertising. You want some information or entertainment, a newspaper or a TV show, and someone else who wants access to you pays for your pleasure. It's amazing individuals have to still pay for anything. Why not give away oranges with ads on them?

But it's a compromise, because the producers of the content serve two masters. They have a low threshold: make what they make just good enough so that you'll take it, and that's enough. After that, their master is the people who pay to reach you.

That's why, if I can afford it, I'm happier with HBO and Apple than with CBS and Google. I'm the master, the only client, and HBO and Apple have to make me happy enough to part with my own money to get what they make. CBS and Google, on the other hand, have to merely please me enough so that other people will pay for my access.

I like being the client, if I can pay for it, rather than having someone else pay for me. And in having to make me part with my own money, HBO and Apple make a better product.


A totally different question: I look at what has undoubtedly been a many-body collective phase transition that took place in Egypt, and I periodically wonder: Here in the US we seem to be stable to small perturbations about the mean, as the financial crisis aftermath illustrates

What kind of small event could trigger a phase transition to any different state in this country?

Farewell, Ogden Nash Equilibrium

You may have hoid

I dumped my droid

into a garbage can I found (using Google Voice Search) on the corner of –– Voice Search: Cue the Brooklyn accent!! –– 33rd

and Seventh.

I'm in heaventh.

There it lay,

Pleading as I walked away

" not responding: Force Quit or Close?"

So it goes.

Spinoza's Logic …

Tests for Cheating

Adil Abdulali once proposed a test for hedge fund returns that would show whether they were fudging their prices: The Bias Ratio. It involved seeing whether there were more slightly positive returns than slightly negative ones.

A similar test to reveal suspected fudges in the grading of high school exams is reported in a WSJ article here.

The SEC's Mission

In investing, the crowds get beta, the smart money gets alpha. It's kind of undemocratic.

The SEC, who aim* to level the playing field by eliminating all advantages, should say to their agents:

Your mission, should you choose to accept it, is to eliminate all alpha, wherever it rears it head.


* From the SEC home page: The laws and rules that govern the securities industry in the United States derive from a simple and straightforward concept: all investors, whether large institutions or private individuals, should have access to certain basic facts about an investment prior to buying it, and so long as they hold it. To achieve this, the SEC requires public companies to disclose meaningful financial and other information to the public. This provides a common pool of knowledge for all investors to use to judge for themselves whether to buy, sell, or hold a particular security. Only through the steady flow of timely, comprehensive, and accurate information can people make sound investment decisions.

The Next Crisis

The New York Times had an article yesterday about the Financial Crisis Inquiry Commission report and concluded it with this paragraph:

Do further bailouts lie ahead? Neil Barofsky, special inspector general for the Troubled Asset Relief Program, seems to think so. When the government stepped in to save Citigroup in 2008, “it did more than reassure troubled markets — it encouraged high-risk behavior by insulating risk-takers from the consequences of failure,” he said in his report to Congress last week.

“Unless and until an institution such as Citigroup is either broken up, so that it is no longer a threat to the financial system, or a structure is put in place to assure that it will be left to suffer the full consequences of its own folly,” he said, “the prospect of more bailouts will potentially fuel more bad behavior with potentially disastrous results.”

It's nice to see someone talking straight.

I attended Goldman's risk committee meetings during 2000-2002, and, while I'm not a fan of everything Goldman does, they did do a very good job of limiting risk.

But they did it not with a new formula or a single rule. They did it by being smart rather than doctrinaire. They were eclectic; they had limits on all sorts of exposures -- on VaR, on the fraction of a portfolio that hadn't been modified in a year, on illiquid instruments, on estimated losses to their portfolio in a repeat of the Russian default crisis, on estimated losses in a repeat of the 1987 crash, on exposures to a single counterparty, on exposure to one emerging market currency, etc. There isn't a formula for avoiding future losses because there isn't one cause of future losses.

Going beyond Basel and its capital charges, if regulators could distill this kind of practical wisdom into a set of principles or standards for other all financial firms, banks or hedge funds, it might help minimize the size of the next crisis. Add to that an obligation to have skin in the game, a limit on size, no off-balance sheet vehicles, on-exchange trading, and a prohibition on being a market maker AND a manufacturer simultaneously (so that, to take an example from a different domain, Amazon can sell books or publish books, but not both), and perhaps the next crisis will be smaller.

Edge's Question 2011


Someone emailed me about making a copy of a diagram a few weeks ago, but I just realized that I lost the email. Please send it to me again.

Schmidt and Sosin

Google's Eric Schmidt, now in the news at Google, is one of the few people I can think of who went from theoretical researcher to billionaire CEO without really being an entrepreneur. I knew of him in the 1980s when I worked at Bell Labs because of the program lex that he co-authored, a beautiful piece of work that was part of the UNIX toolset and allowed you to create lexical analyzers without writing them yourself. You specified the regular expression you wanted to search for, it generated the program to do it. A program that wrote programs, classic UNIX stuff. From there he went to Sun, Novell, etc, but always as far as I recall in technical roles. Until Google.

A nominally similar person he brings to mind is Howard Sosin, who started out as a business school professor at Columbia, and co-wrote a paper that defined and valued one of the first really exotic options, the lookback. From there he went on to found AIG Financial Products. The rest, as they say, is

What Lies Beneath?

The dollar has the soul of an an underlier but the body of a derivative. Being neither, it violates all financial logic.

Lack of Imagination

The Eruv Issue

You would think the people that invented an invisible God who will not be depicted would be able to invent an invisible line demarcating an invisible enclosure within which it's OK to carry objects.

Can Pianists Break Records?

Each decade runners get faster and jumpers jump higher. Some of the improvement is due to the decline of amateurism, more time spent training, and much improved equipment, but how much? It's hard to break it out.

A few weeks ago I went to hear Garrick Ohlsson play Chopin at Lincoln Center. Then, when I came home, I somehow ended up watching YouTube videos of Horowitz and Rubinstein and others more recently playing the same sonatas. Some videos have closeups of mind-boggling finger movements and show the score simultaneously.

So, I wonder, do pianists get better all the time too, relative to previous pianists? On the one hand it's harder to define "better". On the other hand though, pianists have always been professional and their equipment hasn't changed much, so there's less to break out.

Materialism, Genes, Quantum Mechanics

Thanks to Dave Edwards for a link too good to keep to myself:

John Cleese on There's a Gene for That

The 2010 De Klerk - Gorbachev Prize …

for Submitting to Destiny Graciously, sponsored by WD-40, goes to Mrs Jeffrey Picower.

Punching Above Your Weight

On Saturday night when I should have been relaxing I somehow ended up watching HBO, seeing Amir Khan fight Marcos Maidana in the 140-pound division. It started out really exciting with Khan knocking down Maidana in the first round with a brutal body punch that made Maidana wince and fall to the canvas. Then it equalized somewhat. Boxing is kind of interesting for a short while and then exhausting as you wait for something dramatic to happen. Must be even more exhausting for the boxers. But …

Here is the interesting thing that tells you a lot about human nature and futility.

It's the 140 lb division. So, I assume, they shouldn't weigh more than 140 lbs. And, at the announcements at the start of the fight, the ringmaster announced that they had respectively weighed in the morning before at 139lb and 140 lb respectively, and then, in the words of the TV announcer, "rehydrated" to their weights that evening which were about 150 lb.

What this means is that they had presumably had trained to weigh 150 lbs, then, just in advance of the weigh-in, taken diuretics to get down to 140, then soaked up water again to get back to 150.

Ten lbs of water to replace in 24 hours. You must feel awful when you've lost it, and bloated when you get it back.

Isn't this nuts? If one of them did it it would be an unfair advantage, but they both do it, pretty much annulling any edge. Why do they both do it? Answer that and you'll have answered a lot of other questions about life in general.

On Privacy vs Secrecy

This is the best sentence I've seen on the matter of Wiki Leaks, on

MARC ROTENBERG President and Executive Director of the Electronic Privacy Information Center (EPIC) , Washington, DC; Co-author, Information Privacy Law

It is important to distinguish between personal privacy and government secrecy. In the first instance, we are considering a fundamental human right, in the second an instrumental technique that extends the power of the state.

To state one can add businesses. What is even more interesting for me than the leak is the way big corporations (Visa, Mastercard, Paypal, Amazon) have leapt into the fray, casting their judgment before any legal obligation to do so.

Truth Needs To Come in Small Doses

I am tempted very little by TV, not because I'm so superior but because I grew up without it. It's easier for me to read cereal boxes than watch TV when I'm bored. But I have been watching HBO's In Treatment which finished tonight, and while two of the weekly tales were flawed, two were really excellent.

Frances I found boring.

Sunil started out great and ended up disappointingly and implausibly melodramatic, though it's possible even the end was a lie, which could redeem the melodrama. But still, too much.

I don't especially recommend the two above, but the following two are especially worth watching serially.

Jesse was incredibly accomplished, as was Dale DeHaan as the protagonist, whom I'd never seen before. And the end was as good as the rest of it, not disappointing at all. You see someone about to make what he thinks is a really good decision, pleased with himself, but you can see it may really be a mistake, and yet there is no way to for anyone to help him out of it, nor does anyone have the right to. It's very sad.

Adele is a good story too, although it's possible you need to have seen some of Sunil to get all the details, but it's not crucial. One of the things I take away from it is something I have discovered myself: people can benefit from the truth about themselves, but only if it's delivered in very small doses. If one or two doses are just a little too big to swallow comfortably, there will be no opportunity for finishing the entire course. It must be very difficult to give people just enough to stress them but not so much as to repel them.

Wiki Leaks

I am tempted to say that anything that lessens the power imbalance between individuals and governments/corporations can't be all bad.

Recent Advances in Financial Engineering

I have been reading about the benefits of index funds and ETFs and the wisdom of not trying to outsmart the market by thinking you can time it.

A few days ago I passed a bus stop on Madison Ave with a sign that advertised the extensive array of SPDR ETFs now available, and I now have a patent pending on agreat new piece of IP which I can finally reveal.

Announcing SSETI -- Single Stock Exchange Traded Investments: an ETF that allows you to exchange trade a single stock.

Suppose you want to trade IBM in ETF form. SSETI Inc. holds a vault full of IBM stock. When you buy 100 shares of SSETI_IBM, for only a small sponsor's fee to cover the work of replicating IBM, SSETI acquires 100 additional shares of IBM and adds them to its vault. They then issue you an electronic certificate for 100 shares of SSETI_IBM.

SSETI -- All the advantages that liquid exchange trading brings to trading securities:

° A low total cost with a sponsor's fee of just 0.25%

° Diversified vault locations in three countries

° Exchange traded liquidity and trading flexibility.

° You can go long, you can go short, you can trade intraday.

Simple, yet just what you need.


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Cut Us Some Slack

More and more I am reminded of (what I believe is) Lenin's statement:

"The capitalists will sell us the rope with which we will hang them."

Linear and Nonlinear Reading on the iPad

I spent a week trying to read most of the books I wanted to read on an iPad, to save carrying several books.

eReaders are good for novels, news, anything simple you want to read more or less linearly. But when I want to do serious reading on a topic, and especially a difficult topic, that involves flicking back and forth between several books open on your desk on the same subject, jumping back and forth between them and between different pages of the same book. The iPad doesn't work very well for that. A large computer screen is better for handling the nonlinearity.

When I used to use the visual editor vi years ago, there was a way you could mark certain sections of the code and jump back and forth between your current location and a previously marked location by hitting one key (my fingers want to say it was two single quotes typed quickly). Some quick context changer like that would make reading nonlinearly apppreciably easier.

Econophysics: The Goldstone Theorem and Weightless Bozos

I have been refreshing myself on the theory of Higgs bosons and the Goldstone theorem, which may have greater applicability than was previously thought.

The Goldstone theorem says that if you have a Lagrangian with a continuous global symmetry that is spontaneously broken by the ground state of the system, then there must exist particles called massless bosons.

Perhaps this explains what's going on in the country. The continuous symmetry is the invariance of policy. The ground state of the government gets determined randomly by the population at each election, but no matter who gets elected, things don't really change, hence the invariance.

The resultant bosons with zero weight are the people in the administration.

Hypocrisy/Open Systems and the GFC/Neither a borrower nor a lender be

1. There was a time when people blamed quants and their models for the GFC. Now, conventional wisdom is changing. Nevertheless there are still the "why don't real engineers make as much as financial engineers?" op eds, most recently Luke Johnson in the FT yesterday, who rejoiced that very few of the smartest people were now going to work in high finance on Wall Street or in the City.

I looked up Luke Johnson on the FT writers info page, from which I quote:

Luke Johnson is chairman of the Royal Society of Arts and runs Risk Capital Partners, a private equity firm.

He studied medicine at Oxford and subsequently joined investment bank Kleinwort Benson as an analyst. In 1992 he organised the acquisition of PizzaExpress and floated the business on the stock market at 40p.

I'm not sure what "studied medicine" means. It may mean he didn't finish the program. But either way, isn't it sad that floaters of Pizza Express make more money that doctors? And wouldn't the world be better off if Luke Johnson were practising medicine?

2. But conventional wisdom, which I accept -- Krugman in the NYT, Skidelsky in the FT -- is that the GFC is the fault of the Chinese. Skidelsky's version is that, reacting to the flight of our hot money in the last Asian crisis, they decided to hoard their currency.

3. As I understand it now, this is what's going on:

We outsourced the provision of material stuff to the Chinese.

They make lots of things we want and we pay them in US dollars.

They end up with a lot of dollars.

But they don't want to buy anything themselves.

So what can they do with their dollars?

Buy US equity, which will bring them more dollars? Or buy US debt, which keeps our interest rate low and our currency high, and brings them more dollars too, though not much these days?

4. Savants want the Chinese to start consuming, buying stuff from us. But what do we (the US) make that they want?

Increasingly, we produce information tools and education rather than the material things manipulated at the bottom of the information chain that you ultimately need to survive.

But information tools have become increasingly free, paid for by advertising or given away, like Linux. Open systems means giving away valuable stuff for free. And graduate school doesn't cost that much.

So, make people pay for information tools. Charge foreign governments lots and lots of money to educate their students. Go back to proprietary systems, like DEC VAX/VMS, and sell them at high prices. And of course enforce copyright conventions and clamp down on software and IP piracy, so that producers of material things have to use up their hard-earned dollars to buy stuff we make. Charge 10K for a DVD of Inception, and make sure no one can copy it.

Bit late for that, I suppose.

The alternative is for everyone to be self-sufficient and produce most of what they need.

My Tuppence-worth

I spent the last six hours walking around London, mostly Belgravia, Knightsbridge and Piccadilly. Though London looks totally English, I eard ardly a single person speaking English. The street was a river of foreign languages; there were occasional eddies of English, but spoken foreignly.

The single Englishman that approached me on the street outside my hotel first asked if I was English, then told me that he'd lost his car keys and needed money to get back home. I felt at home and gave him my Metrocard.

Where are they all, the English? It's a mystery to me. And who owns all the Bentleys and Rollses parallelling the sidewalks? In New York if you have a Bentley you keep it in the garage.

I waited a longer for the time Heathrow Express than I ever recall before. The shops look unbusy, full of idle salespeople. Are these signs of quantitative dis-easing?

The bookstores are very disappointing -- Waterstone's on Piccadilly is like a school gymnasium for a middle-school prom, large spacious empty floors with books like wallflowers on the edges, looking face out from the shelves so that just a few of them fill up as much space as possible. Hardly anyone is on the floor and no one asks them to dance. You can't get anything out of the ordinary any more, no back list.

Harry Mulisch

I was sad to read the Harry Mulisch obituary in this morning's Times. I read two of his books, The Assault, made into a best foreign film Oscar winner in the mid-Eighties which first introduced me to him, and the ambitious The Discovery of Heaven both of which I enjoyed greatly. I didn't like the one or two of his other books I tried, but those were terrific and I recommend them.

Giants on Broadway

Walking past the Time Warner Center on Columbus Circle the other day I came across a large tent with the banner NYC Atheists, its surface festooned with large signs saying Total Separation of Church and State, and smaller ones saying Atheism is not an argument, it's a conclusion and You don’t have to believe in god to be a moral or ethical person". Also, There are no Jewish/Christian/Muslim children, only children of Jewish/Christian/Muslim parents.

Under the tent were were a bunch of lethargic looking people, and to the side one animated middle-aged guy wearing a T shirt that said The Bible: #1 Fiction Best Seller of All Time. He was having a fierce but friendly discussion with what sounded like an East European young woman who believed in God. New York has great street life. It used to be much better in the Sixties and Seventies when people felt you could actually accomplish something by persuasion and arguing. Against my better instincts, if such a thing is possible, I entered the argument. They might be giants, you know.

The evangelistic atheist with the T shirt was passionate yet polite. The bible was full of lies, he said, and God (god, actually) was like Santa Claus, and it was time to disabuse people. The world wasn't made in six days, the ten commandments encouraged slavery (untrue), the testament god was bad, he made a flood to punish people (true), there wasn't enough water to cover the earth the way Noah/God claimed, etc. All these inaccuracies perturbed him greatly. He couldn't accept the fact that one might regard creation as a metaphors, even though some people no doubt do take them literally. And he defended his T-shirt slogan to the woman by saying it was equivalent to wearing a Christian cross on a chain around your neck, as many do.

Conversation revealed that he was a science teacher and he really really really loved science. He must have been very good at teaching it. He kept invoking scientific facts against the falsities of the bible. He knew all about gravity, Newton, the four forces, evolution, astronomy, cosmology, the size of the universe. I had a brief urge to tell him how complex and non-transparent apparent scientific verities were, and mentioned how distance to the galaxies was measured via Cepheid variable stars, a kind of analytic extrapolation of the idea of distance that involves many detailed models and theories in order to convert star luminosity to distance as an apparent fact, but he knew all about Cepheid variables too, and apparent and real luminosity. He'd even drunk the string theory potion, and told us how M-theory was just around the corner. Soon everything would be understood. Somewhere in the discussion with the woman he invoked Spinoza (he called him Espinoza) and the fact that Einstein believed in Spinoza's God. He was good about science; many of the people who respect science and despise religious beliefs can't explain to you why you they believe in atoms, but he likely could.

Eventually my instinct for self-preservation prevailed and I left. The woman and he were still at it, both passionate, he trying to convince her that science negated her religion by its facts, and she persisting that his evangelistic disbelief was just another kind of belief. I was glad I left; they were both nice but they weren't giants.

Going Postal

I just finished reading the Man Booker prize-winning novel The Finkler Question. It's OK. The explosive packages sent from Yemen to synagogues in Chicago could have been a scene from the book.

It's interesting that no one here seems at all surprised that an attempted attack on America is simultaneously an attack on synagogues rather than on Tom Daschle or The National Inquirer.

As for America itself, there is still hope: a country whose bipartisan money-losing post office, a possible synechdoche for the entire country, can nevertheless come from behind to build an APC (Automatic Postal Center) that makes mailing certified envelopes an automated breeze, can't be all bad, as I was reminded again this morning. If the people who rethought the process of mailing and then built the APC could rethink and then tackle the airline security system and the entire tax code from scratch, we could be on our way.

Jet a Porter

If you want another reason to fly Porter Air to Toronto from Newark and back, in addition to their downtown Toronto airport, could it be that all the people (women actually) running their check-in desk use spanking new Apple iMacs?

First time I've seen a sizable enterprise relying on Macs rather than PCs to do business.

I write this on one of their massed phalanx of iMacs -- iMacs exclusively -- in their lounge just offshore Toronto, while waiting to board.

Not only the wisdom of Canadian banks, but now their airlines …

Confidence Man

There is something about additional quantitative easing that misses the point. The last thing this country needs is lower interest rates, short or long. The problem with the economy is not too high borrowing costs; it's fear about the future. The way to address that is to focus on the future, not on the present: Draw a line in the sand and terminate past messes rather than prolonging them. And then do something that gives people confidence about the future of the economy. Lowering current rates to zero does NOT make people feel good about the future. Cutting spending and future obligations, counterintuitively, is more likely to do that.

Ripples, Reservoirs, Maps

It sounds obvious, but people are prone to forget that financial strategies are formulated to operate on the margin.

So, buying index funds is smart if most other people are trading on information and analysis. You need to be a perturbation on the sea of investors for indexing to make sense. When everyone indexes the strategy becomes nonsensical.

