Emanuel Derman @emanuelderman-blog-blog - Tumblr Blog

Classy Companies, Underdogs, and Schadenfreude

If, as Felix Salmon wrote recently, there is no future for Microsoft, I will not be sorry as they go noisily into the dark night.

There are some companies that are classy, like Bjorn Borg, Stefan Edberg Pete Sampras, or Roger Federer, doing their work with style and inventiveness. When they lose or begin to fade it breaks your heart. There are some companies that are beautiful underdogs, and you root for them even though you know their winning is unlikely, like Lleyton Hewitt.

Apple and UNIX were both underdogs and classy for so long that it's a pleasure to see them winning. Programmers love UNIX for its tools, consumers love Apple for its design.

MS has been neither classy nor an underdog, a behemoth and a bit of a bully. Who loves Windows?

Connors and McEnroe were once behemoth too, brutifying tennis. But they have become wry and introspective in their maturity, able to joke about themselves. MS hasn't.

I've never owned a PC, I've never been to Disneyland or Disneyworld, I've never been to Las Vegas, and, perhaps regretfully, I've never been to the Statue of Liberty, so I have an almost perfect record.

Mechanical Reproduction

Re Izabella Kaminska & Felix Salmon on art markets:

Art always involves an idea and some tension or difficulty in expressing it, between form and content for example, between brushstroke technique and image. Even Duchamp's* urinal involves some mental tension in seeing something mechanical as an object of art, and in mocking the idea at the same time.

Art without tension isn't art, it's closer to kitsch.

A perfect mechanical reproduction of the Mona Lisa would involve no tension, and be uninteresting. There's no idea behind it.

The program that created it is an idea, and it would be much closer to art than the thing it produced.

_____________

Duchamp's The Bride Stripped Bare by her Bachelors, Even is the inspiration for McLuhan's The Mechanical Bride.

The Asian Crisis Caused the Asian Crisis. Is that Clear?

In today's NY Times, Paul Krugman discusses the flight of money from emerging markets, worries about its effects, and attributes the current flight to deregulation.

But the flood of money into emerging markets the past few years has arguably stemmed from the search for yield as central banks printed money for large banks to use but provided them with no return via ZIRP.

Thus, if there is a new Asian crisis, it is arguably due to the Fed's QE, though Krugman attempts to dodge this by saying they were just doing their job.

However, as I wrote in Models.Behaving.Badly (http://books.google.com/books?id=lke_cwM4wm8C&q=krugman#v=snippet&q=krugman&f=false), Krugman and Wells once attributed the 2007-8 crisis to the Asian currency crisis of 1997.

"According to Krugman and Wells (http://www.nybooks.com/articles/archives/2010/sep/30/slump-goes-why/), the crisis of 2007-2008 was caused by the global savings glut. That was caused by the Asian currency crisis of 1997-8, which stimulated Asian countries to avoid a repeat by running net surpluses rather than net deficits.

Thus, we have come full circle.

As I wrote in Models.Behaving.Badly directly beneath the previous quote:

But what caused the Asian currency crisis? And what caused whatever caused that? This is a good example of what Spinoza would call an inadequate explanation

You pays your money and you takes your choice.

Moon over Queens, Mac over Manhattan

Small Anarchies

A few days ago I was at the beach, and I ate dinner at a small seafood shack run by a family. It was crowded with diners and takeout folk. Everything was fresh and tasty. The owner kept coming over to ask how we liked the food. He bought fish at the market early in the morning -- not frozen. There was a full roll of paper towels of decent quality on the table to wipe your hands, not the lousy napkins they give you in big chains.

I was struck by the difference between what he and his family sold and the pride they displayed in selling it vs. the ice cream bar I bought on the beach earlier that day (made by Goodhumor owned by Unilever) whose ingredients I recently tweeted in a photograph, about twenty or thirty of them, mostly unrecognizable as food.

I know it's a little naive, but much of the trouble we have come from the size of corporations and their power over government, the lack of individual responsibility, and the unwillingness of government to prosecute individuals within companies rather than fine them.

The best times I ever had at work and in life were when the group I worked in functioned as a small autonomous unit, with people passionate about what they were doing, like that small restaurant. The stupidest bosses I ever had were the ones who didn't understand the passion for work, but thought only about money.

I know it's naive, but anarchism is about people doing what they like, with passion and with responsibility.

The Complexity of Human Existence

I went to see the Israeli movie Fill The Void a little reluctantly. I wasn't and am still not that interested in the lives of Haredi ("Ultra-Orthodox") Jews in Israel. Though I grew up learning a fair amount about Judaism and synagogue I was never religious, and Haredi life has no appeal for me. I mostly went to see it because it would give me a chance to refresh my Hebrew.

I knew almost nothing about the movie and that's always the best way to see a serious film, so I will say very little except to recommend it, and give nothing away.

The movie is about a girl in an overwhelming existential predicament, under immense and unfair pressure from all sides, where all sides means members of a tight extended family and community. Whatever she does will affect her entire life. As the movie progresses you witness her attempt to accommodate her aspirations to the complex structure of the world she's been brought up in, never once questioning that world. Always serious about life and its obligations, she vacillates as she struggles, and finally seems to recognize something inside herself that provides a solution. But does it? The last scene of the movie leaves you and perhaps her still wondering.

