Black Swan - Initial Thoughts

After three attempts and about three years, I have finally finished the Black Swan. I can honestly say that this was the most challenging book I have ever picked up, and completing it became more of a mission than it was a pure pleasure. The published manifesto circulated to support the book is engaging, and the book starts off well enough before thrusting readers into the deep end.

As I sit back and reflect on the reasons for why it was such a challenge, I have come to the following:

· The vocabulary was too vast.
· To fully follow the book, you cannot put it down for any notable period of time.
· The topic threads at times don’t appear to connect.
· The concepts are a bit too challenging.

Allow me to elaborae further…..

Vocabulary

Nassim is clearly very smart, and unfortunately for me, his vocabulary is far more extensive than my own. As such, there were a great many words whose meanings I simply did not know. As such, my choice was to ignore them, or look them up. To give you a sense of what I am talking about, consider the following words that I jotted down for the purposes of looking them up later:

· Flaneur
· Sycophany
· Levantine
· Mercantile
· Hellenistic
· Byzantine
· Ethos
· Indelible
· Pyrrhic
· Iniquitous
· Bard
· Troubadour
· Epistomology
· Denizen
· Obscurantist
· Fideism
· Erudite
· Philistinism
· Verisimiltude
· Obsequiousness
· Hedonic
· Pontification
· Polyglot
· Wile
· Tomes
· Penurious
· Charlatan
· Aggrandized
· Fiat
· Unctuous
· Precocity
· Ad hominem
· Sui generis
· Quincunx
· Paucity
· Dialectic
· Unassailable
· Derisively
· In extremis
· Synod style

Concepts

Nassim introduces a whole host of concepts in the book, and continues to refer to them after their introduction. As such, it is important to get a handle on them. As a sampling of the concepts introduced, consider the following:

· Mediocristan versus Extremistan
· Great Intellectual Fraud – GIF
· Cheap Signalling
· Barbell strategy for investing
· Mandlebroatian versus Gaussian
· Preferential attachment
· Cumulative advantage
· Knightian risk
· Corroboration errors
· Negative empiricism
· Silent evidence
· Black Swan Triplet: Rarity, extreme impact, and retrospective predictability.
· Epistemic arrogance
· Nerd effect
· Anchoring
· Ludic fallacy
· Platonication

Additional Notes

·He loves Physics as he views it as a pure science – couldn’t agree more!
·Laughs at game theory and people that try to apply rigid math to economics as he argues that we really can’t apply most models to economic issues. Also believes that Alfred Nobel would be rolling in his grave if he knew the types of people that were getting Nobel Prizes these days.
·Suggests that fractals are a good way to go about predicting as they maintain their symmetry at different scales. He then ties this to the need to use Power Laws in our predictions, but suggests that knowing which specific power to use is a very difficult thing to know for sure.
·His sarcasm is costic as can be, but that makes reading amusing.
·He has an interesting history, and is clearly very bright.
·He thinks the bell curve is the Great Intellectual Fraud in that people try to apply a normal distribution to data that can’t fit that type of distribution.
·Mediocristan is a world where data doesn’t vary widely within a given data set. While the individual data points might vary from one another, no single data point can influence the average value of the data aggregate. For example, if you randomly collect 100 people and take an average of their weight, you will get a value X. If you were to replace any one person in the sample with the heaviest person in the world, the average of that sample would not change appreciably. Extremistan is a world where data can vary dramatically one point to the next. An example of an attribute from Extremistan is personal wealth. If you repeat the above example with personal wealth, substituting one person in the sample with Bill Gates would have a huge influence on the aggregate average.

Things I Learned in May

I will be the first to admit that I have an addiction. I can't help but learn about people and things ALL the time. Sometimes I think that work and life don't ever seem to engage your mind as much as shool does. At times though I realize that the problem may just be that I don't realize the amount of learning that actually happens. So, this month, I have decided to look at what I learned in the month of May.

First, a qualifying statement. Everything listed in the immeidiate section below came to me thanks to listening to Ted talks available from http://www.ted.com/. There you will find amazing speeches on a variety of topics including, business, science, politics, etc. I truly encourage you all to hit the site today! If any of these topics are of interest, please let me know and I will point you to the specific speech.

Quorum sensing in bacteria (Bonnie Bassler). It turns out that the study of bacteria has come a loooong way since I studied the topic in school. Specifically, scientists have learned that bacteria communicate by exchanging small molecules, not unlike cytokines you find in immunology. The concept was initially discovered by work on a certain type of nocturnal squid found off the coastal waters of Hawaii. Turns out this squid has pouches filled with bacteria that glow. The purpose of the bacteria is to light the animal from its underside, thereby eliminating its shadow as it patrols the shallow coastal waters using moonlight to see. Brilliant! So, the bacteria collectively turn on their glowing mechanism only once there are enough of them in the area – the measurement being achieved by the concentration of these communication molecules. If the concentration is not sufficient, the bacteria simply do not glow. When they reach quorum, presto, glowing! Amazingly, there are intraspecies communication molecules and interspecies communication molecules.