Analogously, high frequency trading provides valuable incremental liquidity when high frequency traders are the governor on the steam engine. When they become the engine itself, they can't provide stability.

The same, of course applied to portfolio insurance in 1987.

Maybe charity has to be marginal too?


On an unrelated note, here is a link to an exhibition of generalized maps among which are some by scientists, myself included.

Coming to your Senses

I noticed:

If you are running in your sneakers and you become aware of a rhythmic flapping on the top of your right shoe, you naturally assume your right shoelace has come undone. Actually, inspection shows that it's your left shoelace that has untied itself and is now hitting your right shoe on each step.

By coincidence I just came across this precise specification by Hayek in his book "The Sensory Order":

The task of the physical sciences is to replace that classification of events which our senses perform but which proves inadequate to describe the regularities in these events, by a classification which will put us in a better position to do so. The task of theoretical psychology is the converse one of explaining why these events, which on the basis of their relations to each other can be arranged in a certain (physical) order, manifest a different order in their effect on our senses.

Bully for You

How fragile is the Chinese government's sense of itself that a few words from a bunch of guys in Norway can make them try to shut out the outside world in an orgy of fury. It gives one hope.

Odd Things

1. Calming Down. I was working frantically the last month finishing a first draft of a book I'm working on, and finally submitted it. When I finished, I couldn't find a way to calm down; even when I didn't have to, I couldn't tear myself away from the keyboard, trying to learn Illustrator, doing anything but relaxing. There must be a better way.

2. Flash Crash. I heard a talk tonight by Andrew Kirilenko at the Columbia-Courant NYQF seminar on how the CFTC investigated the Flash Crash. The bottom line seems to be that it wouldn't happen if there weren't electronic algorithmic trading. Different types of traders operate at different frequencies; when liquidity temporarily disappears, the high frequency guys all try to sell to each other; prices keep dropping at every pass of the hot potato; there is insufficient time for the fundamental guys to come in and buy something that has become cheap. There is no time for the different time scales to equilibrate when things get out of whack.

One of the suggested cures is trading halts, but that seems wrong to me. That's like saying: go as fast as you like, and when an accident starts to happen, put on the brakes. Much better to have everyone go slower. There's no earthly need for capital markets to execute in milliseconds. Build in some friction, a random time delay, a tax on transactions. Put all the tax payments in a pool and share it among the participants.

3. Nobels. Mario Vargas Llosa is OK.

4. Dr#!d. I can't wait to dump it and get an iPhone, a day whose approach finally seems to be rumored to be near yet again. Meanwhile it's jam yesterday, jam tomorrow, but never jam today.

5. Pina Bausch's Vollmond at BAM: She's terrific but unfortunately dead. It's very good but a bit long. The first half would have been enough.

6. When it gives you an answer, it always surprises you with the thoughtful view of data. Put your Christian name in and see when it was most popular. Or simply do some Mathematica stuff. Or type 'helix' or 'jews' or 'muslims' or 'Cape Town'.

Us and Them

I abandoned the newspapers in a fit of hard work for a few days.

Now I discover that Kim Jong-il has finally appointed his son, Kim Jong-un, as a four star general and heir, even though he has no military experience. Ladbrokes were giving 300-1 odds on Neel Kashkari -- I had put down a dollar and I lost.

I have met the enemy and …

It's always satisfying when there's an adequate reason for something that doesn't recursively involve another event in the past.

I have searched the media and discovered the answer.

The financial crisis of 2007-2008 was caused by the global savings glut.

The global savings glut was caused by the the Asian currency crisis of 1997-8.

And the Asian currency crisis of 1997-8, was, as everyone knows, caused by George Soros.

The Poverty of History

The financial crisis of 2007-2008 was caused by the global savings glut.

What caused that? According to Krugman, it was

The Asian currency crisis of 1997-8: Asian countries came out of that wanting to run net surpluses rather than net deficits, so as to avoid a repeat.

And what caused that?

The Music of the Spheres

Biology & Physics

One more remark re Dawkins' comment on how evolution honed human intuition to "understand" things that move at a medium pace at a medium scale.

Human intuition is famously bad. If human intuition were honed to understand the medium scale and medium pace, then people would have figured out millennia ago that it doesn't take any force for slow human-size things to keep moving. Unfortunately, on earth, because of friction, nothing keeps moving without a push, so it took Newton to realize that fundamentally, you don't need a push. And he figured that out from planets, vast and fast.

The discovery of the astonishingly accurate laws of physics and chemistry is vastly more mystifying than many naive biologists imagine. There is nothing mundane about it. You can't grasp it without a sense of wonder. One of the things I find depressing about Dawkins is his lack of astonishment.


As for that field, Paul Krugman has an article in the latest NYR of Books: The Slump in which he attempts to demolish many of the standard arguments about the cause of the financial crisis. He pretty much absolves low interest rates and quant models, arguing that other countries and other markets (Spain) where these didn't prevail still ended up with disasters and bubbles. He seems to blame a suppressed reminbi and the global savings glut that had to flow somewhere.

I quote from his deepest explanation:

"Our guess is that the bubble got started largely thanks to the global savings glut, but that it developed a momentum of its own -- which is what bubbles do."

Economics really is dismal, undivorceable from politics. No one can agree on anything and no one really knows what happened. The truth is: everything happened. There is no "cause".

Krugman can't resist a whack at Raghuram G. Rajan whose "endorsement of the conservative story line, without even an acknowledgment of the problems of that line, comes across as slippery and evasive."

If you want a further taste of economics you can attend the recently advertised Spring 2011 JOIM Conference on the evolution of optimal portfolio construction featuring, among others, Martin Leibowitz, Harry Markowitz, Robert Merton, William Sharpe, Myron Scholes and Jack Treynor. Oops, I have to stop now -- I hear a jukebox playing "Let's Twist Again."


I am nothing (if not fair) and I am happy to admit that the upgraded operating system on the Android is a bit of an improvement. But what is really good on it is the app called Voice Search, which acts on voice commands.

You can say something like “Email Albert Baker what’s up” and it listens to it, searches for Albert Baker in your Contacts, opens up an email to him and inserts the words “What’s up?” in the body of the message, and asks if you want to send it. Very impressive.

But for someone who grew up with nasty boys and girls in a British-style school, there are natural next steps.

Command “Email Albert Baker Damn you” and that works fine.

Command “Email Albert Baker Expletive you Expletive”,

What Would Google Do?

Google quickly opens up an email that says, letter by letter, “#### you ####” (sic)

It understands and replaces.

Is Google becoming its own China?

Aphorism for the Day

One of the most useful things a person can know about himself is where he or she begins and where other people end.

If you don't know where you begin, you will perceive yourself as being pushed against when you're not.

If you don't know where you end, you will push on other people without realizing it.

Neither is good.

From the New York Times Style Section, Sep 1, 2030

…Despite globalization, New York's denizens still fondly remember the countries they came from. After the fall of North Korea, in 2015, many upper-class North Koreans were free to emigrate to the United States. Some of them, like the previous generations of Eastern Europeans who came here in the 1990s, sometimes get nostalgic for the lifestyle and system they left behind.

Interviewed outside the Tavern on the Green Condominiums at Central Park yesterday, two fifty-something couples, former residents of Pot'onggang-guy?k, which they nostalgically referred to as "the Scarsdale of Pyongyang", reminisced:

"We had a good life there, you know. America is good, but there are many people without culture. In Pyongyang the skies were clear at night -- you could see the stars. It was beautiful. No pollution. The food was wholesome, all locally grown, in season. People could appreciate the small things in life. Everyone who lived near us was cultured; we all loved classical music. We got only the best movies and books. The newsstands weren't full of trashy magazines, like here."

Mosquito Coast

I have been thinking of the opposition of some New Yorkers (cited in a New York Times poll yesterday) to the building of a community center near the site of the former World Trade Center.

The reason deep down, it seems to me, is that New Yorkers unconsciously equate the building of the community center with a kind of triumphalism. It may not be the intentions of the builders to look triumphant, but that's what it probably evokes in many insecure New Yorkers for whom the post-9/11 insecurity hasn't faded.


In physics, effects propagate locally in time and space and the future cannot affect the present. In the social sciences, economics in particular, the imagined far-away future can affect the present, and hence affect the actual future too.

There Must Be A Pony

As far as I can tell from reading op-eds about the need for a second stimulus, this is how things got to be the way they are:

° After the financial crisis everyone got scared about the future and stopped buying the crap they don't really need.

° The companies that make the crap people don't really need, anticipating a decline, laid off people, sometimes preemptively.

° The laid-off people then had to stop buying not only crap they don't really need but some of the things they actually do need.

° That affected the companies who make things people really need, and so they laid off people too.

° If everybody would just start buying stuff they don't really need then pretty soon everyone would be able to buy the stuff they really need.

What becomes a legend most?

Legendary Service

The other day I needed to buy a gift and saw that TD Bank sells gift Visa cards. I like TD -- they are open 7 days a week and someone always asks you how they can help you when you walk in there, and it always looks pretty empty.

They obviously don't sell a lot of gift cards because it took about fifteen minutes to complete the transaction -- someone had to find the keys to the vault to retrieve their stash of cards. Nevertheless, I bought one and after I got home, read the fine print.

It turns out, if you don't spend it within a year, they start to use pay you negative interest each month until it disappears. Cheapo phone cards do this to you month by month, but now banks too. It is a stimulus. Sometimes a great notion.

Legendary People

Koestler on Newton

"What he achieved was rather like an explosion in reverse. When a projectile blows up, its shiny smooth symmetrical body is shattered into jagged, irregular fragments. Newton found fragments and made them fly together into a simple, seamless, compact body, so simple that it appears as self-evident, so compact that any grammar-schoolboy can handle it."

Koestler on Descartes

"Descartes' wide-open mind boggled in horror at the idea of ghost arms clutching through the void- as unprejudiced intelligence was bound to do, until 'universal gravity' or 'electromagnetic field' became verbal fetishes which hypnotized it into quiescence, disguising the fact that they are metaphysical concepts dressed in the mathematical language of physics"

Like Stefan Zweig, Koestler, I just discovered, committed joint suicide with his wife.

Koestler on Galileo

Quotes from Koestler's The Sleepwalkers:

"One of the points that I have laboured in this book is the unitary source of the mystical and scientific modes of experience;"

"The inertia of the human mind and its resistance to innovation are most clearly demonstrated not, as one might expect, by the ignorant mass – which is easily swayed once its imagination is caught – but by professionals with a vested interest in tradition and in the monopoly of learning. Innovation is a twofold threat to academic mediocrities: it endangers their oracular authority, and it evokes the deeper fear that their whole laboriously constructed edifice might collapse."

Yiddish Stimuli

I was thinking about the futility of low interest rates and easy credit as the cure for everything and a Yiddish proverb my parents used to use jumped into my head:

Es helft wie a teiten, bankes

It means

It helps like leeches for a corpse

but it's more pithy and rhythmic in Yiddish.


Reading the papers lately I sometimes momentarily feel that I get a hint of a glimpse into the frustration behind the French or Bolshevik revolutions (though I know where my head would end up too).

Today's New York Times has an article about the accoutrements that accrue to some museum directors: not just good pay but also apartments for free whose rent, paid by the museum, is not taxable, because they invoke some clause that says that, like university presidents, if they are required to live on ("near") the premises, then their rental doesn't count as income. Not all museums push this envelope, only the regulatorily edgier ones.

And there's the constant stream of news about investigations into Congressman and Senators who play the system for money, dodging the rules they oversee. And the letters to the editor who pity the Congressman and Senators being investigated because they say that everyone does it and these few are being scapegoated.

This red fiber of entitlement is so deeply threaded through the fabric that no single law can disentangle and remove it. Probably it was always that way and I've just begun to notice it more.

Admirable Inconsistencies

There are people in the world who can walk on both sides of the street simultaneously and you have to admire them.

Berkshire Hathaway just marked down their long-term derivatives positions by $1.4 billions while Warren Buffett talks about weapons of mass destruction.

George Soros is also pretty cool: a master speculator with one hand and writing about the inappropriate kinds of speculation with the other. Not necessarily inconsistent, I'm willing to admit, but nevertheless a feat.

Zef Prost Poshlost

My investigations into Die Antwoord led me once again to the topic of vulgarity.

Die Antwoord claim to sing Zef, which turns out to be an intrinsic South African kind of poor-white Afrikaans-inspired vulgar Southern-Cape slang and style that didn't yet have a name when I lived there and wasn't yet as evolved as it is now.

But Die Antwoord are not authentic: they are conceptual Zef artists, not genuine Zefs. They are clever intellectual performers, as I said, local Ali G's making Zef music for money.

"Zef", apparently, may stem from the abbreviated name for a Ford Zephyr, made in England, that my parents once owned, so uncool that it's now cool.

Another Zef South African rapper Jack Parow sings a song called "Cooler as Ekke" (Cooler than Me). Here are some of the lyrics, (translated from Afrikaans, in which it's much snappier):

I'm America, You're Iraq

I'm a Bic pen, you're a Mont Blanc

I'm original, you've been copied

I'm a flash drive, you're a floppy

You think you're cooler than me

You think you're cooler than me

I drink Klipdrif, you drink Peroni

You've friends in Sweden, I've friends in Benoni

… etc

Benoni is an unfashionable town in what was the Transvaal. You get the picture. I haven't tried to get the tone, which would be more like "I is America, You'se Iraq," and more street-talk than my translation.

Of Zef, Parow says: “It's kind of like Posh, but the opposite of Posh. ”

Good definition.

There are many gradations of vulgarity and commonness.

South African Jewish immigrants looked down on prost which is a kind of crass bad-taste uneducated commonness.

Russians battled against poshlost which, as best I can tell, is a kind of middlebrow pretentious antivulgarity that is vulgar itself. From Wikipedia

Poshlust, Nabokov explained, "is not only the obviously trashy but mainly the falsely important, the falsely beautiful, the falsely clever, the falsely attractive" (Nabokov 1944, p. 70). Nabokov (1973) also listed
"Corny trash, vulgar clichés, Philistinism in all its phases, imitations of imitations, bogus profundities, crude, moronic and dishonest pseudo-literature—these are obvious examples. Now, if we want to pin down poshlost in contemporary writing we must look for it in Freudian symbolism, moth-eaten mythologies, social comment, humanistic messages, political allegories, overconcern with class or race, and the journalistic generalities we all know."

I own up to a certain admiration for vulgarity if its genuine. Or perhaps, to be precise, it's not so much that I'm in favor of being vulgar as I am anti-anti-vulgar, as some people in the Fifties would define themselves not so much as Communists but as anti-anti-Communists. I'm anti-anti-religious too.

Genuine vulgarity is probably a good thing, kind of real energy that keeps people going.

Die Antwoord: Part Deux

Is it possible, that despite my normally impeccable standards I was in unseemly haste and unseemly taste to embrace Die Antwoord quite so urgently?

It may be so.

I was overcome by sentimentality/pride at hearing English spoken with a heavy South African accent without embarrassment. Plus provinciality, the excitement of seeing someone from your small town make good in the capital.

Wikipedia tells me that Ninja of Die Antwoord is maybe 46 years old, and an accomplished guy before this. Die Antwoord is funny, and is closest to Ali G doing Eminem.

Die Antwoord (pronounced Dee Unt-Voord)

About six months ago my nephew in South Africa sent me a link to what he warned me was a rude video. I took a look briefly and it was kind of funny.

Then the other day in The Times I saw a positive review of a South African band performing explicit songs on Governors' Island, and putting two and two together, I realized they were the band my nephew pointed out. I just checked them out on the internet and suddenly got quite patriotically sentimental.

Most foreign bands try hard to sound American. I listened to a Stones song on the car radio the other day (Wild Horses and then You Can't Always Get What You Want) and was struck by how American they sounded. It's effective, but it's a kind of envy and inauthenticity nevertheless. Everyone in show business tries to sound like they come from the center.

What I liked in my brief visit to Die Antwoord (it means The Answer in Afrikaans) is their unashamed localness. They're confident enough to not try to adjust their vocabulary and references to be understandable by strangers. Their website is really funny, at least to me -- a kind of South African rap performed by what seem to be (what were called) "poor whites" when I lived there. They're unashamedly (actually proudly) trashy. They swear in a very local patois.

Actually, I may be being fooled: they are pretty professional and so this kind of white trash patina may be an act, I don't know.

I once read The Tax Inspector by Peter Carey and was impressed, in addition to the plot, by his unselfconscious use of an Australian milieu. If you write a book set in London you don't have to explain to the reader what Bond St is. He treated Sydney the same way twenty years ago. And Die Antwoord seem to treat South Africa similarly. Of course, South Africa isn't any more the unknown cultural place it was when I lived there. When I came to New York you couldn't buy a travel book on South Africa. Now there are ones on Cape Town alone.

Listening to their website, I was charmed by the South African familiar high-school dirty-talk flavor of Die Antwoord. I never particularly liked rap, but this was local stuff and ingrained in me , and I suddenly could glimpse the charm of rap to people for whom the references were familiar too.

The Misguided Center of the Universe

On the east side of Central Park West, on the side of the road heading north, is a narrow bike lane which I recently made use of.

Since there is only one bike lane for both sides of Central Park West, I figured it was OK to use it going south. It's meant for bikes going in both directions, I said to myself. So I did.

This morning I rode up to Columbia going north on the same lane. A few blocks up, I saw a man on a bicycle riding south on it towards me.

An immediate warm flush of irritation coursed through my body as I saw him inconveniencing me by going the wrong way.

So much for rationality and world peace.

Movie Connections

I watched Elia Kazan's Splendor in the Grass with Natalie Wood and a very young un-arrogant Warren Beatty this weekend, streaming Netflix. I remember it being around when I was a kid but never saw it then. It's very good, and very unAmerican in its not so happy (not unhappy) ending.

It seemed to me an American version of The Umbrellas of Cherbourg -- the same sad realism -- and then I discovered that it was made three years earlier, so I wonder if the latter is a French version of Splendor. Both good.

Elia Kazan's novel The Arrangement is worth a read too, fades away towards the end after a very good start.

SECsy Beast

There is something odd about the strategy of the SEC's settlement of charges related to Abacus.

They had four possible strategies:

1. Keep charges against the employee, keep charges against the firm.

SEC might lose and look stupid.

2. Settle with the employee, settle with the firm, let them both go back to work.

Sounds sensible to save face if you think they can't win.

3. Settle with the employee, keep charges against the firm.

A common strategy: going easy on small fish to go after bigger ones.

4. Keep charges against the individual, settle with the firm and let them get back to work.

What's their rationale here? Picking on someone your own size?

The Mills of God

In the summer after a long day's work a not-so-young man's mind turns to cigarettes. I like to buy a pack, smoke one or two, and then throw it away to avoid future temptation. I set out to do this last Tuesday. A very occasional smoker, I went into the nearest corner grocery store and bought a pack of Marlboro Lites that set me back … $14.

I still think of $7 as being a shockingly high price for a pack in NYC. The last time I bought a pack I paid somewhere around $10. What is going on here? If you smoke a pack a day, that's $5,000 per annum. This is surely going to not result in increased tax revenues for long.

When I grew up in South Africa I loved the smell of cigarettes and knew I was going to smoke as soon as I could. Somewhere around the age of 16 I started on menthols whose brand name I can't remember. I never smoked a lot. At some point I splurged on Mills that came from England in beautiful last-your-whole-life tin cases of yellow metal. Players were pretty cool too, and Sobranie. Imported, they cost twice what Peter Stuyvesant or Ransom or local Viceroy (red box for the filter, green for the plain) cost, but they seemed worth it, I convinced myself.

There were and are lots of poor people in South Africa, and so cigarettes came in a luscious variety of containers to match your lifetstyle. Cylindrical tins of fifties; flat big double-decker boxes of 30s; flat boxes or packs of twenties; smaller boxes of 10s; and cute little boxes of 5s that sometimes were placed as freebies on dining tables at weddings and barmitzvahs. And finally, blessedly, you could go into grocery stores and buy ONE cigarette in a variety of brands kept loose in a tin near the counter. (Those days may be coming again too, given the $14 price. It's now cheaper to buy a cigar than to buy one cigarette and throw the pack away.) When I was back in Cape Town last Xmas they still sold single cigarettes, but they cost more like a Rand or so now.