I woke up thinking about the movie and its characters.

Models.Behaving.Badly -- a talk at the Institute of Physics, July 2013

The Shoreline of Time

Walking along the beach and looking at the fractal water line on the sand, I wondered how I was able to traverse in a finite distance the infinite path.

It seemed to me that I could do so because I existed in a higher dimension than the 1-D waterline and could step over its fractal curves by taking finite steps in a higher dimension above it. And how can I traverse continuous time at a steady pace, when each moment consists of recursive submoments? Perhaps I’m elevated above time in a higher dimension too, and can take finite steps over it.

My Theory

Without having read anything at all about Snowden personally, I'm inclined to think he made a slightly naïve mistake, and I feel a bit sorry for him. He tried to do something good in his own view and then suddenly discovered that he didn't know himself as well as he thought (who does?) and found he didn't want to spend 20 years in jail and so had to rely on countries worse than the USA because he hadn't envisaged the consequences.

That's my theory.

Kneejerk Secrecy

Sometimes, I try to invite people from big financial corporations to give a talk to students at a seminar I hold at Columbia. Quite often, some of them refuse -- their compliance people won't give them permission. Others won't even ask for permission: their bosses don't like the idea of them talking to anyone; they may become visible and be hired away, they may unwittingly give away something interesting. Better to be safe than sorry.

When I worked at AT&T and on Wall Street that was often the case too. Better not tell anyone anything, better not publish some result that other people had likely discovered too. Who knows?

This is the way the government thinks too, like another corporation. And yet there are apparently over a million people with Top Secret security clearance.

There are not that many things that really need to be kept secret, except out of embarrassment.

The Restaurant That Fell To Earth

I've lived in New York for more than 40 years, and watched its gentrification from up close. On Amsterdam and Columbus Ave in the Seventies and Eighties (blocks and decades both), it proceeded in steps, a kind of slow continuum of the spreading of adjacency in which restaurants, not too fancy, slowly diffused from Broadway and downtown and eventually displaced the street-side flat-tire changers with bubble-finding tubs of water operating out of narrow dark doors.

I hardly know Brooklyn at all, and haven't witnessed its gentrification, though I've heard much about it and about the new artisanal but apolitical culture. Last night, I ate at Northeast Kingdom in Bushwick. The food was very good, but the process of gentrification seemed very peculiar. There, in the middle of ungentrified people and storefronts, were a few restaurants that looked as though they'd been picked up from somewhere else and parachuted in. And the people coming too, unselfconsciously dressed up and walking through the streets, out of place and yet not bothered. It was as though someone had taken two decks of cards, different manufacturers and design, and force-shuffled them together just once, pressing cards from one into the middle of the other.

It seemed like a jump rather than a diffusion. Very weird.

https://dl.dropboxusercontent.com/u/46489619/Data%20Minding.pdf

Outtakes from Models.Behaving.Badly, typos and all. Derives modern portfolio theory, look ma no optimization.

https://dl.dropboxusercontent.com/u/46489619/Espequanto%20for%20Advanced%20Beginners.pdf

An introduction to how to use quant metaphors in everyday life, based on my FAZ column

http://www.faz.net/aktuell/feuilleton/modelle-die-sich-schlecht-benehmen/f-a-z-column-by-emanuel-derman-espequanto-for-beginners-12208187.html

History Repeats: Lewis Mumford's Prescient Paragraph (1934)

The important thing to bear in mind is that the failure to evaluate the machine and to integrate it in society as a whole was not due simply to defects in distributing income, to errors of management, to the greed and narrow-minded-ness of the industrial leaders: it was also due to a weakness of the entire philosophy upon which the new techniques and inventions were grounded. The leaders and enterprisers of the period believed that they had avoided the necessity for introducing values, except those which were automatically recorded in profits and prices. They believed that the problem of justly distributing goods could be sidetracked by creating an abundance of them: that the problem of applying one's energies wisely could be cancelled out simply by multiplying them: in short, that most of the difficulties that had hitherto vexed mankind had a mathe-atical or mechanical—that is a quantitative—solution. The belief that values could be dispensed with constituted the new system of values. Values, divorced from the current processes of life, remained the concern of those who reacted against the machine. Meanwhile, the current processes justified themselves solely in terms of quantity production and cash results. When the machine as a whole overspeeded and purchasing power failed to keep pace with dishonest overcapitalization and exorbitant profits—then the whole machine went suddenly into reverse, stripped its , gears, and came to a standstill: a humiliating failure, a dire social loss.

The first (1990) paper on valuing quanto options

A Behavioral Finance Puzzle: The Wahidis and The Burtons

Ahmed Wahidi is an Afghani goatherd with three wives, Aafifa, Latifa and Fatima. They live high in the Hindu Kush.

David Burton is a computer programmer who works for HP on the West Coast of the USA. He recently married Linda, a coworker with a joint degree in economics and computer science.

Which family is likely to multiply faster?

1. The Wahidis

2. The Burtons

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