Cigarettes came in a luscious variety of styles too. Filter was filter. But then there was plain, no filter at all. And most cool, cork, which was cork-tipped, literally, a bit of cork on the lip-end of the cigarette to prevent it from sticking to your lips, but no filter at all.

And the accoutrements of the smoking life were great too. My sister's boyfriend smoked Viceroy Green 30s, and used the back of the flat box as a Filofax, writing his reminders on the large white surface and then copying them over from pack to pack. How cool was that?

We live in a poorer world when it costs so much to indulge our addictions.


On a related note, I have carried around in my electronic filofax for years a quote that apparently comes from Hegel that says

"The history of the world is none other than the progress of the consciousness of freedom."

I used to believe in free will and liked this quote, though it refers to the progressive extension of political freedom to unpropertied men, women, and eventually animals. But lately I have been reading bits of Spinoza and been impressed by his argument that people are not really free to act, only "free" to follow their unasked for desires. It took thousands of years to figure out the laws behind simple things like inanimate planets. We haven't lived long enough yet to discover the laws describing all matter, of which we are a part.

His amendment to Hegel would be

The history of our knowledge of the world is none other than the progress of the consciousness of our lack of freedom.

Quantity vs Quality

Richard Bookstaber has an interesting but I think short-sighted analysis of scoring in the Saturday WSJ at The Scoring Problem.

He argues that the number of points scored in a game should be such that the error due to random fluctuations in skill is small enough to not change the result most of the time, but not so small that people get bored waiting for the game to end. He concludes that baseball and American football are somewhere near the sweet spot, and that tennis has too many point, soccer too few.

His numerical analysis ignores many of the elements of human drama that make sport worth watching.

I dislike the episodic nature of baseball and American football, so filled with commercial breaks that they are indeed the ultimate capitalist games. American football with its specialized massed armies switching from offense to defense and its weird bulked-up uniforms is closest to ritualized war conducted by bureaucrats from the sidelines.

I like fluidity. I also like the triumphs, disappointments and catharsis of life encapsulated in a shorter time frame.

Tennis is just about perfect; if one player is much better than another, it ends quickly; if two people are more or less equally matched there are phenomenal reversals of fortune in which character and tenacity play the major role, as they do in life. Also what's nice about tennis is that you can't break the rules tactically to score an advantage. That's what I dislike about basketball.

Even cricket, with the possibility of test match draws that should in principle be dull, is exciting as one person tries to save an entire team from failure by simply staying at his post. And again, breaking the rules doesn't help you.

Bookstaber dislikes soccer's penalty shootouts. He thinks it makes the outcome of a low-scoring sport in which a random fluctuation in scores can give you victory even more random, and the triumph of randomness offends him. But it's not simply the triumph of randomness; a penalty shootout is a test of fortitude and concentration under stress with some element of randomness. There are times in life when that matters most.

Ad Ventures

I recently entered a competition to create "a pithy ad" for the New York Review of Books Classifieds, and won a half-bottle of distinguished wine (not yet delivered) for my honorable-mention tongue-in-cheek entry:

"FANNIE MAE with troubled assets, bored with Freddie Mac, seeks well-regulated stimulus package from counterparty too big to fail. No cash for clunkers."

Though the NYRB listed the winning ads as competition winners in their print edition, in their online edition at, for reasons known only to them, they simply listed the ads with all the others, as though all were genuine.

To my initial surprise, I have therefore received quite a bunch of propositions, some risque, some not, mostly from self-admitted upper west siders, who are definitely a good-looking and pretty fearless bunch as far as I can tell from the unrequested photos they sent.

Things are looking up for America.

UnPC Scientists

Thanks to Dave Edwards for a link to this comment by Michio Kaku:

"As you know, I work in something called String Theory which makes the statement that we are reading the mind of God. It’s based on music or little vibrating strings thus giving us particles that we see in nature. The laws of chemistry that we struggled with in high school would be the melodies that you can play on these vibrating strings. The Universe would be a symphony of these vibrating strings and the mind of God that Einstein wrote about at length would be cosmic music resonating through this nirvana… through this 11 dimensional hyperspace—that would be the mind of God. We physicists are the only scientists who can say the word “God” and not blush. The fact of the matter is that we are dealing with the cosmic questions of existence and meaning."

This reminds me of Keynes's speech about Newton, from which I quote:

Why do I call him a magician? Because he looked on the whole universe and all that is in it as a riddle, as a secret which could be read by applying pure thought to certain evidence, certain mystic clues which God had laid about the world to allow a sort of philosopher's treasure hunt to the esoteric brotherhood. He believed that these clues were to be found partly in the evidence of the heavens and in the constitution of elements (and that is what gives the false suggestion of his being an experimental natural philosopher), but also partly in certain papers and traditions handed down by the brethren in an unbroken chain back to the original cryptic revelation in Babylonia. He regarded the universe as a cryptogram set by the Almighty - just as he himself wrapt the discovery of the calculus in a cryptogram when he communicated with Leibniz. By pure thought, by concentration of mind, the riddle, he believed, would be revealed to the initiate.

Uruguay a Ghanaf*

In cricket, if a batsman illegally interposes his legs between the ball and wickets, the umpire, if he judges that the ball would have hit the wickets, rules the batsman out "LBW" -- Leg Before Wicket.

If cricket were soccer, the batsmen wouldn't be out; instead, the umpire would have given the bowler a free throw at the wicket.

If soccer were cricket, Ghana would have beaten Uruguay.




Could the Russian penetration of the US have gone deeper than we thought?

Kagan Geithner Bernanke

Summers Vilsack Romer

Financial Metaphors

Years ago I used to admire the literate double-entendre ads for people seeking people in the New York Review of Books, and wrote a blog entry about them: Masculin-Feminin

A few weeks ago the NYRB announced a competition asking you to compose a "pithy personal ad". I received an Honorable Mention and the promise of a half bottle of wine "of distinguished vintage" for this one, which appears in the latest issue:

"FANNIE MAE with troubled assets, bored with Freddie Mac, seeks well-regulated stimulus package from counterparty too big to fail. No cash for clunkers."

The Droid, Gurgling

My Droid, I reported a few days ago, jitterbugged ceaselessly for 5 days while I was in the Caribbean, where, from the moment of my arrival, it responded only to phantom input.

I received a bunch of kind emails from people with similar problems who exchanged theirs for Blackberries. Prepared for the worst, I boarded a plane to New York, ready to confront Verizon and start all over again with a mint Droid or a totally different phone. But within minutes the jitter slowly began to fade away.

I conclude that it was the humidity. It was indeed unbelievably damp where I was, inside and out; nothing would dry.

Presumably, the touchscreen's electrical conductivity got screwed up. Nevertheless, I don't want to be too forgiving. The fact it that while my Droid malfunctioned, I was surrounded by people merrily iPhoning away with no problem. My iPad too was jitterfree.

Go figure.

A Short Moral Tale

Once upon a time a lady who loved animals took a vacation at an upscale island hotel, part of a chain offering cheap promotional rates to entice customers to a new location where the local staff still needed training.

On the hotel grounds lived a grey cat that belonged to no one. The cat was skinny but healthy-looking. When people congregated at the outdoor bar the cat approached quietly and miaowed, asking for food. But the cat was well-behaved and wary, and seemed to understood that making a nuisance of itself would be counterproductive. So no one paid much attention to the cat and it lived in tentative coexistence with the hotel, fending for itself.

One day the lady who loved animals fed the cat a bit of her tuna baguette; on another day she gave it scraps of turkey and bacon from a club sandwich. The cat was so hungry that it even ate french fries, though it rejected bread.

Being kind, the lady then bought some tins of cat food in a local supermercado. The next time she went to the outdoor bar, she took along the cat food, opened a tin, and gave it to the cat, who devoured it. The lady cleaned up carefully and deposited the empty can in the garbage. No one was bothered.

But a man wearing long trousers and a tie and carrying a clipboard, part of the mainland management of the chain, was visiting the island that day, checking to see on how well the newly trained local employees were performing their tasks. He saw the stray cat being fed. He spoke quietly to the staff at the bar. A little later the grey cat was observed being deposited into a plastic soft-drink crate which was then covered with a towel, and then placed on a shelf in the bar supply hut. The cat miaowed plaintively and then soon fell silent.

The lady asked what was happening. The bar tender said that the local humane society had been called and would come to pick up the cat. She gave the bar tender her last can of cat food to send with the cat to the humane society, and they placed it on top of the towel on top of the crate. A few hours later the crate was gone.

Sometimes a little help can do a lot of harm.

The Invisible Hand

I hesitate to report on this for fear of being pitied and mocked, but honestly compels.

If, like me, you are the proud owner of a Verizon-Motorola-Google Droid, you will be interested to know that its synchronization problems that cause the entire machine to seize up, its dumb search function that cannot even find appointments in its own calendar, and other sundry design problems are dwarfed by a new one I've discovered: The Invisible Hand!

Lest you think I am the only poor soul so afflicted, I recommend you google or bing "motorola android touch screen jitter".

This is the situation. Sometimes, the Droid screen starts to jitter, as though stroked by invisible touches from some phantom Dybbuk trying to arouse it. It looks as though it is suffering endless and continual touch screen input. The screen scrolls up and down, left and right, opens up the picture gallery, displays menus, asks you to enter data, ceaselessly.

Needless to say, this makes looking at your calendar or dialing a phone number an impossibility. Often, it makes unlocking the screen and using the smartphone in any way at all a non-event.

I've experienced this occasionally over the past few months, and it seemed to happen after I put the phone in my pocket. I thought that maybe it was accumulating touches from my pocket lining and then trying to parse them. Trying to kick it out of its Parkinsonian tremors, I eventually removed the battery, but when I re-inserted it the behavior continued. I thought perhaps that, being a smartphone, it buffered all its touchscreen inputs, and that even after I put in the battery again, it was still trying to parse the meaningless strokes it experienced in my pocket. Usually, after a few hours, it seemed, the buffer emptied.

But this may have been my fantasy. For the past day or two my phone has been in extremis, trembling at invisible touches that seem to resume even after a quiet night spent batteryless.

I googled the string above and discovered with some relief that I am not the only one with this problem. People similarly afflicted seem to be divided as to whether this is a software problem or a hardware problem (something to do with high humidity and the electrocapacitive touch screen). Ours not to reason why, but the iPad and the iPhone don't seem to have similar problems.

To paraphrase a slogan about dogs and cats I saw in a store recently, iPhones have owners, Droids have staff.

Spinoza's Ethics Summarized

Definition 7: That thing is called free which exists from the necessity of its nature alone, and is determined to act by itself alone. But a thing is called necessary, or rather compelled, which is determined by another to exist and to produce an effect in a certain and determinate nature.

Underlyers <==> free.

Derivatives <==> compelled.

Derivatives suffer passions, Underlyers have actions.

Try to be an underlyer, not a derivative

Breaking The Cycle

This is the text of an interview I had on Edge: Breaking The Cycle

Mighty and dreadful, even more so than losing money

I knew a man once who wanted to get frozen when he died so that he could be revived when they had a cure for what would kill him. He's dead now. And I know someone still alive who voluntarily undergoes extreme calorie restriction in the hope of living much longer. He's very skinny and it may work. But last Sunday Times Obituaries Section had an article on a man who really though he could defeat death.

Arakawa, a Japanese-born artist, died at age 73 of unspecified causes. He and his wife, Madeline Gins, had built houses with psychologically disorienting features that were supposed to keep you perpetually young.

From the obituary:

“This mortality thing is bad news,” Ms. Gins said by phone from her studio on Houston Street. She said she would redouble her efforts to prove that “aging can be outlawed.”

In the 1990s, the couple invested money with Bernard Madoff. After Mr. Madoff’s fraud was exposed in 2008, they were forced to lay off staff and close their office. “He pulled the rug out from under us,” Ms. Gins said at the time. But, she said this week, her husband shrugged off things as trivial as money. There was a bigger morality in play.

“It’s immoral,” Ms. Gins said, “that people have to die.”

This insolvency thing is bad news too, she might have said. We will redouble our effort to prove that bankruptcy can be outlawed. It's immoral that companies have to die.

Sector Inflation

People seem to think that inflation hasn't kicked in yet, but inflation supposedly happens when too much money changes too few things.

I think we are already seeing inflation as a result of increases in the money supply, but the inflation is limited to those sectors to which the increased money supply has flowed. The money being printed hasn't flowed into people's pockets, it's flowed into the financial firms. As a result, the prices that have gone up are those of securities, the things financial firms buy, rather than food and clothes, the things people buy.

The Moral Life of Babies

There is an article in today's Sunday NY Times Magazine about experiments done at Yale on the moral life of babies, accompanied, on the NY Times website, by a video of some babies watching "naughty" and "nice" puppets, and then, on being offered the puppets by the experimenter, picking the nice puppet:

If you watch the video, it's hard not to think of the Clever Hans syndrome; the experimenters seem to be very close to prompting the babies to take the "nice" puppet, sometimes pulling away the "nasty" one as soon as the baby looks at the nice one, and talking very nicely to the babies as soon as they start to make the right choice.

From personal observation of small children, I know how quickly they can understand the world. But if the video actually reflects the experiments, then it seems plausible to me that the baby seems to be trying to win the approval of the experimenter for the choice it's making.

Dueling Systems

Cri de Bourse

Physicists with an interest in economics tend to wake up at 3 a.m. and dream of stabilizing the economy with equations. A more tractable task for econophysicists would be to participate in the design of an electronic trading exchange that doesn't undergo instabilities or phase transitions. Electronic exchanges are not going to go away, and making algorithmic exchanges stable, testing them with cellular automata, seems like it could be a tractable project for statistical physicists involving no delusions of grandeur and much usefulness.

And then, of course, there is always the problem of software bugs, even when you think you have the right model.

The Duel

I went on impulse to see a movie of Chekhov's long short story The Duel at Film Forum, and it was good, but kind of confusing as to the motives of some of the characters. I then came home and downloaded it for free from the iBook store onto my iPad and began reading it, and everything is much clearer. So much of the back story depends on inner thoughts in the story, and these are missing in this movie, as in most movies. One exception is a BBC TV series I once saw in England in the 70s based on Sartre's WWII trilogy (it may be called Iron in the Soul, I'm not sure) and as far as I recall they used voice-overs for every character, so that sometimes each character spoke and sometimes each character thought aloud right before or after they spoke, and it worked very well.

As someone pointed out somewhere, it's easier to make an excellent movie out of a second-rate book. (Too much respect is counterproductive.) Nevertheless, if the movie isn't too bad it still serves to point you in the direction of the book itself.

Getting Into Trouble Very Efficiently

The Path of Roughest Descent

I was watching the Senate hearings the other day, and was struck by the faulty approximate way in which the universe tries to right itself in a series of steps that are all themselves faulty and overshoot or undershoot their mark.

There is a determinism to the workings of the universe, but it's a rough sort of determinism. It tries to improve things by banging everyone together and thereby polishing them in a rough grained sort of way, their protrusions being slowly ground down by interaction with other people's protrusions. The universe doesn't use a high-speed diamond drill to clean out your cavities; it uses stone-age implements which results in fillings that are often too high and must be smoothed by grinding your teeth.

After a while I realized the whole thing was a perfect illustration of karma, which I just looked up again on wikipedia:

"Karma is not punishment or retribution but simply an extended expression or consequence of natural acts. Karma … names the universal principle of cause and effect, action and reaction that governs all life. The effects experienced are also able to be mitigated by actions and are not necessarily fated … it is not a simple, one-to-one correspondence of reward or punishment. Karma is not fate, for humans act with free will creating their own destiny … The conquest of karma lies in intelligent action and dispassionate response."

In a way, karma is the low-tech version of Longfellow's

Though the mills of God grind slowly, Yet they grind exceeding small; Though with patience he stands waiting, With exactness grinds he all.

Congress is not involved in the conquest of karma. Few people are.

Lessons of the Fall

1. Efficiency isn't everything.

Many market mechanisms get knee-jerk justification in the name of the great god Efficiency. Sometimes it's just a self-serving argument, when there is no better one, in favor of something that's good for the proponent.

The argument for efficiency can sometimes be the last refuge of a scoundrel, as Samuel Johnson might have said.

Inefficient propellor planes are less vulnerable than jets to a high-altitude cloud of tiny particles of volcanic glass and pulverised rock.

2. The creation of content and its delivery are better off separated.

The world gets uncomfortable when dominating amounts of creation and flow are controlled by the same person or company.

Thus, Amazon can dominate the selling of books but it will be bad if they take over publishing, as rumor has it they would like to do. Similarly, Hollywood shouldn't control the TV channels, to take a very outdated example. And securitization and market making should be done by different companies too.

There is perhaps a sort of anti-Heisenberg principal (anti because it has an upper bound rather than lower bound on the right hand side) that says that if the product of creation and flow controlled by one entity (person or company) gets too large, it becomes dangerous from the point of view of both that one entity and from the point of view of the entities it serves:

[Principal] [Agency] < h

[Creation] [Distribution] < h

where h is a constant, say (30%)^2 that shouldn't be exceeded. You can have a lot of one and a little of the other, or vice versa, but not a lion's share of both.

[A Poor Workman Blames His {Tools] of the Trade}

The architects of the bailout have been trying to cure insolvency by treating it as illiquidity.

The SEC may be trying to cure unethical behavior by treating it as illegality.

Serend iPad ously, Better Late Than Never

I have some advice for myself, or for you if you have my character flaws: "Use things for what they're good for."

With every other (computing) device I've acquired in the last 15 years, I've tried to make it capable of being my primary platform in its domain.

So I've spent days trying to make my laptop do absolutely everything my desktop does, everything I needed to do anywhere, from running Windows in emulation mode to syncing with my cellphone to running Matlab and Mathematica. I have the excuse that it needs to replace my desktop wherever I'm using it.

Similarly I've spent weeks forcing my cellphone to be a complete calendar and note taker, with similar excuse.

Maybe out of exhaustion, I haven't tried to tame the iPad. I don't have to read every book I own on it. I don't have to have my calendar on it, since I carry my phone. I don't have to run Parallel Systems on it, even though I'm sure it wouldn't be that hard for them to make it possible. I can carry a laptop when I really need all that. As a result I've found it's fun rather than an obligation.

An example: I wanted to read something by GK Chesterton, and found that, for 99c on Amazon or for nothing on iBooks, I could download a 600 page book by him onto my iPad and read it with great ease and clarity. I would NOT have bought a physical 600 page Chesterton, even for 99c, because it'd be too big to carry anywhere with me. But as a virtual book, it's great to have it. I can pull it out any time and browse a little, without feeling acquisitive. The same will no doubt apply to videos and movies.

Probably I need this advice more than you do.


Having arm-wrestled the Verizon-Motorola-Google Droid to a draw, I decided not to subjugate the iPad. I don't have to because it's a luxury, not a necessity. I don't need keep my calendar on it because I already do that on my phone, so it's less important that it do everything, at least for me. That said, here are a couple of impressions based on very casual use.

° I expected to be underwhelmed. It's better than I expected.

° The virtual keyboard in landscape mode is terrific -- I can really touchtype flawlessly. But it's so good and so fast that it becomes slightly irritating to have to switch to a keyboard for the numbers and punctuation. i wish you could simply hold the shift key and get the numbers, exclamations, apostrophes, etc. without waiting.

° The insides of the Droid are fine. It's the user interface that lacks deep polish, even though it oozes shallow polish. I suppose one should expect this; Google has little experience with designing complex interfaces and they have lots to learn. (I can point out some flaws on Apple's Mail: when you delete a message, it doesn't take you automatically to the next one.)

° On the iPad, the interface is fine, especially since it has no peer with which to compare it. What's lacking is access to all its insides. You know it's running UNIX, has multitasking and a file system. It feels so much like a Mac laptop that you want to start doing all the laptoppish things you can do as well as read, browse and look at videos, but … you can't access it's cloaked insides: I don't think you can save files for future use, or print, or set tabs on Safari. I imagine those things will come.

° There is a 45 degree angle between the genders of the Droid and the iPad. The Droid is a male imp -- hard sharp edges, chunky, mischievous, stubborn, obnoxious, a sort of Pan. The noises it makes are panicky, and the logo is sci-fi-ish. I wonder if many women bought the Droid. I doubt it.

° The iPad isn't feminine, hence the 45 degrees angle. But it's not clearly masculine either. It isn't gay, it's just neuter or metrosexual.

Mysteries of Small Pharma

In the last couple of decades drugstore chains (Duane Reade and CVS) and bookstore chains (Barnes & Noble and Borders) have taken over Manhattan. There are very few small independent bookstores left -- The Corner Bookstore and Crawford Doyle Booksellers on Madison Avenue are two good ones that display a definite taste in books. Anything on their shelves is interesting, unlike the shelves at a chain store, but I sadly doubt they can survive. I used to shop expensively at Shakespeare and Co in a quixotic attempt to keep them going when B&N first moved into the neighborhood, but it was futile.

Now look at my collage above: near Lincoln center between CPW and Bway within the space of a few blocks there are three unlikelysmall drugstores. How do THEY stay alive? They are cute and anachronistic, but they don't sell anything special. What would anyone buy there that they couldn't get more cheaply and brashly at DR, from antibiotics through sunblock and beachbags to oatmeal?

Or are these small unlikely drugstores Pynchonian/Men-In-Black secret gateways to some other world, serving a common purpose that none of us except their proprietors know, who, subsidized by some mysterious mission, meet weekly to further their common cause?

Stations on an underground railroad for failed financiers to flee to Canada? A Rosemary's Baby experiment to create a future chairman of the Federal Reserve Bank?

You never know. Manhattan has many mysteries.

A Responsible Post

A Foolish Inconsistency

One of the bugbears of my life is (other) people who behave inconsistently, who say, in effect, without batting an eyelash or turning a hair, "That was then, this is now."

When I was young I had friends who thought everyone should live on a kibbutz and do manual labor and heaped scorn on people who didn't. Some of my friends went to live on kibbutz, and most of them, ten years later, were back doing something else. I should be more tolerant of this but I'm not.

Today's New York Times has a particularly sad example of how poorly people are able to put themselves in other people's shoes, despite their good intentions. The article is headlined "Helping Patients Face Death, She Fought to Live", and is the tale of a woman who spent her working life persuading terminally ill patients to accept palliative care rather than heroic efforts, and then, when she became terminally ill herself, decided she didn't want to accept palliative care but wanted to fight to the last breath.

I suppose one should be careful of persuading anyone to do anything, unless they absolutely beg you for advice, and even then …

I leave the last word to Lewis Carroll:

"You are old," said the youth, "as I mentioned before,
And have grown most uncommonly fat;
Yet you turned a back somersault in at the door -
Pray, what is the reason of that?"

"In my youth," said the sage, as he shook his gray locks,
"I kept all my limbs very supple
By the use of this ointment - one shilling the box -
Allow me to sell you a couple."

Books & Movies

The Art of The Steal

At stake under Repo 105 was $50 billion of debt.

The Art of the Steal's focus is a similar sum of money. It's about the ultimately successful efforts of various Philadelphia organizations and charities to subvert the will of the late owner of the Barnes Foundation in Merion, Pennsylvania, and move the art he bought and displayed in a house in Merion to a museum in Philadelphia, against his Will and his will.

As someone without power in the movie says, and it seems right, what all the people at the foundations, museums and charities really get a thrill out of is the idea of controlling $50 billion, the estimated worth of the foundation's amazing collection of post-impressionist art, never loaned or sold, rarely displayed.

Though the movie waxes indignant about the wiles of the foundations and the dissing of the Will and the vulgarity of museums, and they are doubtless right about the motives of the various parties stimulated by the thought of controlling assets, it seems to me that in the end the outcome isn't all that bad: Putting the art in a public place isn't awful, even if the museums are interested only in money and attendance and selling Cezanne scarves.

The "good guys" in the movie detest the vulgarity and the money chasing, but somehow, though everything they say is likely true, you look at them and think: What do they actually want, to keep the pictures in a temple that only true aesthetes can enter, not the great unwashed, in order to remain faithful to the will of a man who's been dead for 50 years?

Why Evolution is True by Jerry Coyne

I know little about evolution, and I'm always unnecessarily peeved by people who get worked up about other people's irrationality, but this book is very well written and convincing.


Spinoza argued that the things that people do out of apparent free will actually have a causal explanation -- we just haven't understood it yet.

I like the few videos with Slavoj Zizek I accidentally discovered on Youtube, performer though he is. What I particularly like is his implicit attitude that everything apparently random deserves an explanation in terms of its meaning to humans -- the design of toilets in different countries, for example. I like to think everything has a meaning. We invent the things we talk about, even ostensibly natural objects, so why shouldn't they have human meanings?

And I realize that what I dislike about the narrowly materialist explanations of things -- emotions as chemistry, behavior as neuroscience -- is that even if it's true it's only half the picture. It's the mechanical explanation for things, and it may be valid, but it doesn't provide the human context that go with the matter that we gave a name and category too. I like even Freud for this reason: the idea that there is some meaning to dreams and idiosyncracies and neuroses, that nothing we name happens without a human relevance and cause describable in human terms.

Of course even the material world is identified by humans, and so perhaps purely material explanations are still human explanations.

Botoxed Balance Sheets

So … … … Lehman and Ernst & Young executives are being investigated for trying to conceal debt and leverage by having temporary repos masquerade as permanent sales.

I would think that cosmeticized balance sheets have been a pretty standard procedure for years, from faux-steady GE earnings growth through off-balance-sheet SIVs to general end-of-quarter-reporting involving temporary leverage reduction. The Lehman case is perhaps more extreme, I suppose, but how different? More blatant once discovered?


I rarely watch Youtube but tonight, wanting to discharge and then recharge my iPod by making it run for a long time on a long video, I stumbled across a documentary about Slavo Zizek (whom I never heard of previously, my ignorance) talking about the contradictions of liberal democracy, the unfortunate ceding of populism to the right wing, the near impossibility of capitalism with a human face, the rise of totalitarian capitalism in Asia, Berlusconi and many other interesting things:

The Dialectics of Cures

A friend of mine read an excerpt of Hank Paulson's account of the bailout and expressed dismay at discovering that Paulson was a Christian Scientist who didn't want to take pain-killer for a headache. Prior to this, he seemed to find Paulson entirely reasonable.

Trying to decide rationally between what's a medicine and what's food, what's literature and what's pornography, what's investment and what's speculation, what is an effect and what is a side effect -- it all sounds tough to me. But lately I've had a long run-in with medicines for a persistent sinus-y kind of cough and cold that made me think maybe no medicine was the way to go. I'm going to go green.

Everything I took the past month seemed to not only not cure me, but actually exacerbate something else. Pseudoephedrine eventually and paradoxically causes the runny nose it 's supposed to suppress. Antibiotics upset your stomach. Eventually people start suggesting new medicines to offset the old medicines, yoghurt capsules against antibiotics, etc, which I declined.

Finally, seeking a happy to end to it all, I agreed to take some methylprednisolone for a few days, a kind of steroid, to beat down the residual allergy. They give it to you like some kind of shock-and-awe treatment: a 6 tablet bombardment on day one, 5 on day two, 4 on day three, etc. On day 6, it requires no more drugs at all: then the Saddam Hussein bad cells come out of their foxhole with their hands up.

It helped a little, but then, on the very last morning I woke up scratching at what I saw were small hives on my inner forearms.

Then I had my Proustian recollection.

When I was about fifteen years old, I had allergies, and eventually went to an allergist who almost killed me. He injected grass pollen into my arm veins with such deadly accuracy and ill effect that not only did my arm swell up, but so did my air passages and throat etc, so that they had to give me adrenalin on the spot and a few weeks of methylprednisolone.

Then I embarked on desensitization: for two years our family doctor whom I still recall fondly came by to inject concentrated grass pollen into my forearms in increasing doses. Somehow what doesn't kill you is supposed to make you strong.

I don't think my allergy to grass pollen ever went away, but what did happen was a new problem. For more than ten years thereafter, if I wore wool or nylon against my bare arms, hives would appear where I had once been injected with grass pollen. Somehow, deep inside my skin, something remained that remembered the insult of the allergist and grew angry every time some minor external occurrence reminded my body of it.

Why did those hives suddenly appear a few days ago? (They are gone now).

My theory is that in taking the methylprednisolone now, many years later, my supposedly desensitized cells on my arm, experiencing once again a cure, remembered their ancient insults by the allergist and family doctor and decided to rebel again. Experiencing the cure again, they also remembered the disease.

Sometimes nice words can remind you of a time when there were were harsh words too.

Well, that's my theory. I scoff at your unscientific beliefs but mine seem perfectly reasonable to me.

The Decline of Professional Chemists

Fifty years ago in South Africa, and in England, chemists (pharmacists in the U S of A), ran their own small shops. They were open from 9 - 5. They were pretty much only allowed to sell medical-type goods.

The doctor who made a home visit to you wrote out a prescription for a cough mixture or eye drops that involved various ingredients that only a chemist was allowed to assemble. Many medicines were custom. The pharmacist was trained to assemble and dispense them. He (they were mostly he’s) used distilled water and various chemicals he had in stock. He worked in the back of the chemist shop. He assembled them with pipettes and glass flasks and finally decanted them into a dark brown light-excluding bottle with a cork. He wrote out a label by hand and pasted it on, with instructions. And then a guy on a Vespa, if you were willing to wait, delivered it to your house.

Mirabile dictu, many of the chemists in Cape Town actually carried chemicals and photographics supplies too. I used to buy granulated zinc weighed out into little brown paper bags and dilute hydrochloric acid decanted into the same brown bottles, and then make hydrogen-filled balloons. I brought glass tubing and heated it and bent it. I bought sulphur powder. Somehow, the suburban chemist carried it all in little brown labeled drawers in a bureau in the back, or ordered what he didn’t have from the stockist, Haynes Mathews, a magical name, downtown. I also bought sodium hypochlorite and developer and black bakelite tanks, though that was, I concede, already a drifting from the true job of a chemist.

My sister had a boyfriend from Johannesburg -- I think his name was Lou -- who was a chemist and ran his own small business. Being a chemist wasn’t that far away from being a real doctor. She invited him over to a Friday night family dinner. He appalled my parents by having the honesty to tell them that sometimes when he was in a hurry he used tap water instead of distilled water.

Chemist shops needed chemists, both for their skills and their license, and you could make a good living by being a locum, a Latin word indicating an itinerant qualified chemist who came in to work for a daily fee in some chemist shop in place of the regular but temporarily absent chemist, in order to provide the licensed authority to make medicines and the skill. Sometimes, I suppose, the locum was hired by an entrepreneur chemist who wanted to grow jis business.

I thought of this yesterday when I went into Duane Reade to fill a prescription. I handed the prescription to a woman cashier who was (wo)manning the cash register and taking prescriptions. She passed it to a bunch of female pharmacists standing behind a shoulder high counter who, non-stop, were talking on the phone squeezed between ear and shoulder to either friends or doctors offices or insurance companies or, rarely, patients, while they simultaneously read prescriptions and counted little capsules or tablets out of giant vials out and poured them into little vials and labelled them and handed them back. They were so busy and so bored doing such dull assembly-line work. No decanting and no talking to customers. The cashier had a more human job than the chemist.

A link to a conference on the intersection of quantitative finance and the social sciences

London June 15, 16 2010

"Conference topics include how cultures in credit markets influence understanding and behaviour, how philosophy informs financial mathematics and the impact of friends and networks on trading decisions.

The conference will ask whether there is anything we can learn from applying a social sciences overlay to complex markets, and discuss what is “actionable” in terms of quantifying these themes in trading strategies, risk management and regulation"

Down And Out Embarrassed and Undone

This morning I walked up Columbus Ave on my way to work and passed a Danskin store that had a sign outside that said "Seized by the U.S. Marshal". Things are bad when people on the Upper West Side are no longer buying leotards, although it's possible that stores like Lululemon, which cater to the yoga crowd, may have undone the Danskin purveyors. But something embarrassing has happened to me twice in the past couple of months that has convinced me more strongly than ever that the recession is still with us.

Much like Orwell reported on the state of poor down-and-out people in European capitals in the early 1930s, I feel obliged to report to you the indications of how the recession has affected working people in New York. And at greater risk to my reputation.

In the 1970s New York was indeed a walk on the wild side. Simon and Garfunkel in The Boxer sang about the ladies of the night on Seventh Avenue. And if you drove anywhere near the Lincoln Tunnel there were women who looked like they were freezing to death as they patrolled the streets of the far west side in hot pants (you may be too young to know what those were). New York then wasn't New York now.

Even in the Eighties there was a visible underside. I once took some small children to another child's birthday party at Dezerland on the West Side, and when we came out looking with no luck for a cab on the windy icy street there were virtually unclad women waving at cars that went by.

"What are they doing?" one of the kids I was shepherding asked me.

"I don't know," I lied.

"I know," a seven-year-old girl said to me. "They dress like that so it'll be easier to get a taxi."

That was then. Now Times Square is Disneyland and everything is clean. Or so I thought.

Several months ago I left a business dinner at 9 pm and walked up Park Avenue on a nice fall evening. As usual, of course, I was minding my own business, thinking about the sorts of high-minded cultural things that people in New York think about. Suddenly, two very elegantly dressed women in their thirties, laughing and chatting to each other, walked towards me and started to talk. I paused. I thought they wanted help, but instead they offered to help me. I declined. They gave me a business card with a location and a phone number, and the admonition "No Blocked Calls Accepted". I'm glad they knew how to look after themselves.

To me these Park Ave women didn't look like the kind of people who did business on the street; they should have been, I imagine, doing their Belle-du-Nuit thing in an East Side townhouse that cops are supposed to raid, escorting the patrons outside to the pop of flashbulbs while the men cover their faces with their hats. The fact that they were out drumming up business near the Mercedes Benz and Aston Martin dealers and the Waldorf Astoria means that even the luxury spenders are spending less.

Which brings me to two nights ago. It had been raining and snowing and I eventually took a walk around 8 pm in the evening, heading to near the Time Warner Center. Weather fit for neither man nor beast. Minding my own business, thinking about nothing of course except the finer things in life, and looking of course like all I was thinking about were the finer thing in life, like the latest William Kentridge exhibition or the solution to a partial differential equation, I ambled along head down. (Methinks the gentlemen doth protest too much? Nevertheless, it's true.) Somewhere around 58th street I stopped, my feet in a puddle, to read an email newsletter from SSRN on my cell phone. Half a minute later, still engrossed in the latest reports on risk management and asset allocation, I sensed someone standing beside me waiting for my attention. I looked up.

"Reading your email?" said a woman, easily 10 years or more older than me, peering up. "Go ahead, I can wait."

Nice but frail lady, a touch of ill-matched make-up, the sort of person you see buying Aleve and pet food for their cat in supermarkets.

Modesty and my perennial good taste permit me to reveal no more about what she said to me. Suffice it to say that it involved choices and various kinds of rhymes I'd never heard before. Then she handed me a card with initials only, a phone number and an address. She was apparently an ACCOUNTANT whose office hours were 1:00pm - 9:00 pm and she did her spreadsheets from home.

Is there something friendly and unprejudiced about the way I walk or stand, even when I'm simply looking at my Droid that suggests I'm open to this sort of stuff? Usually I like to blame myself for things, but I have to say I don't think so.

The people who used to hustle in this business in New York used to look like they were hustling. You could tell them a mile off by the way they dressed. Or they looked like addicts.

When people who (i) look as though they normally ply their business indoors in expensive places or (ii) look as though they should be home drinking hot Lipton's tea, are out on the street in the rain taking dangerous chances, I have to conclude that life is still tough.

Even after the Stimulus.

On the strategy of making the world fit your tools

According to today's WSJ, some economists are suggesting the Fed should target an inflation rate higher than 2%, perhaps 4%. The argument is as follows:

"The new argument for inflation goes like this: Low inflation and the low interest rates that accompany it leave central banks little room to maneuver when shocks hit. After Lehman Brothers collapsed in 2008, for example, the U.S. Federal Reserve quickly cut interest rates to near zero, but couldn't go any lower even though the economy needed a lot more stimulus.".

This reminds me of a dentist I once went to twenty years ago who put a filling in a lower tooth. The filling was a little high and bumped against the opposing upper tooth when I closed my mouth. He then proceeded to file down the upper tooth to fit the filling.

The Shootist/The Monastery /The Whorehouse

Universities have their quota of disgruntled people. There is a perhaps lucrative book waiting to be written -- The Ungraduate?  -- about the attempts that have been made on professors lives, more often by students than by other faculty. When I was in graduate school there were at least a few more than apocryphal recollections of such occurrences. A casual google search quickly leads you to many, of which just several are

There are many more. Google "Bayard Peakes" for some interesting information.

Killing someone isn’t going to get you tenure or a degree. But there is definitely something anomalous about modern universities; when I returned to academic life seven years ago I found it unlike what I had recalled or imagined.

Part of the confusion is the perplexity as to where universities lie in the spectrum of higher learning vs business. Forty years ago, at least in my imagination from the student side of things, it was simple: your grades were supposed to be all that mattered (in England and South Africa, provided in the latter case, of course, that you were the right color) and everything else counted for nothing. Universities were supposed to be dedicated to learning and teaching, and tenure provided some freedom. 

Now, universities are different, and don’t quite know which camp they fall in, the idealists or the moneymakers.

They patent algorithms.

Pharma companies reside on their premises.

Administrators think it's their job to be entrepreneurs and fund raisers.

Departments strive to provide executive education as a way of generating funds.

They admit more students than there are future jobs for because they like the cash flow.

They inflate grades and are tempted to tolerate cheating because their students are quite clearly customers.

And on the (somewhat perhaps?) good side, professors themselves get graded by students. (I took quantum mechanics from Robert Serber who pulled out his ancient yellowed notes from his jacket pocket and copied them onto the board while he took long deep luxurious puffs from his chain of cigarettes. No powerpoints given out in advance, no office hours.) 

And they give tenure, the apparent trigger for the recent episode. It’s such an all-or-nothing thing; where else in the world is there a job that they can never fire you from? (Apparently, I recently learned, in the NYC school system.)

Nevertheless, many universities, like Walmart, use non-tenured adjuncts at a fraction of their cost to do the heavy lifting cheaply, the correct phrase, I'm told, being the “proletarianization of academic life”.

On A Clear Day You Can See Forever

Running in the park, I passed a slow bicycle-rickshaw and heard the driver say to the passengers:

"You see that kids' playground there? It was donated by Robin Williams … the slides and seesaws are made out of a special soft metal so that the kids won't crack their heads. It really works."


I was on an airplane yesterday and was reading the NYR of Books, where the personals are always amusing (Masculin-Feminin) and mostly unrealistic. I like this one because of the kicker in the last few words, in boldface, that display an admirable lack of self-reflection.

GRACE, SUBSTANCE, and just the right amount of sparkle and good looks. Intriguing, passionate, bicultural—harmonious blend of New York and India. Accomplished, published, professional. Sensual self-deprecating charm, keen artistic sensibility. Avid jogger, ardent cook, slender figure, good dancer (performed in India/United States), can be technical klutz (fixing things...). Known for infectious smile, impish mischievousness, easygoing nature, generosity. Intellectual and feminine—loves creating warm, nourishing home, gravitates to Arts/Science New York Times sections, Faulkner, Jhumpa Lahiri, Alvin Ailey, theater, yoga. Admits to guilty pleasures—chocolate, wine, my flatscreen TV for DVDs. Would love to return to Paris or Grand Canyon with special man. Seeking educated, attractive, considerate guy, 50s–60s. In shape, passionate, warm, financially sound, liberal, able to see beyond himself.

You can see the original (and, if you are not too self-involved, the contact information) at Personal Ad.


And I watched an old movie, La Notte, set in Italy in the early 60s. It made me wonder -- how, after WW II, did the Italians manage to go so quickly from being part of the Axis enemy to the height of coolness? England didn’t become cool until the middle of the Swinging Sixties, Germany never got to be really cool, but by the mid Fifties Italy was exporting Vespas, Cappuccino, Espresso, Pizza and a general impression of knowing how live life with no-one regarding them as an old enemy.

First, do no hleg!

For the last twenty years I’ve known that I get injured less, when running, if I run in the thinnest racing flats, even though I’m not a racer. The only thing less harmful is running without shoes at all, on grass or beaches.

Now, I’m happy to see, the latest issue of Nature ( confirms that running barefoot and landing (the natural way) on your forefoot, on any surface, even the road to hell, produces less shock than running in the most rationally padded stabilized shoes and thenlanding on your heel (the necessary !natural way to land when you have built-up heels and rigid soles).

Maybe I should try throwing away my spectacles (glasses to you) too, I thought, and then I realized that I did read an article the other day that said that giving near-sighted kids bifocals that only corrects their distance vision and not their close-up vision seems to make their nearsightedness progress less rapidly. (,CST-NWS-kidbifocals22.article)

It makes sense -- by giving them a bifocal you're fixing only what absolutely needs fixing, their distance vision, but still allowing them to see the way they usually do close up.

The Great Wall of Ungovernable America

The Great Wall

The commander-in-chief—so you’ve heard—has begun a mission to fix the system, directly from his office, for us, the citizens in all the states. He ordered his chief of staff, his aides and his secretaries to come to the oval room and attend a meeting, a meeting so important that only they were informed of it. They listened to his plan for eliminating war, bringing healthcare to everyone, ensuring a good education for all children, smoothing the grosser inequalities in pay, fixing the financial system, harnessing corporations, removing conflicts of interest, returning to a volunteer army of citizens, building infrastructure. Then he sent them off to write bills and take them to the people. They head out at once, tireless, making their way through the visiting crowds and reporters, intending to speak to congressman and senators, governors and state legislators, town halls and citizens. If any of them run into resistance, they point to the flag on their lapel pin. They move forward easily, appointments set up with the powerful first and the citizens later. But the number of people they must persuade is so huge; their dwelling places are infinite. If the commander liked action more than words, if the capitol were an open field, if the lobbyists weren’t being sent to harass and dissuade them, if money weren’t power, if officials weren’t worried about their next election and the jobs they might get if they were voted out of office, if they weren’t appearing on talk shows, then soon all the commander-in-chief’s men and women would be moving for the common good. But instead, how futile are the efforts. The aides are still dealing with the inhabitants of the capital, lunching and being lunched, seeking and denying power. Never will they win their way out of the capitol. And if they did, they would have to battle past meetings with lobbyists and ceo’s, thousands upon thousands, filled to bursting with food and liquor. And if they finally reached the outskirts of the capital city—but that can never, never happen— the capital city, the centre of the world, is still there in front of them, piled high and full of sediment. No one pushes his way through here, certainly not someone with a mission from a talkative man. But you sit at your screen and dream of that mission when the channels go silent.

(adapted from The Great Wall of China, Franz Kafka)

The Apple Tablet

A few months ago I accidentally dug up my old Newton circa 1997, and was amazed at (a) how tightly integrated and well designed the software and user interface was and (b) how good the handwriting recognition was. Someone had thought carefully about what you might want to do with the thing, and then built it to do that. It was the size of a VHS cassette, but made phenomenal use of the available hardware. And there was so much you could do with the stylus -- entering an appointment took one stroke, not finger taps through many confirmatory menus.

I can only hope that the forthcoming Apple tablet will allow for handwriting recognition. There seem to be rumors along those lines.

You can find a pretty accurate video of the handwriting recognition at the four-minute-mark on the video at

I can vouch for the fact that my twelve-year-old model still recognizes my cursive.

What America needs is more jobs …

… … Steve Jobs.

(Prompted by rumors of the Apple iSlate/iPad, about which more later. And by low level software bugs* on the Google Droid.)

I have always been and still am a big Apple fan.

I can't say much for Microsoft and Bill Gates -- they have brought technology to the masses, but it's messy inelegant stuff. Who really wants to know that much about video cards, chips and C: drives? Life is too short.

And Google, when you think about it, had one good idea, their search algorithm. And now they live by advertising. They're a middleman. They get paid for placing ads as they take you to other people's content, other people who aren't getting paid for the content. Nothing to be that proud of, though standing up to the Chinese Capitocommunists is.

Bankers, too, are middlemen, mysteriously paid for things you can't put a name or clear function to.

But Apple, that's another story. Many good ideas. Mostly brought to fruition through technical innovation and management. Yes, I know they copied a lot of it from Xerox Parc.

Steve Jobs and Apple have produced things people want, things you can name, things people are willing to pay for with their own bucks. They changed the way things are done, and are paid for what they bring to the table.

They're cooks, not waiters.

More jobs.


* that result in frequent black-out freezes followed by pop-up UNIX-flavored messages like "Sorry! The application Email (process has stopped unexpectedly. Please try again. Force close".

The Mental and Physical Worlds

Jeremy Bernstein, a physicist and science writer whose books I like, has a blog on the death of Paul Samuelson at

I had some brief correspondence with Samuelson a couple of times almost ten years ago, and he seemed to be a real gentleman in the old-fashioned sense of the word, courteous and open.

Bernstein writes that "the use of complex mathematical models to make risky investments that, taken to extremes (which Samuelson himself never did), nearly caused the collapse of our financial system in the fall of 2008."

I've more and more come to disbelieve that financial models "caused" the near collapse of our financial system. They weren't blameless, and I don't excuse them, but people and society are too complex to be brought down by one thing. The physical world can be turned upside down by one link in the chain but, with the mental, causality is not so straightforward.

Re the mental: I have just finished reading the biography of Dirac, "The Strangest Man", by Graham Farmelo, which I enjoyed, partly because I have been studying and writing about the Dirac equation. Dirac was an espouser -- perhaps only in retrospect, after he had done his great works on the the foundations of quantum mechanics, the electron, and the quantization of fields, as well as pointing the way to Feynman's path integral Lagrangian treatment of quantum mechanics -- of the efficacy of mathematical beauty as a guide to correct theories of the physical world. He thought experiments should be disregarded if they disagreed with beautiful theories, roughly speaking.

Theory and experiment seem to play leapfrog -- with Maxwell, theory led experiment; then, with early quantum mechanics, experiment led theory; then with Dirac and the prediction of the positron, theory was the stimulus; with the particle zoo, experiment tossed up puzzles which Gell-Mann solved; then with gauge theory, mathematical instinct and beauty ruled again. Now string theory is begging for a lead from experiment.

Personally, I think that great equations and theories come from an unknown place which isn't rational: Farmelo quotes Dyson on Dirac as follows:

"His great discoveries were like exquisitely carved marble statues falling from out of the sky, one after another. He seemed to be able to conjure laws of nature from pure thought -- it was this purity that made him unique."

I think I may have heard Dirac talk once at Columbia in the Seventies. (I know for sure I heard Heisenberg give a seminar there.) It's interesting to read how by the 1950s his colleagues disrespected him as a has-been and pushed him into retirement from Cambridge as he lost interest in the latest developments in physics. It happens to (almost) everyone -- it apparently didn't happen to Pauli -- but somehow I hadn't realized it happened to Dirac.

That didn't happen to Fischer Black, but there is something about some of the anecdotes about Dirac in the book -- his awkward directness and lack of manners, his willingness to keep absolutely silent when he had nothing to say -- that reminds me in a small way of Fischer.

Farmelo quotes the priest-cosmologist Georges Lemaître (what better scientific interest for a priest than cosmology? And how do you like the effort that went into that i-hat?) on science vs. religion:

"The Friedmann-Lemaître picture of the universe's birth seemed to be at odds with the account of creation in Genesis, but this did not bother Lemaître, who believed that the Bible teaches not science but the way to salvation. 'The science-religion controversy is really a joke on the scientists', he said: 'They are a literal-minded lot.'"

Brafana Brafana

South Africa is multi-talented in the sporting field, from women's 800m runners to football, and I have been catching up on the latest in the world of sports as the year winds down to a quiet close.

Having witnessed the shameful loss of the Proteas, the national cricket team, to England, by an innings and many many runs, I decided to cheer myself up by investigating South Africa's chances in the forthcoming World Cup to be hosted here in June 2010.

Excitement runs high, you can be certain.

Aware of this, I took a scouting trip to Cavendish Square today, a fairly normal suburban shopping center in Cape Town. From what I can see and have displayed for you in the attached photograph (taken surreptitiously by uncloaking my Droid and its 5 Megapixel cyclopean eye and firing off a quick shot at some by-no-means-insubstantial personal risk of embarrassment not to speak of danger -- this used to be a police state and a very conservative country in the 60s and 70s and people have been put under house arrest for far lesser violations of security or good taste), I think you will have to conclude, as I did, that things look very good for the South African team. Everything is larger than life in Africa. There is a bumper crop of talent. The rest of the world can stand very little chance of success against a land which can unashamedly display this kind of breadth and depth in just one small suburb. The country is solidly behind them and everyone seems willing to provide support for the cup effort and lend a helping hand (or two).

A Happy New Year to you all. And Fifa Mandela!

Trading Places

I had a fantasy in which the Fed and the TSA (Transportation Security Administration) switched roles.

If a bank failed at 9 a.m. one morning and shut its doors, the TSA would announce that all banks henceforth begin their business day at 10 a.m.

And, if a terrorist managed to get on board a plane between Stockholm and Washington, the Fed would increase the number of flights between the cities.

Goethe on Heisenberg and on Global Warming

The Eastern philosophers are transcendental; the English seem rational and scientific; but the Germans seem to combine the two, which I like.

Here is Goethe:

Nature will reveal nothing under torture; its frank answer to an honest question is "Yes! Yes! – No! No!" …

Fluidity and Funding

Watching cricket, it seemed to me that there is something about American sports that is in contradiction with American character.

American society is fluid. But its popular games are characterized by purely episodic bursts of action. Though classic cricket takes five times longer than baseball, it flows more continuously. And though rugby and soccer take much less timer than American football, they're much more fluid too.

Someone pointed out to me that this may be exacerbated by the need to intersperse commercials. It's interesting to think that what has determined the nature of the sport in the country is ultimately the source of funding of the networks, government-supported BBC vs the advertising-supported ABC, NBC and CBS. I suppose in retrospect it's obvious -- hence the rise of shorter and more intense variants of rugby and cricket. But they are even more fluid than the classic versions of the game, and much more fluid than American football.


The SA Communist Party, still taken seriously here in South Africa and in the midst of many political spats, though, I'm told, many ANC officials drive government-provided Porsches and BMWs.

The British Empire's heritage of kippers, baked beans and grilled tomatoes with your eggs for breakfast. When I lived here as a child, you could also get baked haddock for breakfast in British-style hotels that had no en-suite bathrooms, as they are called here, and therefore had chamber pots under the bed.

5-day international cricket tests -- terrific. Much better than baseball, one-day cricket matches, Twenty20, or attenuated Rugby Sevens, all bastardized. But they now have instant replay on cricket to settle catches or LBWs, which seems fair to me. But it's strange to see how they use simulation into the future to project the path of a ball that hit the pads and then judge whether it would have hit the wickets. They must be using Newton's laws, I assume, but they can't really know exactly what the spin of the ball is based on the video. But then, neither did the umpire. How long can it be before all calls get settled by electronics in all sports? I think that's an OK solution.

Not speaking ill of the dead: The ex-minister of health here under Mbeki just died while awaiting her second liver transplant. There is a tempest in a teapot here over the fact that obituaries have sometimes resentfully written about the fact that she and Mbeki were responsible for over 300,000 deaths from AIDS by their espousing a cure of beetroot, garlic and lemon juice -- taken internally, I must stress, rather than applied externally (which come to think of it might indeed successfully prevent AIDS, conception and everything leading up to it). I don't see why one shouldn't speak ill of the dead if they deserve it. For an interesting summary of the origin of the phrase, see It isn't biblical at all.

Speaking of the dead:

There is an interesting article in the latest NYR of Books by John Richardson about Francis Bacon. I never cared much for his butchery paintings, and reading the article made me no fonder of them. If you look at art about "perversion", by which I mean sadism and masochism and not homosexuality, then Bacon's painting seem to my relatively untutored eye narrow and narrowing, whereas Nabokov's Lolita, also about perversion, is somehow redeemed by a transcendence and a widening.

Finally, if you want to see a good anachronism about political behavior that forgives enemies and is unexpectedly entertaining, I sort of recommend Invictus. Mandela seemed to understand that politics was about leading rather than following the masses. And I'm impressed by Matt Damon's flawless impersonation of an Afrikaner.

Appropriate Epitaphs

For The Financial Crisis

I don't understand the nature of money, but one thing is clear to me: the urge to acquire and hoard money, even when it's a miserly urge, it is related to the will to live and survive. I once heard a speaker about Marxism at Columbia at the start of the financial crisis describe the infinitely devious raw energy and ingenuity of capitalism, how nothing can stop it always finding new ways to generate itself.

In that sense it's very different from love, which, even as it leads to procreation, is more closely related to death. Not surprisingly, I suppose, because, procreation is a way of avoiding death. Passionate love in particular, as Aldous Huxley I think put it somewhere in Brave New World, is about a desire to merge, about disappearing as an entity, which is a kind of death.

People kill themselves for love; but they kill other people for money, which I think proves the point.

I began to think about this while reading J. M. Coetzee's latest book, called Summertime. In it, a woman in it says of her husband:

"He ran his  life according to principles, whereas I was a pragmatist. Pragmatism  always beats principles; that is just the way things are. The  universe moves, the ground changes under our fee; principles are always a step behind. Principles are the stuff of comedy. Comedy is what you get when principles bump into reality."

This would make a good epitaph for the good intentions arising out of current crisis.

For Attempts To Persuade People Of The Existence of God

You can't reason someone out of a position they didn't  reason themselves into -- Anon.

For Attempt To Persuade People of the NonExistence of God

You can't reason someone out of a position they didn't reason themselves into -- Anon.

The Corrections

Cape Town, like all of South Africa, is in the throes of preparing for the World Cup in June. Everything is much more spruced up than before. Less homeless people in public places, better roads, cleaner parks, lots of new building going on, increased gentrification, a new football stadium between the sea and the mountain that looks impressive but blocks the view of both like a Trump building in NYC. Things look superficially pretty good here in the regions I have inhabited the past four days, though people still warn you about crime.

I went for a run in my old haunts along the Sea Point beachfront and passed the SABC, the headquarters of the broadcasting corporation, still located where it was decades ago. But now it has an extra sign on the building saying "Vuka Sizwe". I pondered this for a while and then remembered that one of the anti-apartheid underground revolutionary groups when I was at university, I think, was called Umkonto We Sizwe, and it meant Spear of the Nation,a good name for a national liberation fighting group, and I decided that Vuka Sizwe must mean Voice of the Nation.

I bought fish and chips at Texie's in Sea Point -- they still make chips the good way, not crisp and browned like McDonalds, but rather firm yet not crisp, yellow golden rather than brown on the outside, and cooked all the way through without a crust, able to soak up vinegar and salt like an edible sponge, what they call 'slap' chips, pronounced 'slup' in Afrikaans meaning kind of casual or disheveled or untidy. A man there in the line with me picked up my accent and realized I didn't live here anymore, and started talking to me. "South Africa," he told me, "is two nations. The first, about 8 million, all colors, does pretty well and has money. The second is 42 million people, more or less invisible, living in abject poverty." I've seen glimpses of them only, between the airport and the city. The population seems to have doubled in thirty or forty years.

At Clifton the beautiful beaches and surprisingly cold water are still there -- your calves actually hurt from the cold at first immersion, and most of the people are white, though the people roaming up and down the beach selling drinks and ice cream are still black. There you almost can't tell that there's been a political correction. But everywhere else you can, and it's good. The neighborhood I'm staying in is full of multiracial couples, more than in New York by far. I would guess that the white male part of the couples are more often Afrikaners than English, from the little I can overhear, which is surprising since the Afrikaners were the major protagonists of apartheid and seemed to think, in the past, that they had the most to lose from apartheid disappearing. Maybe this is a case of people being most threatened by what is really closest to them rather than most distant from them. Maybe that's why McCarthy hated the Communists so much.

The newspapers are full of stories about the Minister of Corrections, a woman who, as part of her office, got a government sponsored Porsche Cayenne, worth close to R1million, maybe $125,000. Nice work if you can get it. This must be the visible part of the iceberg, strange for an ANC government to go from rags to riches. The line between public and private wealth is dissolved by corruption.

But, I wonder, trying to be open minded and thinking about what I've seen in America the past few years: how do you weigh that up against people spending their own $40 million to get elected, against lobbyists, against bailouts for the people who need it least, against government money spent to preserve riche? The line between public and private wealth has sort of dissolved for us too, so I don't feel I can rightfully complain too much.

New Watered-Down Version of Old Things

The Hemlock Society Updated

Alexa Joel, according to newspapers in South Africa where I currently am, tried to kill herself with an overdose of homeopathic medicine. That is sad. But homeopathic medicines are supposed to work strongly by virtue of their extremely minuscule doses. Suicide by homepathy requires even stronger doses, and so, logically, the most potent way to kill yourself homeopathically is to therefore take no homeopathic medicine at all.

Sex in America

I saw an enjoyable movie on the airplane -- Juno, by Ivan Reitman. Funny, cute, and everyone very matter-of-fact in a hyper-realistic way about teenage sex and pregnancy. It reminded me of an old book I once found in my original home in South Africa and read recently, from the 1950s, called The Dud Avocado, by Elaine Dundy, recently deceased, obit in the NY Times, a one-time wife of Kenneth Tynan, which apparently caused a sensation in the early Fifties when it took a funny offbeat mock blase look at grown-up twenty-something American girls' matter-of-fact promiscuity and adventures in Paris. Over fifty years the matter-of-factnesss has moved from 23 year olds to 16-year olds, and Juno was much more matter-of-fact than the ill-concealed attempt to be blase in The Dud Avocado.

Sic transit gloria suicidii fututiique

if you'll pardon my Latin.


I am very persistent and have very high standards, and so it took many days and nights of visions and revisions, no kidding about the many, but I finally made my smart phone and my Mac do what I want them to do to each other, more or less. The trouble is that Verizon sells it, Motorola makes the hardware, and Google unsupports the software. There is lots of room in the cracks.

However, I am triumphant. It's dangerous to be too perfectionist though. Every time I try to make one thing work a little better, it's back to square one.

Like Nostradamus, William Blake knew what I would be up against with the Droid:

From wikepedia "Verizon serves as a Satanic force similar to Milton's Satan."

"Lo, a shadow of horror is risen
In Eternity! Unknown, unprolific!
Self-closd, all-repelling: what Demon
Hath form'd this abominable void
This soul-shudd'ring vacuum?--Some said
"It is Verizon""

But Blake also knew the cure, as English schoolboys sing in their Jerusalem hymn:

"I will not cease from Mental Fight,
Nor shall my Droid sleep in my hand:
Till I have made the Bastard sync,
No matter whatthefuck Google planned."

On Fischer Black: Intuition is a Merging of the Understander with the Understood

Talk delivered at Bloomberg on Tuesday Nov 24th, 2009: Fischer Black and the Financial Crisis: Rising Above The Noise

On Fischer Black: Intuition is a Merging of the Understander with the Understood

On Fischer Black: Intuition is a Merging of the Understander with the Understood (Powerpoint)

Feelings vs. Emotions

A few years ago someone insisted to me in a conversation that "feelings" didn't mean the same as "emotions".

I thought about this for a while, and then decided that maybe there was indeed a difference: I convinced myself that feelings were something deep and emotions were a surface phenomenon, like ripples on a lake, the visible part of a feeling.

I tried to convince a bunch of acquaintances of this distinction in discussions but they remained stubbornly unimpresssed.

A few days ago I caught an old movie, "Voyage to Italy", by Roberto Rossellini from the early 1950s with his then scandalous wife Ingrid Bergman costarring with Gerald Sanders, a couple in trouble, talking English and dubbed into Italian. It was pretty good -- one of the reviews said it instantaneously made every movie before it look ten years older, and it's true. It's ostensibly part of the Italian neo-realistic wave, but it's concerned with personal life and the bourgeoisie, the stuff of most novels, and not with a social agenda. Even though it has an unconvincing ending, you can see that it's closer to Antonioni than what came before it from a psychological point of view, though it's direct rather than elliptical.

The point of this is that somewhere in the middle of the movie Ingrid Bergman says of her husband to someone who remarks that he seems very private: "He doesn't like betraying his feelings." It struck me that the naturalness of that remark indicated an archetypal knowledge that feelings are betrayable, and hence perhaps indeed something deeper.

Religion and Science, Keynes and Newton

Rationalists think that to be a good scientist you cannot be religious.

I am not sure I believe in God but there is something transcendent about great science which the unimaginative and materialistic ignore. The greatest scientist who ever lived was Newton, and this below is some of what John Maynard Keynes wrote about him in a speech delivered three months after Keynes's death in 1946 at Newton's Tercentenary at Cambridge University. It is based on a box of Newton's personal papers that he read.

In the eighteenth century and since, Newton came to be thought of as the first and greatest of the modern age of scientists, a rationalist, one who taught us to think on the lines of cold and untinctured reason. I do not see him in this light. I do not think that any one who has pored over the contents of that box which he packed up when he finally left Cambridge in 1696 and which, though partly dispersed, have come down to us, can see him like that. Newton was not the first of the age of reason. He was the last of the magicians, the last of the Babylonians and Sumerians, the last great mind which looked out on the visible and intellectual world with the same eyes as those who began to build our intellectual inheritance rather less than 10,000 years ago.

His deepest instincts were occult, esoteric, semantic-with profound shrinking from the world, a paralyzing fear of exposing his thoughts, his beliefs, his discoveries in all nakedness to the inspection and criticism of the world.

There is the story of how he informed Halley of one of his most fundamental discoveries of planetary motion. 'Yes,' replied Halley, 'but how do you know that? Have you proved it?' Newton was taken aback - 'Why, I've known it for years', he replied. 'If you'll give me a few days, I'll certainly find you a proof of it' - as in due course he did.

His experiments were always, I suspect, a means, not of discovery, but always of verifying what he knew already.

Why do I call him a magician? Because he looked on the whole universe and all that is in it as a riddle, as a secret which could be read by applying pure thought to certain evidence, certain mystic clues which God had laid about the world to allow a sort of philosopher's treasure hunt to the esoteric brotherhood. He believed that these clues were to be found partly in the evidence of the heavens and in the constitution of elements (and that is what gives the false suggestion of his being an experimental natural philosopher), but also partly in certain papers and traditions handed down by the brethren in an unbroken chain back to the original cryptic revelation in Babylonia. He regarded the universe as a cryptogram set by the Almighty - just as he himself wrapt the discovery of the calculus in a cryptogram when he communicated with Leibniz. By pure thought, by concentration of mind, the riddle, he believed, would be revealed to the initiate. He did read the riddle of the heavens. And he believed that by the same powers of his introspective imagination he would read the riddle of the Godhead, the riddle of past and future events divinely foreordained, the riddle of the elements and their constitution from an original undifferentiated first matter, the riddle of health and of immortality. All would be revealed to him if only he could persevere to the end, uninterrupted, by himself, no one coming into the room, reading, copying, testing-all by himself, no interruption for God's sake, no disclosure, no discordant breakings in or criticism, with fear and shrinking as he assailed these half-ordained, half-forbidden things, creeping back into the bosom of the Godhead as into his mother's womb.

Broken Symmetries in Physics and Politics

Symmetry is supposed to be aesthetically beautiful, in newborn babies and in beautiful people, though sometimes a slight asymmetry is charming and attractive.

In physics one used to look always to find the greatest symmetry between different forces in the universe. Electricity and magnetism was made symmetric by Maxwell, electrons and positrons, and positive and negative energy, by Dirac

In the late 1960s physicists discovered that underlying symmetries in forces can be hidden by the fact that some part of the world they operate in -- the vacuum in physicist lingo -- is stable only in an asymmetric configuration, and that this asymmetry then conceals the underlying beauty. Thus, weak and electromagnetic interactions are roughly cognate, their equivalence masked by the asymmetry of the vacuum and revealed only at high enough energies. Maybe this isn't the end of the story and is more of a workaround than the truth, but it seems to work.

Human beings have a deep antipathy to moral asymmetry. Even monkeys refuse treats they would normally like when they see other monkeys getting better treats.

Today's New York Times articles and columnists refer to many issues that are characterized by asymmetries that are large and not charming or attractive at all.

Among them:

* The asymmetry between the treatment of China and (say) Cuba -- one of them has money and has to be treated with respect -- despite their political correspondences. As Thomas Friedman nicely says, never cede a century to someone who censors Google.

* The asymmetry between the treatment of investment banks' bad risks and the treatment of individual investors' bad risks. No amount of talk can conceal the link between connection, power and treatment.

* The asymmetry slowly becoming apparent between Obama's speeches and his capacity to turn them into action.

Total symmetry is boring -- everyone likes a bit of variation -- but it has to be limited. The nice thing about broken symmetry in physics is that the underlying symmetry is still visible when you look hard enough. That's not the case in the political arena, where the harder you look the more asymmetry you see.


I promise this is my last post about the droid, whose inadequacies only I care about. I can only repeat that it is a very premature baby despite the Verizon advertisements. And it has a schizophrenic personality, part teenager part geek part businessman.

Great to have a good browser, which makes me persist with it, maybe even until something better comes along.

Great to flick through pages and to have a Notification window blind that tells you about arriving emails, missed calls, appointments and alarms.

Not so great to have Twitter, YouTube and Facebook, none of which I particularly want.

Sad to have hard-to-hit keys on the real keyboard.

Sad to have a clumsy touchpad (on the real keyboard) that is too small and awkward to manipulate. One constantly has to suppress the urge to pull out the non-existent stylus in order to select and edit text precisely. I still reach for the stylus and then realize that it isn't there. The finger pointing doesn't work very well. On the iPhone you can two-finger zoom a text field to enlarge it and edit it better, but not here.

Very sad to have no Notes and Tasks.

Very very sad to have tediously awkward menus that make editing an appointment require many many keystrokes.

The good thing about the latter is that it makes me think twice before I decide to change something, so perhaps I will eventually use these things less.

I have a renewed respect for the planning and design that went into the Treo and the Palm (who leveraged off the Newton team). Their technology was less sophisticated, but the functions were tremendously well integrated by comparison. I am curious to see whether the Pre, when Verizon gets it, will work better.

You don't need a lot of apps if you have a good system and a browser.

They call it Android but I call it Maladroid.

Civilian Trials of Foreign Terrorists?

I may well be wrong (about anything and everything) but my first reaction is that it's an ethical mistake and a foolhardy one too to try the (alleged) Sep 11 terrorists in civil court.

The ethical mistake: Civil courts are appropriate for trying people within your society who have broken a social contract, actual or implied. Violent destroyers of your society from outside your society, justifiable or unjustifiable, have not broken the social contract and don't belong in civil court. They might belong in a court administered by a real "United" Nations who could be an appropriate distributor of justice for people who have broken the world's social contract, assuming you could imply that there is one. But that is unlikely to happen.

The foolhardy nature: It seems foolhardy to me to take potentially provocative and dangerous actions in the service of murky ethics.

I am open to correction.

On the Jury

I was on a jury in 1980. At the start the judge cautioned everyone not to discuss the case with their family or friends each night.

On the first day I heard the charges against the defendant and the whole thing seemed obvious -- he had stolen something and run away. On the second day I heard the police give testimony and it seemed clear they were hiding something. On the third day it turned out that the defendant had a previous criminal record for something similar. Etc.

Luckily I had kept quiet each evening, against my worser nature, and I realized what a good thing it was I'd held my tongue. If I'd told anyone what I was thinking each day I would have perhaps painted myself into a corner that would have made it difficult to announce a change of mind the next day for fear of embarrassment. In the end we acquitted for lack of proof.

Last night I watched the documentary "Roman Polanski: Wanted and Desired". When Polanski hit the news a few months ago I thought he shouldn't complain and should come back and face the music, as should everyone, whoever's work they are doing. I didn't think personal testimony about what a good artist and nice guy he was should bear any relevance, and I still don't.

The documentary doesn't change my mind about whatever he allegedly and admittedly did, but, if you believe the more or less factual parts of the documentary as opposed to the opinions of his French academy friends, then the judgments about his flight to France are subject to greater complexity.

The judge in the case seems to have painted himself into a corner where he worried mostly about how he looked to the public when he made his decisions. That said, despite Polanski's childhood in Nazi-occupied Poland, the Manson murders, and the loose LA culture of the Seventies, it doesn't let him off the hook. But it's not as simple as I thought to figure out exactly what's right.

The Droid Emploid

I was quick to judge the Droid too, but I still stand by my criticisms about the things it lacks, esp the keyboard, which I guess has such flat keys because it has to slide in and out. The absence of various critical applications is really dumb -- imagine a small computer coming without a file reader and text editor for documents. It also has a very vulgarly raucous unpleasant set of ringtones and wallpaper to choose from, quite unclassy and unbusinesslike given that it supports Microsoft Exchange and isn't aimed at teenagers. But it does work pretty well as you get used to its menu style.

I finally managed to drag and drop a picture I like as wallpaper, shown above, which I got off the internet. You have to mount the damn droid as an external USB drive to do it, and then unmount it again later. The picture is David Hockney's Pearblossom Hwy., 11 - 18th April 1986, #2,, a photocollage made out of thousands of small photos. I saw it once a long time ago at the Jewish Museum in New York, I think, and it looks nice and open on a phone screen.

Anoid by the Droid …

Well, always an early adopter if it's Mac compatible, I gave in and traded up from a Treo 700p to a Motorola Droid. I've had it less than 24 hours. I can return it within 30 days.

It has very good fast internet browser, great screen, reasonable email, OK phone.

But let me rather focus on the inadequacies.

The physical keyboard that slides out is cool but inferior to that on my Treo. The keys are flat and right next to each other, so you need fingernails or very small ladyfingers to hit them accurately. I end up holding it with my left hand and using my right index finger on both the left and right hand sides of the keyboard, not very comfortable, whereas on the Treo I was much faster with two thumbs. The Treo keys are hemispherical and easy to make contact with, and clearly separated.

On the software side, the Droid is an incomplete work, which is where most of the problems lie. There are a host of inadequacie, of which I mention just a few:

No password to lock the phone.

An iPhone, a Palm, or even my Newton of many years ago are integrated systems with the software and hardware built by one manufacturer, more or less, even though you can/could buy extras. They mostly came with a Calendar, Contacts, a Notebook or Memo pad and a Todo list, all the stuff you need. The hardware and basic software was built by the same company. They had a uniformity that made them easy to use. Even my Treo, which is ancient, is a single thing on which I can do email, calendar, notes, lists, memos, contacts, etc, all in the same style and easily and I suddenly have more respect for it. And the Treo and iPhone sync with a Mac, so you can work on the mobile device and then move to the computer, or vice versa.

The Droid is a hybrid mish-mash. The calendar has no Todos as far as I can tell. There is no Note Pad. There is no synchronization with a Mac -- you have to sync with Google Calendar and Google Contacts, which works very very well, but which I resent -- I don't really want to have to use Google's server to store my information -- that should be optional. There are fairly pathetic 3rd party ways of then syncing Google Calendar with iCal or something like that, but they don't work reliably, and so far they don't work for syncing Contacts from Google to the Mac. So you have to go through two steps to get the information on your computer: Droid-->Google Cloud-->Mac.

Yes, there is an SD storage card, but no, there is no way to access it except by USB drag and drop, and when you move a file there, there is no native way to see it or access it. How are you supposed to read or write anything? Or look at attachments?

Verizon claims you can do all this with third-party stuff, and maybe you can, but you have to pay for it and there isn't a lot of it, and worse, that stuff will likely not synchronize. The Droid, like a lot of things these days, has been released too early. Some of this will be solved as third-parties step in to provide syncing for iTunes, iPhoto, Notes, etc, but that's not there yet and it's unlikely to be very good.

The Droid has a spiritual feel that is techy, for Linux lovers, whereas what you want in something like this is to be a dumb consumer that has everything you need out of the box, which Apple understands. And even they didn't provide Notes and cut-and-paste at the beginning.

I think the Droid gets maybe more respect than it deserves because of who makes it (Google has become a 900lb gorilla) rather than what they've made, which may be true of the Kindle too.

Summary: The Droid is more of a pain in the ass than I expected, a sort of incipient Hemodroid that may make life difficult. I will persevere for now.

Agents & Australia

I was always puzzled when people raved about Australia. Growing up in South Africa, one far corner of the British ex-colonies, I never had any great desire to recreate a South African lifestyle in another distant corner of the Empire, and so I always imagined I wouldn't particularly like the country. Maybe I had a very post-WWII attitude, where England, Europe and America darkened and crowded the horizon and seemed like the attractive center of the world. Now, maybe, I've gotten tireder and kind of like less central places. There's something familiar here. It feels like South Africa with the Africa part removed, which sounds like it could be bad, but isn't.


I have been to many meetings in business offices here, and in every one there is a jug of icy water and several glasses on a tray in the center of the table. In the US, it's always bottles of Poland Spring, or offers of coffee or tea, and here it's always iced tap water. Nice.


Someone from a pension fund here commented: if you put your money in a hedge fund, doing say fixed income arbitrage, and a year or so later the economic environment becomes bad for FI arbitrage, it is very unlikely that the hedge fund manager will say: "You know, you ought to redeem your investment. This isn't a very good time for what we do."

This is the realm of agency theory. In the 1970s, academics justified the golden parachutes awarded to CEOs by arguing that, if the CEO were to receive a golden parachute as a result of losing his job as the result of a merger or acquisition of his company, the job loss wouldn't threaten him and would allow him to remain objective about the benefits to the stock holders he represented of the possibility of a merger, irrespective of what happened to him. Nice theory.

So, why not golden parachutes for hedge funds too? Under my scheme, when you invest in a hedge fund, you promise to keep paying them fees and incentives even if you redeem your investment.. That way, the hedge fund manager will be free to tell you when you would be better off putting your money to work elsewhere.

G'day. They actually say that.


They've been moving in tandem for months as I have been watching, and this afternoon the price in dollars of an ounce of gold just passed the level of the S&P 500, 1039.70 vs. $1036.06.


An Australian man I know referred the other day to the GFC, and I didn't know what it was. I was once embarrassed to when I thought that LTV stood for Ling Temco Vought, which it used to, rather than Loan to Value. Turns out GFC is Strine for the Global Financial Crisis.

The issue isn't merely the high pay and big bonuses at financial firms, because even if you have salary caps the profit then goes to the shareholders. The issue is the alternation between large losses and high profits, and who therefore deserves the current high profits.

A few months ago I wondered why banks can pay 50% of their revenue in bonuses, and why their profits are so large. One of the answers I got was that they make so much money because they are not paying for the impliedcost of their insurance by taxpayers, and that seems to me plausible. Every few years some bank or other -- e.g. the Mexican currency crisis years ago -- loses more money in year than it ever made in its lifetime.

It seems to me that the institutions that got bailout money or guaranteed credit backstops from the taxpayers have profited immensely from the administration's actions. What they have earned is not windfall profits -- I assume windfall means the wind comes by and blows down the apples for you to pick up. What they have benefitted from is more like let-me-fix-up-the-weather-for-you profits. The Fed and the taxpayers put a floor under their stock prices, which in technical terms means they gave them a put.

Usually when someone buys an out-of-the-money put and can't pay cash, they have to fund it with an out-of-the-money call, the two options together comprising a costless collar. So, the banks that got saved by the taxpayers should, in all fairness, be short a call to the taxpayers, and their profit and upside above some reasonable level should belong to taxpayers now that the call is in the money.


Theories and Facts

Nicholas Wade in the NY Times reviews Richard Dawkins' new book, The Greatest Show on Earth, about evolution. The review is at

Wade spends some time and space pointing out that Dawkins gets his "knickers in a twist" in trying to argue that evolution is a fact, rather than a theory. He quotes Dawkins claim that evolution "is a fact in the same sense as it is a fact that Paris is in the Northern Hemisphere."

That Paris is in the Northern Hemisphere seems to me a matter of definition rather than fact. Evolution is not a fact in that sense at all.

I would call a fact something that you ignore at your peril, in particular your peril in the material world. A fact is Maxwell's equations, Newton's laws, the germ theory of disease. You can't ignore these without severely crippling your ability to live in the (modern) world. Ignore or refuse to make use of their results and you will get harmed. Ignoring these is like the Nazi's making science Judenrein.

Mechanics and electromagnetic theory and germs are theories but they are facts too. Goethe, in his Theory of Colour, wrote that every fact is a theory, and I think that's right, about which more some other time, but that doesn't mean that every theory is a fact. You are in trouble if you decide to ignore the germ theory of disease, or the structure of DNA, or the theory about the metabolism of the cell, because these theories allow you to influence the material world in the present and future and affect your well-being. In that sense, these are facts. But evolution for the most part is an explanation of history, and if you ignore it it's less clear to me that it has deleterious consequences, as long as you don't ignore what you know about molecular biology. I don't think that evolution is exactly equivalent to molecular biology. Even more clearly, you can ignore psychoanalytic theory without obvious harm, so I wouldn't call Freud a fact either.

Don't think I don't accept evolution; I do.

On a recent airplane trip I read bits of Goethe on science, and in one essay he writes a few sentences that seem relevant to Dawkins' narrow obsession with atheism:

"… We are well enough aware that some skill, some ability, usually predominates in the character of each human being. This leads necessarily to one-sided thinking since man knows the world only through himself, and thus has the naive arrogance to believe that the world is constructed by him and for his sake. It follows that he puts his special skills in the foreground, while seeking to reject those he lacks, to banish them from his own totality. As a correction, he needs to develop all the manifestations of human character – sensuality and reason, imagination and common sense – into a coherent whole, no matter which quality predominates in him. If he fails to do so, he will labor on under his painful limitations without every understanding why he has so many stubborn enemies, why he sometimes even himself as an enemy.

"Thus a man born and bred to the so-called exact sciences, and at the height of his ability to reason empirically, find is hard to accept that an exact sensory imagination might also exist, although art is unthinkable without it. This is also a point of contention between followers of emotional religion and those of rational religion: while the latter refuse to acknowledge that religion begins with feeling, the former will not admit the necessity for religion to develop rationally."

Sur Prizes

Prizes are just things handed out by a bunch of people, not by God. God's ones don't come with announcements, are harder to identify, even harder to understand, and often a mixed blessing. The world would be better off without all the awards being handed out in the names of dead people and living corporations. Mostly, the prizes are there to glorify the distributor.

Prizes have some value when they recognize both effort and achievement. The American educational system, as I witnessed in grade schools and universities, has become willing to give prizes for effort independent of achievement, as a kind of faux egalitarian encouragement, very postmodern, and apparently the Europeans are heading that way too. Although it can be fair to acknowledge that sometimes effort itself is an achievement.

Some prizes elevate the person they're awarded to before he or she has been properly recognized, e.g. Albert Schweitzer, and can act as inspiration to the world. Maybe these are the only defensible ones, in that they can help the person continue their good work.

Other prizes simply recognize someone long after everyone else has. Einstein got his for his explanation of photoelectric effect via the photon, but in his annus mirabilis he also developed the theory of Brownian motion as an indicator of the reality of atoms, and the theory of special relativity. He could have received three prizes in physics alone. His prize was long overdue, had already been pledged to his divorced wife, and was merely a formality, a nice but superfluous coda. He would be no less famous or influential had he never received it.

Some prizes are almost toadying. Fischer Black while he was still alive received some prizes from foundations neither I nor anyone else had ever heard of who were clearly trying to glorify themselves rather than him. Or maybe they were angling for a job at GS.

And some prizes can provide no elevation and simply lower the value of the prize and the people that award it.

WORK and work

I walk around tired a lot and I was trying to figure out why. I think this is why.

At the end of the day I often say to myself "I've got to get some work done." When I said this to someone in passing the other day, they said to me "What have you been doing all day?"

I thought about that and realized that I'd in fact been been WORKing all day, dealing with bureaucratic stuff at Columbia, going to meetings about career services for students, meeting with some students, replying to emails, preparing a talk I had to give for a business trip. This was the WORK I was paid for.

WORK is how I earn a living. Sometimes it's also work, which is what makes me feel productive and well; it's what I do that I feel compelled to do out of desire rather than obligation, though I do my obligations first. It's what I feel will last longer than a day, though maybe not much longer.

These aren't completely orthogonal states. Sometimes the two kinds of work coincide, and then life is easy. At other times, they only partially intersect, and then life gets tougher, because I do the WORK and then I try to do the work.

A few weeks ago a student at Columbia told me about a summer internship at an investment bank he'd had in which he spent most of his time programming, and was surprised that they weren't using him for his skills in stochastic calculus. He thought he was going to spend his time doing research and writing papers along the lines of what people in Quantitative Strategies used to do at Goldman. I tried to explain the difference between WORK and work, and that the place he was at no doubt had enough people to do the stochastic calculus they needed.

When I worked at Goldman Sachs in the 80s and 90s, I did WORK building trading systems and that was work too. The papers that I collaborated on, on various kinds of volatility and options, was strictly work, and I don't think I got paid for doing that. It was a self-imposed task. Same with writing the book I wrote.

So, that's the way the world w orks, at least for me, and when I don't get enough work done during the WORKing day, then I spend the rest of the time trying to work too. It's tiring but I can't live easily without it.

2 Nobels

By Monday, Obama could be the first person in history to win both the peace prize and the economics prize in the same year, outstripping Curie, Bardeen, Pauling and Sanger, but not yet the International Red Cross, who won 3 (at different times though). Too late for literature for this year.

Ars Longa … …

If you want some solace from the tedium of news about financial troubles, presidents working on spiral-bound pitchbooks for investment committees, and politicians and friends defending bail-jumpers on the grounds of character and acquaintance, then you might like this remark from Feynman about Maxwell's equations:

From a long view of the history of mankind — seen from, say, ten thousand years from now — there can be little doubt that the most significant event of the 19th century will be judged as Maxwell's discovery of the laws of electrodynamics. The American Civil War will pale into provincial insignificance in comparison with this important scientific event of the same decade.

Chocolate Digestives

Enough with the bailout and Lehman. The papers keep writing about it but they have nothing more to say. Let me rather think about consumer products and how to get people to buy more and more so we can live happily ever after with continuously growing GDP.

I discovered in a deli nearby recently that they sell the English sweets (candy to you) I grew up on, such as wine gums (no wine, mostly gelatin really), Crunchies, Bountys, Fruit Pastilles, Aeros. Those are all near the checkout counter. But a few shelves away from there lie McVitie's Chocolate Digestives, in dark and light chocolate.

When I was living as a kid in South Africa, you could get what I think were Cadbury's Chocolate Digestives, and these are similar. A coarse gingery colored brown wheaty inside, crumbly and rough, covered with a layer of smooth rippled dark chocolate (unless you want the light chocolate, not enough contrast and too milky for me, though normally I don't like dark chocolate by itself.) The combination of coarseness and smoothness without too sweet a taste is excellent.It reminds me of people wearing dark suits with white sneakers, and of Nick Cave's coarse voice when he sings romantic songs, also of Leonard Cohen. The contrast adds to the effect. And the name -- the word Digestive, nice and 19th Century colonial, now evocative of post-prandial Digestifs, but without that pretentious frenchified ending. This isn't continental alcohol with herbs, made in monasteries by (once) celibate priests; it's good healthy British whole wheat, simple and sturdy, even if it is made in Canada. If you want to jump start the consumer revival of the economy, you could find worse places to start. I recommend them. I have not been paid to write this, not even in kind.

The deli also sells generic Q-tips, the guilty secret of so many people. I read the label. I trace the insidious start of political correctness in America to the day that the ear-bud producers first started printing

WARNING: do not insert swab into ear canal. Entering the ear canal could cause injury. If used to clean the ears, stroke swab gently around the outer surface of the ear only.

on their cardboard boxes, professing mock ignorance of what's really going on.

What's Sauce for the (Very Big) Goose …

The anniversary of the sinking of USS Lehman has produced a spate of articles, including this one in the New Yorker by James B. Stewart, at EIGHT DAYS: The battle to save the American financial system (I think you need to be a subscriber to read this.)

Stewart describes, sympathetically I would say, John Mack's indignation at the alleged shorting of Morgan Stanley stock, and writes that Mack wanted the SEC to ban shorting. Eventually they did indeed forbid the shorting of hundreds of financial stocks, many of them the stock of companies who themselves provided stock loan services or ran long/short strategies themselves.

During the collapse of emerging equity markets and their currencies about ten years ago, our financial leaders explained to the Asian markets that that's how capitalism works -- money zooms in and money flies out.

Stewart's subtitle, The battle to save the American financial system, is quite to the point. At bottom, it's not Citi, AIG, Goldman or Morgan that is too big to fail. What's happening is that the US believes, that, IOHO, the US is too big to fail.

Grunting and Snarling in Tennis and Economics

Last night I held a panel at Columbia about the economic system and the principles that should govern it. One interesting question raised but not answered by Prof Bhagwati was: Why are the returns to the finance industry so great? No one had a really good explanation but two reasonable ones were: the existence of cartels, and secondly, that financial firms' outsize returns are periodically wiped out by risks they weren't paying adequate insurance for.

I find the whole thing surprising from another angle. There are so many rich unknown people on Wall Street, people worth tens to hundreds of millions for being part of an industry … but you can't quite say what they did. Someone pointed out to me the wealth in the entertainment and sports industries, and in technology companies, but that's different. In tennis the riches come mostly from endorsements and they fall off very quickly with ranking. The 100th best player in the world probably makes a difficult living, and the 300th best certainly struggles. But in either case, when someone tells you their name you can say what they did, whether it's play football or write code at Microsoft. There's a product, a song, a skill you can name that's associated with them. What's surprising about financial services is that you can be anonymous, make lots of money, and no one is quite sure what you did that got you the cash.

Speaking of principles and tennis: I liked the old days better, when people didn't act up on the court as though tennis were professional wrestling. Borg, Edberg, Wilander, Sampras all played stoically and seriously, and didn't grunt. Federer is more or less in their category, but even he has disappointingly taken to a little fist-pumping and animal snarls (above). I think some of this has to do with the corporate backing and endorsement money.

A proposed solution to the Serena Williams/line judge foot-fault disqualification. It could best be settled by President Obama, who should invite them over to the White House for a beer. There are many fruitful areas where jawboning could be employed in place of regulation.

Going Postal, Express

From time immemorial envelopes have had a flap that seals on the back, and stamps and an address that go on the front. Fedex and UPS respect this tradition.

But the USPS makes envelopes like the one in the picture at left.

What looks like the front in the top part of the picture, is actually the back.

What looks like the back in the bottom part of the picture, is actually the front, where the stamps, address, and return address are supposed to go.

I discovered this the hard way yesterday.

Eventually the postal supervisor scrawled a more or less illegibly cursive "ADDRESS ON BACK" on what I thought was the back of my Express Mail envelope.

The post office has wisely printed "EMS" on what I thought was the front of my envelope, an abbreviation you usually see on ambulances.

Back in the State of NY: The Difference Between Physical and Mental Bailouts

My first day back in NYC and at 1pm as I was about to reach CPW to go for a run in the park I heard a loud but not terrifying sound of metal on metal. I saw a woman standing on the corner 20 yards ahead of me raise her hands to the side of her head in dismay. I rounded the corner and there was an SUV on its side, across the entire right lane, its front having knocked down a bus stop pole. A man on a cellphone was already talking to 911. He seemed to think the driver had had a seizure.

I went over and there were already three or four people by the vehicle. You could see inside through the half-open sunroof that had now become a half-open small door.The driver was on his side, unconscious but clearly moving his lips in a twitching sort of way, his right arm arm beneath him and somehow outside the car, but apparently intact. A few people tried to get him out, but it wasn't possible. There wasn't much anyone could do though one person did try to put some water in his mouth which probably wasn't smart. I thought of breaking the rear window but didn't know how to.

Then, impressively, came the police. Then the fire engines. Then an ambulance. They knew exactly what they were doing. They cleared everyone out of the way. They took tubes to inflate something, perhaps to raise up the side of the vehicle in contact with the ground. They use giant metal jaws like a pliers to open up parts of the car -- I think they pulled off part of the roof. Meanwhile someone cut his way through the windshield. They took the man out and put an oxygen mask on him and he seemed better as they put him into the ambulance.

Some people felt obliged to take photographs, clicking away furiously, God knows why -- the ambulances, the sirens, the police cars, the fire engines, the blocked road, the overturned vehicle. What were they going to do with them? And one man with an ID around his neck kept trying to get close to the car with a camera, and as the police more and more angrily told him to step back, he tried each time to equally angrily argue and approach from another angle or from behind a fire engine. He seemed to think this had something to do with freedom of expression. I'm not sure how they got rid of him -- I saw one policeman reach for handcuffs threateningly.

The police and fire engine men and women were thoroughly fantastic. They did what had to be done, coolly and expertly. They were Hippocratean - first they did no harm, secondly they expertly went about clearing the space, opening the vehicle, removing the man. You have to admire them.

When something is wrong in the physical world, there are often experts who know what to do and you can trust and respect them. The physical world repeats itself and so they've seen things like this happen before and they've prepared for it. Not always of course, but often.

When something is wrong in the mental or organizational world, most often no one is trained or expert; they pretend to know what's the right course and tell you what would have happened if they hadn't done what they did, but no one really knows.

In Santa Fe

1. I heard Justin Fox on TV one night, author of The Myth of Efficient Markets, and I was impressed by his grasp of the subtleties of financial models. He understood what models are good for, despite their limitations, and he understood that behavioral finance is overrated -- he said that it was good for understanding consumer behavior, but didn't have much to say about markets as a whole.

2. There is a fierce attack on the state of economics and on many of his named fellow economists of the Chicago school by Paul Krugman at

How Did Economists Get It So Wrong?

But even Krugman's dreams as someone trained in economics won't quite die. Somewhere in there he says

"… they (economists) will have to acknowledge the importance of irrational and often unpredictable behavior, face up to the often idiosyncratic imperfections of markets and accept that an elegant economic “theory of everything” is a long way off."

A long way off? Why not just say impossible?

3. Efficient Markets, Physics, Biology

The revulsion against efficient market theory continues, and some people propose replacing physics-inspired models by evolutionary-style models. But efficient-market models, though they use the language of physics, do in fact bear some kind of resemblance to the social-darwinism models of the past couple of decades.

According to the EMH God is in his heaven and all is right with the stockmarket world, because prices incorporate all known information. Evolutionary models say we are the way we are, people and social institutions, because that's the way it had to be for us to get here -- kind of anthropic-y. The parallel with biology is already there. The key thing about physics (not cosmology) is that it projects into the future, and God knows it works. These other disciplines look backwards rather than forwards, and try to explain the present.

4. I bought an Egg McMuffin at the McDonalds in Santa Fe this morning and I couldn't help noticing that the people who populate McDonalds at 9 a.m. quite clearly come from a very different racial (and of course social) segment of the population than the people in the Plaza. Not surprising, but the difference is much more noticeable than in New York.


Noam Chomsky in the Boston Review on our myopic view of "The Crisis":

One way to enter this morass is offered by the June 11 issue of the New York Review of Books. The front-cover headline reads “How to Deal With the Crisis”; the issue features a symposium of specialists on how to do so. It is very much worth reading, but with attention to the definite article. For the West the phrase “the crisis” has a clear enough meaning: the financial crisis that hit the rich countries with great impact, and is therefore of supreme importance. But even for the rich and privileged that is by no means the only crisis, nor even the most severe. And others see the world quite differently. For example, in the October 26, 2008 edition of the Bangladeshi newspaper The New Nation, we read:

It’s very telling that trillions have already been spent to patch up leading world financial institutions, while out of the comparatively small sum of $12.3 billion pledged in Rome earlier this year, to offset the food crisis, only $1 billion has been delivered. The hope that at least extreme poverty can be eradicated by the end of 2015, as stipulated in the UN’s Millennium Development Goals, seems as unrealistic as ever, not due to lack of resources but a lack of true concern for the world’s poor.

Adobe Shmadobe

I like Santa Fe but … I can't tell the difference between a JC Penney's and The Church of JC Latter Day Saints. Everything looks the same on the outside. The streets are translation-invariant. You can't tell where you are by looking at the buildings. Noether's theorem says there must be a conservation law as a consequence of invariance, but here the invariance is a consequence of a conservation Law. I am almost yearning for a little American graffiti.

The homogeneity reminded me of Robert Venturi, who wrote Complexity and Contradiction in Architecture. Complexity is what Santa Fe is famous for, but the facades of the houses don't seem to embody it at all.

Blend or Contrast?

I am at the Santa Fe Institute, about which more perhaps some other time.

The photo in the bottom panel above is a more or less typical Santa Fe house. They are all adobe-colored by law (no longer made of mud and straw but of a similar color on the surface), biomorphically round-edged, Gaudi-esque almost, matching the color of the desert soil so that they blend.

The photo in the upper panel at left is of houses in Morocco, which is also largely desert, but many of the houses are blue. Is this a choice to contrast with the desert or blend with the sky? I don't know. I think it may have some religious significance.

The photo in the upper panel on the right is of houses on the coast of Norway, where they sometimes paint them brightly, but it's a sad kind of brightness, somehow blending with the sea and cloudy sky.

#$&^ING ignorance vs. #$&^ING inability to know

I wrote a post recently on the Efficient Market Hypothesis in which I said

But the EMH, if you don't take it too literally and get carried away about axiomatically defining strong, weak and other kinds of efficiency as though you were dealing with axiomatic quantum field theory, does recognize one true thing: that it's #$&^ing difficult or well-nigh impossible to systematically predict what's going to happen. You may think you know you're in a bubble, but you still can't tell whether things are going up or down the next day. The EMH was a kind of jiu-jitsu response on the part of economists to turn weakness into strength. "I can't figure out how things work, so I'll make that a principle."

Two follow ups:

1. Someone sent me this link to

ING Blog

The Ockham webcrawler thinks that #$&^ING is a reference to the Dutch banking giant. This is #$&^ING ignorance.

2. In Krugman Blog

Krugman says that, rather than saying the EMH turns weakness into strength, I should have said that the EMH turns ignorance into strength.

I don't really agree. What's behind the EMH isn't ignorance about how markets "really" behave. Ignorance implies eventual knowability. I think it's more likely #$&^ING inability to know how they behave, because how they behave may not be time invariant.

Ain't Misbehavioral

No kidding, I received an abstract of this paper in an email newsletter recently:

Effect of wind on stock market returns: evidence from European markets


Applied Financial Economics, 2009, vol. 19, issue 11, pages 893-904

Abstract: Environmental psychology studies have found evidence that wind speed has a strong influence on mood and comfort. This study investigated the relationship between wind speed and daily stock market returns across 18 European countries from 1994 to 2004. A significant and pervasive wind effect was found on stock returns. This finding was supported by psychological literature claiming that mood affects judgement and decision-making in situations involving uncertainty and risk, and coincides with the argument of misattribution. This investigation also found strong seasonality effect and temperature effect in European stock markets. Specifically, the influence of wind on stock returns is demonstrated to be more significant than that of sunlight, indicating that wind might exert a stronger impact on mood than sunshine and hence be a better proxy for mood than sunshine. Above all, our findings contradict the rational asset-pricing hypothesis and contribute to the behavioural finance literature.

Date: 2009


Immensely clever, incredibly stupid, or a joke? A fact or an illusion? A proof that the entire universe is one big coherent system? Some parts of financial 'theory' always remind me of nutrition theory.

Coming soon maybe:

Effect of stock market returns on wind: evidence from natural gas traders on Kansas City Board of Trade

The Efficient Market Hypothesis and The Anthropic Principle

Everyone is kicking the poor EMH now that it's down, some of them quite eloquently and hard. But I'm always on the side of the poor underdog.

I wasn't around, thank God, when the EMH became popular. I've never found much real use for CAPM in what I do, which is mostly what Summers in one of his better moments called ketchup economics, the economics of relative value rather than absolute value. Unfortunately, absolute value theories don't work very well in economics. I learned finance bottom up, and found options theory much more useful, though much less ambitious, than CAPM and mean-variance.

But the EMH, if you don't take it too literally and get carried away about axiomatically defining strong, weak and other kinds of efficiency as though you were dealing with axiomatic quantum field theory, does recognize one true thing: that it's #$&^ing difficult or well-nigh impossible to systematically predict what's going to happen. You may think you know you're in a bubble, but you still can't tell whether things are going up or down the next day. The EMH was a kind of jiu-jitsu response on the part of economists to turn weakness into strength. "I can't figure out how things work, so I'll make that a principle."

It reminds me a bit of the anthropic principle: "I can't explain why the fine structure constant is 1/137 so I'll just say that if it weren't I wouldn't be here."

Entangled Lives

Money Desire Pleasure Pain


For Spinoza there is only one world and one substance and no separate creator and creation. It is pointless to speculate about other possibilities. But people do.

  • Paulson on Bailout

    Many more Americans would be without their homes, their jobs, their businesses, their savings and their way of life," he said in written testimony prepared for a hearing Thursday. While losses have been staggering, "that suffering would have been far more profound and disturbing" had the government not intervened, he will tell the House Oversight and Government Reform Committee.

    Who knows?

  • Saved by Being Late

    NY Daily News: Italian tourists arrive late for helicopter ride; mother and son grateful to be alive.

    Tourist Paola Casali was delighted Saturday with her cranky 13-year-old son: He saved their lives. The native of Rome and the teen held pricey tickets for a helicopter tour above Manhattan. Casali's enthusiasm for the trip wasn't shared by the boy, and they arrived late for her planned takeoff.

    And who knows? Would they have been killed if they had arrived on time? Had they boarded the helicopter, would they perhaps have taken off 1/10 a second later and would everyone have been saved?

I saw it with my eyes, I heard it with my ears …

In the August 4 NY Times I referenced there was an

Eli Peli in:

and a

Flora Mora in

But wait, there's more!

Thanks to Ernie Shoemaker for pointing out to me that the photograph of Flora Mora and her Two Clients had a caption that read

"A Liberty Travel agent, Flora Mora, left, helps Christina Farina and Bettina Aizzi book a flight to Rome."

The Sky is Falling, The Sky is Falling

Print newspapers, as everyone knows, are having a hard time, and you can see the New York Times getting sadly thinner each week.

But I can't figure out whether the people they found to feature in today's stories

Eli Peli in:


Flora Mora in

are an attempt to extend their science and business audience to children as well as adults, or are the a more subtle message about the predicament the publishers of the newspaper find themselves in?

People Who Will Answer The Telephone

A couple of days ago, on a whim, I downloaded David Byrnes's 1986 movie True Stories from iTunes. I remember seeing it just about when I started working on Wall Street, and liked the soundtrack, which included a Talking Heads song and video called Wild Wild Life, and had the verse

"Check out mr. businessman
Oh, ho ho
He bought some wild, wild life
On the way to the stock exchange
Oh, ho ho
He got some wild, wild life

It sounded more exciting than working as a scientist or engineer.

I recommend the movie. It's even better than I remembered. It's about a small nondescript gung-ho American town in Texas and the mundane lives its inhabitants live -- the mall, the big electronics firm that dominates the town, the people, their lack of a big city or European sensibility. But Byrne, and I don't think he means it ironically, looks closely at the intersecting whimsical stories of some of the people, and the way they take their small aspirations seriously, and get redeemed in the smallest and most trivial of ways. I haven't seen a Fellini movie for years, but it reminds me a bit of an American version of it, not in lushness, but in intent.

You might think he is being ironic at their expense, but I don't think so. He takes them kindly but seriously. It's sad and funny and kind. A clever look at America in 1986 and now, and terrific music that is better if you can listen to the words. John Goodman and Swoosie Kurtz and the late Spalding Gray are good. And a charmingly realistic performance by someone I never heard of, Roebuck 'Pops' Staples, as a Haitian voodoo enchanter and trickster who brings love to people by incantation (see picture above).

In the culminating Talking Heads song, "People Like Us", John Goodman sings that
"Theres something special bout people like us
People like us
(who will answer the telephone)

I was pondering this because I have been dealing with people who don't write their own emails and are unable to look at their own calendar to make their own appointments, something that always surprises me. It reminded me of my days in big-business America when I would be called by someone's secretary to be told "Xxxx wants to speak to you" and then told to hold until the secretary's boss came on the line. People who don't answer the telephone and don't dial it either. I understand the need for it, very reluctantly, but I think it's overdone.

High Frequency Algorithmic Swimming

The world swimming championships, falling records and buoyant streamlined swimsuits in the Foro Italico (sounds nicely gladiatorial) illustrates that standards are hard to maintain.

Records in athletics fall because of: better training; improvements in the human mind and body; drugs; and advances in equipment.

There's not much you can do to prevent better training. There used to be amateurs who did something else as their main occupation but those days are gone. Roger Bannister was a medical student who ran and stole time from his studies in order to train. That's no longer the case. People can devote all their time to training and there's no way to limit it.

Drug-free improvements in mind and body are also hard to avoid; diets are better in many countries, people are taller now than in the past, they have less childhood diseases, etc.

Drugs are a slippery slope. What is a food and what is a drug? What helps to ameliorate an idiosyncratic illness (Ventolin for bronchial spasms) vs what is adding something no one has naturally (steroids for muscle growth). Steroids no but antihistamines? Coffee?

Equipment is tricky too. Pole vault changed with the advent of fiber-glass spring loaded poles, and the right to land on foam rather than sawdust. Dick Fosbury could invent the Fosbury Flop in high jump and leap over the bar backwards and land on his back only when foam replaced sawdust. It's a different game. Rubberized tracks improve records. So do swimming pools with wave-damping sides. Tennis outlawed spaghetti rackets. It's all so inconsistent.

But swimming is one sport, even more so than running, that could be pretty pure. Just water and a body. Regulate suits to be minimal and of a standard material, so you can compare old records to new ones. Regulate swimming pools and their sides too. Men in the tiniest of spandex Speedos and maybe women too. Why not? Have one sport about which there is no equipment confusion. Even so there will be trickiness -- a while back someone invented the idea of swimming underwater for the first length of the backstroke and now everyone does it.

Time for the SEC to regulate this business too. Allow no one to live closer than thirty minutes from an olympic-size pool.

What Should Economists Dream Of?

Isaiah Berlin wrote a famous essay called "The Hedgehog and the Fox" based on the Greek aphorism "The fox knows many things, but the hedgehog knows one big thing". Berlin's essay then classified writers as hedgehogs/deep or foxes/tricky. 

Freeman Dyson wrote an article a few years ago in which he classified mathematicians as frogs or birds. He is not referring to English slang for Frenchman and young women. Frogs like grubbing around in the details with no overarching view of the field (but that's OK by Dyson, who declares himself a frog) and birds like flying on high and contributing to the scope of the field.

I have been skimming the latest issue of the Economist on the crisis in economics, and from a grumpy point of view you could argue that the trouble is that in the mathematical side of economics the birds are interesting but wrong and the frogs correct but their details don't make for a discipline.

The Brownian-motion-continuous-hedging-no-arbitrage birds have a beautiful schema that they see as fly on high, but it isn't quite right. In the Economist Scholes explains that it's the model users and the data that are the problem, not the models. I don't  totally disagree but that doesn't altogether help.

The behavioral finance frogs find interesting insects, and have great stories to tell but they can't explain the whole world beneath the heavens.

The alternative guys stress biological analogies and want to be birds but so far it seems to be all analogy and storytelling.   

(On the scientific side, I heard an interesting preliminary talk at the Quant Congress by Lisa Borland on the econophysics/phase-transition approach to contagion.)

The Economist mentions Andy Lo's idea of creating a National Financial Safety Board, like the National Transportation Safety Board that investigates airline accidents. It sounds like a good idea and can't do much harm, but I suspect it is based on a flawed view of economic systems as engineered and therefore easy to systematically diagnose and pinpoint,  rather than as a part of  society, politics and power in which the historical truth is hard to discover. (The International Safety Board to investigate the causes of World War I is still deliberating.)

Maybe everyone just expects too much from economics. It's not rocket science. It's more a question of what defines sensible and decent behavior, and then devising incentives to get people to behave accordingly.


Meanwhile, in Sunday's New York Times, Tom Wolfe writes about NASA's lack of vision during the past 40 years after the moon landing:

"What NASA needs now is the power of the Word. On Darwin’s tongue, the Word created a revolutionary and now well-nigh universal conception of the nature of human beings, or, rather, human beasts. On Freud’s tongue, the Word means that at this very moment there are probably several million orgasms occurring that would not have occurred had Freud never lived. Even the fact that he is proved to be a quack has not diminished the power of his Word."

According to Wolfe, the Word for NASA should be to build that bridge to the stars.

When you set out to be a scientist, if you're idealistic,  the Word is the nature of the universe. When you become a doctor, if you're idealistic, the Word is empathy & helping people. All achievable.

What are the motivations of an idealistic financial economist? What is a reasonable and achievable Word for the field?

Restoring Illiquidity

If there's one general lesson you learn from options theory that transcends its uncertain details, it's that every good thing has its downside. Positive curvature is accompanied by rapid time decay. Everything in moderation, therefore.

Liquidity is not an unmitigated good, and the world recognizes this practically in most things by creating friction and viscosity to slow us down. Without friction nothing would happen and no one would exist.

You can have friction in time. People used to get engaged before they got married, wait for a marriage license, pass blood tests, etc. Same in reverse. If you join a gym you have a few days to change your mind. Wall Street partnerships and their illiquidity made firms think long term.

You can have friction in space. Coop apts outlaw or tax apartment flipping for the benefit of the long-term residents. Some stock markets have circuit breakers to slow things down. In some countries stock buying and selling requires a stamp tax. Glass-Steagall imposed barriers on mixing lending with trading.

Too much friction may be bad, but a little friction is a good thing.

Statistical arbitrage claims to be a liquidity provider and therefore good for you. It's not so entirely self-evident to me. And if it does provide liquidity, is it the kind of liquidity you want if you're a long-term resident of the market?

People have to extrapolate to reach conclusions. Lack of estrogen is linked to osteoporosis so you should take supplements. A little liquidity is good therefore more is better. Not so obviously obvious. Lowering friction sounds good but maybe it's a slippery slope.

"Shocking" News About Algorithmic Trading

1. Everyone is getting very excited about the alleged theft of Goldman algorithmic trading code. The truth is, as far as I can judge, that there is quite an appreciable level of transfer of algorithms and ideas between proprietary trading groups, and that this kind of thing happens much more often than people let on. People on all sides of the Street tend to embrace people who come to their firm from other firms with ideas (not code) and bitterly resent those who leave, unless they're the ones leaving. The whole US economy and market is not going to collapse because of this, or it would have already. Or maybe that's why it did …

2. Someone principled and old-fashioned briefly bemoaned to me last week the fact that such a large fraction of daily stock trading volume was being run by hedge funds and investment banks doing algorithmic trading. Wasn't investment supposed to be governed by the aim of directing scarce resources to productive use in the economy?

I wanted to make the standard argument that all this algorithmic trading led to greater efficiency and execution and a more rapid approach to fair value, but I didn't. Instead I simply said that there is no turning back the clock, and we agreed on that.

Still, the recent Reuters headline "AQR Launches Momentum Funds for Retail Clients" made me think again about the way in which the icing on the cake has a tendency to become the biggest part of it.


I am flying to area code 212
To stab a Concorde into you,
To plunge a sword into the gangrene.
This is a poem about a sword of kerosene.

This is my 21st century in hell.
I stab the sword into the smell.
I am the sword of sunrise flying into area code 212
To flense the people in the buildings, and the buildings, into dew.

This is a poem by a man called Fred Seidel whom I never heard of prior to this. I came across it in an article in the New York Review of Books and transcribed it. He captures the glamor of 212 as a symbol of New York, and the fascination of destroying it. It's interesting how much more powerful it is with one level of indirection: "I am flying to area code 212" rather than "I am flying to Manhattan".

When I first came to New York City all of it was 212 and you needed no area code to dial within it.

New York used to have telephone exchanges too, not just area codes: The John O'Hara novel Butterfield 8 was named after BU-8, the prefix you rotary-dialed a long time ago for the first three digits of fashionable Upper East Side telephone numbers.

I used to notice people wearing T shirts that said ACK, and discovered it was the FAA code for Nantucket airport. People will do anything to feel special, that's the way it is.

The Istanbul area code is 212, apparently because the people who designed the Turkish phone system modeled it after the USA. Ankara, surprisingly, is 312 rather than 202.

I notice that 212 is isomorphic to SOS on the telephone keyboard, both of them palindromes. Symmetrized (see picture) it looks like a heart split in two.

Are you bicestrian? You don't look bicestrian.

"So many riders in the Tour de France have been tossed out because of drugs, the overall leader is now a delivery guy from Empire Szechuan," joked David Letterman in 2007.

Anyone who lives on the Upper West Side of Manhattan knows what it's like to walk across Broadway when the sign says WALK and then narrowly escape being hit by a delivery guy coming through on a bicycle. Or riding the wrong way down a one-way street.

There's a simple explanation. The delivery guys have been given the right at any time to regard themselves as either cyclists or a pedestrians. When the traffic light is green, they regard themselves as vehicles and ride. When the light is red they define themselves as a pedestrian who just happens to have wheels. They can choose whatever is advantageous at any time. Who can blame them? Life is short and they need the money.

I am reminded of this when I read rumors that some of the investment banks want to give up their bank holding company status now that their funding crisis is over.

Public Private Investment Partnerships

1. Call me old(-fashioned) but I would like to find a philosophically sound position that justifies my intuitive feeling that the world isn't entitled to the details of Steve Jobs' (Jobs's??) health. Ever since the Sixties there has been a feeling of greater entitlement on the part of the public and the press to know about your personal life under the argument that it affects your public life, and therefore they shouldn't be separable.

I agree that they interact, but I think they should be kept as separate as possible. If you are a political hypocrite who preaches conventional moral behavior but doesn't practice it, I like to think that's relevant, but I could be persuaded otherwise. But I feel in my heart that the world of investors has no right to know Steve Jobs' sexual orientation or what he took sick leave for. If they need to know that, then maybe they also need to know the state of his personal relationships in general, and whether his family gave him a hard time last night, since these things certainly those affect his capacity to do his job.

2. I subscribe to which I like because they keep you up to date without too much newspaper reading and because they take a somewhat moral approach to economics.

Here's something recent I agree with:

"Banks may have suffered inadequate pain. With green shoots sprouting around the world and mega-bonuses for bankers on their way back, there’s a risk that the industry may be returning to normality too quickly. There’s even a chance that governments won’t be radical enough about reforming the financial system, the UK Financial Services Authority’s Lord Turner has warned.

The general public will be outraged if bankers go back to the trough again, so soon after bringing the global economy to its knees. But it’s naïve to expect financiers to act as moral creatures. They are behaving perfectly rationally in pursuing their own self-interest – taking full advantage of the cheap money and support operations that governments have provided to them.

Given that an appeal to some higher interest won’t work, there are really only two ways of regulating bankers’ behaviour. The first is to make them suffer pain if they make bad decisions. Some of that has happened. Bankers in the City of London and on Wall Street were clobbered pretty badly in 2008. But most of them survived. Without the authorities’ aid, there would have been a near total wipe-out.

The second option is to regulate. And there is definitely quite a bit of regulation in the works. But enthusiasm for this detailed, slightly mind- numbing task could wane as memory of the crisis fades. The banks will also soon get their mojos back and start lobbying the politicians. Turner thinks there is a “real danger” that the authorities won’t seize the opportunity to fix the system provided by the crisis. Hopefully, he is wrong – because otherwise it won’t be too long before the industry runs amok, again."

Sensible Salary Caps

I went to the doctor one day last week after a few weeks of feeling ill. My doctor is a very nice man. HIs nurse put me in an examining room and measured my weight, temperature and pulse. Then 20 minutes later or so he came along and looked into my throat and nose and listened to my chest. Then he gave me an antibiotic. They had my insurance card on file and so I left without paying anything.

A few days later I received an email link to the billing at my health insurance company.

He billed $140 for "office visit".

He billed $135 "lab services".

He billed $480 for "office surgery".

I was initially appalled at a total of $755 for a fairly routine visit, grateful as I was for the help. I was especially appalled at the billing for an "office visit" since it seemed to be double counting with the rest of the treatment.

Then I looked more closely at what the insurance company had paid out, and felt better.

They disallowed the office visit, saying quite correctly that this service was included in other procedures performed on the same date of service.

They allowed $40.17 for the lab services, which I take to be the nurse's treatment.

They allowed $208.72 for the office surgery, which I assume is what the doctor did to me.

The total they allowed was $248.89 and they paid 80% of that, which came to $199.12. I may be responsible for the mismatch, $49.77.

The end result is an arguably unsurprising charge for a routine visit to a doctor of your choice in Manhattan. I don't understand why he had to bill $755 to get paid a third of that. And I wonder if he would have billed me the same amount if I didn't have insurance.

Man and God in NYC

..... ..... ..... ..... There are weird barely visible things happening in New York, weirder than the banks returning their money to the administration or the demonstrations in Iran.

Walking on the West Side this morning, I saw on Broadway the bus illustrated in the upper part of the photograph above. The are having their say.

But then I made my way over to the East Side and there, outside the building I was heading to, was the truck shown in the bottom part of the picture.

God works in mysterious ways. His followers are forbidden from writing his name accurately for fear of committing blasphemy, but he doesn't have to pay for advertising.

I will keep you posted as I learn more.

The Continuum Hypothesis

I went to the World Science Festival to hear several talks about Time, psychological and physical. This led me to a question:

If the time axis in classical physics is of cardinality Aleph 1, that of the continuum, which is noncountably infinite. then what is the cardinality of the number of memories you can have? Are they countable or uncountable?

It feels like for any given memory, you can always go "one decimal place further" or one level more granular in the details of the memory, and therefore there is no way to order them, and so they must be uncountably infinite.

But maybe this is an illusion and if I try it I will hit rock bottom in granularity, even though associations will keep coming.

Obscure Objects of Desire

I used to be a fountain pen fetishist, craving pretentiously named (Dostoeyevsky, Mozart, Oscar Wilde, …) limited editions of Mont Blancs that always ended up leaking into my breast pocket when I leaned more than 3 degrees away from the vertical. I could never understand why Mont Blancs looked so good but worked so bad. I had a Pelikan that you could throw in the air and juggle with and it wouldn't leak. But not Mont Blancs. They live to leak.

I would resist fountain pen temptation for many months, sometimes years, and then eventually give in in order to stop the torture. Sometimes I bought cheaper Lamys that looked very modern, sometimes a faux 1930s Parker, sometimes, just once actually, a (disappointing) vintage bakelite Conway Stewart like the first pen I ever had when I was in high school, which I wish I could find. Once in South Africa at university I owned a Sheaffer PFM (Pen for Men, indeed), a masculine instrument with a not entirely unexpected snorkel filling system that rose up out of the back of the nib and ejected ink (it's true). A few years ago I found it in disuse and nostalgically sent it to Sheaffer for repair, and they kindly emailed me back to say they couldn't repair it,and gave me a lousy cheapo modern trashy Sheaffer as compensation. Like Sheaffer, so GM, an early warning -- can't even repair their own products. Eventually I got it repaired at the Fountain Pen Hospital in New York, who did a great job.

In the end, all the pens were disappointing. By dint of great willpower and the exercise of inborn character, not to mention professional help from Graf von Faber Castell and his wife the elegant Gräfin Namiki, I eventually overcame this addiction. Now I write only on computers, except for making lists of things to do.

Nevertheless, relapses are always possible, and you have to be on your guard. I am in Frankfurt for a day, and in the lobby of my hotel is a glass display box that contains a beautiful black pen with an unpretentious and really modest silver top. Plain and elegant, modern and classic, simultaneously, what more could you want except a nice feel and no leaking? I went over to the store on Rathenau Platz nearby that sells it to take a look. The hotel concierge who directed me to Rathenau Platz didn't know that Rathenau was a Weimar Minister who was assassinated in the 20s -- something I learned from my son -- and when I informed her she said "Sorry, I don't know much history."

The elderly German gentleman in the pen store who served me very graciously interrupted a conversation with five other German gentlemen who all wore suits and ties, as does almost everyone in downtown Frankfurt. I can understand some German and they were coming by to chat, which is to say that the store was empty, another recessionary sign. But he was gracious indeed, and he let me try out Fs and EFs to my heart's content, unafraid to actually fill them with ink the way they fear to in American stores.

While I was writing my name over and over again in various thicknesses on the 40 lb tester paper, I sudenly looked up and at the man and saw that he was running the tip of his index finger over the upper side of his left lip and looking directly at me. I took this to mean that I had gotten some ink on my face from the pen, and, as though he were my mirror image, rubbed my own finger on the corresponding spot on my face and looked at him quizzically. (We had a sort of unspoken agreement to speak as little as possible in either English or German.) He looked back at me, and then ran his finger across his lip again, a little lower. Thinking I had missed the spot of ink, I then did the same. He then moved his finger along the corresponding path. I repeated it. Etc. Finally, I said to him: "Do I have something on my face?" "Oh nein," he answered, "I thought you were pointing out to me that I had something on mine."

I started out this blog intending to say something very positive about local volatility models and calibration, which I have been thinking about for a while, but given the energy I have put into fountain pens, I will postpone that to a future day.

No Habla Bupa

I am in Aruba, the A in the ABC Dutch Antilles, B for Bonaire, C for Curacao. What a relief not to be able to get the NYT and the WSJ, not to hear about the S&P.

Everyone speaks Papiamento, the local Portuguese/Spanish mishmash patois. It was apparently brought here by Ladino-speaking Jews from Portugal hundreds of years ago, who took it to the Cape Verde Islands too. I like it: the words are simple and when you see it written somewhere you can figure out what it means, mostly, from the Latin roots. It looks like a natural kind of Esperanto. Bon bini is their nice and simple tourist version of bienvenido.

All around the hotel I'm in are people carrying bags that say Bupa Aruba. Bupa sounds like a Papiamento word. Could it be a Ladino word for a Portuguese Jewish grandmother, I thought, and were these people carrying the bags part of some grandparents' convention? But then a man in a tweed jacket with leather elbow patches asked me if I was with Bupa, and I thought Bupa might be the British University Professors Association. It wasn't. I thought it could be the Brazilian Aruban Papiamento Union --yes, I know that make Bapu, not Bupa, but surely you know that AIDS is SIDA in France and it's still the same thing.

Anyhow, I was wrong. Bupa, it turns out, is the British United Provident Association, some sort of healthcare thing. Convention-al.

I'm usually not crazy about animals, but this hotel has some amazingly intelligent parrots in the garden. They can do hellos in male and female voices. It also has four of what Papiamento speakers call Patu Pretu, or Pato Preto in some parts of ABC, and if you want to know what that is look at my photograph above, taken with my cellphone camera. This pato preto has a white-tipped beak and a white underside to its wing. Patu" or "Pato" is technically a duck, but nevertheless, I was told, the photo is of a pato preto. It's a little weird to run into a metaphor.

I have been thinking about models and metaphors. People, even people who curse models, try to understand their world with metaphors, explaining one part of it they don't understand by analogy with another part they think they do. But not everything is a metaphor, and metaphors are limited. If you step on a sharp shell while running on the beach and exclaim "ow!", that's not a metaphor. If you struggle to climb out of a low place to a high place against gravity and pant and your chest heaves, that's not one either. If you have some trouble in life and you say you feel low, that is one.

A memorable metaphorical story about a patu pretu is Thomas Mann's 1952 novella called the English version of Patu Pretu. It is much less well known than "Death in Venice", but very good.

My Own Private Stimulus

I don't want a fancy stereo. I don't want a Tivo. I don't even want a Kindle (very much). The only consumer fetish I have is for laptops to write on and smartphones that help me maintain the sense of being organized -- all other technology leaves me fairly cold. So, for several months now, maybe longer, I've been fighting the compulsion to buy a Macbook Air, Apple's lightest portable laptop.

Do I need one? Not that badly. I have a two-year old Powerbook that works just fine.

Will it make my life simpler? Yes -- it would be nice to carry 3 lbs rather than 6 lbs when I move around. 1.0 lbs would be even better, but I am cool and won't go PC.

Will I have to spend two days making sure all my data and programs (Matlab, Mathematica, FrameMaker, Parallel Systems, etc) port over and run? Yes, and the time would be better spent on other more productive activities.

Will I have to carry around a small USB drive if I go away for a while and want to take all the contents of my normal desktop with me? Yes, because the Air has a small hard drive. I will also need a SuperDrive to read/write DVDs.

Nevertheless, I want one … but it's wrong. People shouldn't buy things they don't really need.

However, faculty in my dept get some money to spend each year on hardware and software to do their research. And that money will just sit there if I don't spend it. It will be cash hoarded rather than cash spent. And if you listen to the administration, you know that that's bad.The paradox of thrift …

So, I am going to do what's good for the country and get the Air. If you have someone else's money you can use to stimulate the economy, I suggest you do it too.

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