It is believed that it is quorum sensing that is used when they take over a host such as a human. Another interesting aside is that 10 trillion bacterial cells can be found on you and/or in you at any time compared to about 1 trillion of your own cells. Similarly, you have 30000 genes in your genome, but in your life about 3,000,000 bacterial genes influence your life via the bacteria on

AIDS in Uganda. Uganda is often cited as one of the only successes at reducing AIDS infection in sub Saharan Africa. This has always been attributable to the launch of an aggressive campaign entitled ABC for its pillars of Abstinence, Being Faithful, and Condoms. Recently, however, a social scientist has made a very interesting observation. It turns out that the incidence of infectious disease in a country is correlated to the amount of exporting it does. So, in the case of Uganda, its primary export is coffee. Precisely over the years that AIDS infections decreased, the price of coffee went up. When prices goes up, export go down, and by extension, maybe the incidence of infection goes down.

Decision Making. I learned some interesting concepts about how we make decisions. It turns out that introducing an innocuous choice to people may well sway their way of choosing. For example, imaging choosing between the following items:

· All expense paid trip to Rome
· All expense paid trip to Paris

As both are fairly equivalent, participant choices can be expected to be fairly even. But, if you introduce a third option, All expense paid trip to Rome, save your morning coffees. As expected, this shifts the choices made from the coffee deficient trip to Rome to the complete trip to Rome. Interestingly, however, it also shifts the choices away from Paris altogether. Applied to dating, this means you should be seen with a slightly less attractive version of yourself. In that way, you will seem comparatively more attractive.

Texting Google (David Pogue). You can text google for information and it will return a reply is sub 5 seconds. For example, text “New York weather” to Google and presto, you get the day’s weather. You can do the same to get local restaurant listings and many, many more things.

Also, at present if you have a wifi enabled phone, you should make your calls while on wifi instead of the carrier because wifi calls are free. Better yet, even if your signal switches the paid carrier later, you won’t be billed as the carriers haven’t figured out how to track this transition yet!

Twitter (Evan Williams). 47 members of US cabinet members have twitter.

NOAA (Robert Ballard). – The ocean equivalent of NASA, this body explores the features and creatures found in our ocean. Sadly, 160

Sheep Castration (Mike Rowe). Host of the TV show “Dirty Jobs” describes how the Human Society and PETA confirmed human way of castrating sheep leaves them trembling and suffering for a far greater period of time then would if the more traditional method of having the testicles bitten off by a human (no joke) was employed. Mike goes on to say that we as a society have waged a war on work, that an honest day of manual labour is something that few people want to do, yet is something we still vitally need.

Brain Science (Jill Bolte Taylor). Probably one of the best talks ever, this talk provides amazing insight about stroke by a neuroscientist who underwent a stroke. She describes how her left hemisphere would cycle between being online and offline with crazy results. While online, she was aware of her stroke and what needed to be done (i.e. get help), but when offline, she was in a state of euphoria thanks to functioning of the right brain. The right brain she describes was unable to process boundaries to objects; everything appeared to be connected and at peace. She struggled to place a call for help, but the concepts of numbers simply did not register with her – she resorted to looking at them, trying to identify similarities in the “numbers” on her business cards and those on the phone. She was successful in dialing, only to hear her colleague speaking to her in what she interpreted Scooby Doo type talk. To her amazement, when she spoke, what came out was equally unintelligible. After eight years she has recovered and has an amazingly unique story to tell. If you listen to one talk, may this the one!

These kernels of knowledge have been drawn from the book Social Intelligence by Karl Albreght.

· New Expression: Ballistic Podiatry! – Nice way to say shooting yourself in the foot.
· Social Flatulence – acting and/or saying something inappropriate.
· Social Dandruff – when your behavior directly impacts those around you, and you are entirely oblivious and/or don’t care, much like if you flicked you dandruff ridden hair all over nearby passengers on a bus.
· Social Halitosis – When people talk, and talk, and talk without regard to giving other’s a chance to contribute.

African Aid (Dambisa Moyo). While we think that aid that the western world has provided to Africa is a good thing, the reality is that it may not be. Overall, Africa has benefit only marginally from the millions of dollars that have been shuttled its way through foreign aid, despite the well-intentioned efforts of highly visible celebrities like Bono. In her book, a very outspoken and knowledgeable Dambisa Moyo makes the argument foreign aid actually supports the dictators in power as it gives them little incentive to change anything for the betterment of their citizens.

Game Theory. Not that I aspire to grandeur on the poker stage, but I have started to study Game Theory. While it isn’t overly complicated, it is twisted at times. For example, there can be a solution to a problem that would provide the best results for both parties, but sadly will never be selected. An example of this is the Prisoner’s Dilemma. Suppose you and I committed a crime and were sitting together in a restaurant sometime after the event. Sadly, we had never discussed our stories, and suddenly two cops approach us and separate us. Held in our individual cells, we are asked what happened. Our choices and results are as follows:

· Neither of us implicate each other – we both get off.
· We both implicate each other – we both serve three years.
· One of us implicates the other, but not the other way – the implicator gets off; the one implicated serves 5 years.

The question is, not having chatted, what do we do? The result is that we implicated one another and serve three years. Although saying nothing would have served us better collectively, not knowing what the other would do, left us with the best option of implicating one another.

A Word About Expectations

Does the world need expectations?

Think about it. If you are like me, I'm sure you see examples of people failing to meet expectations all around you. Maybe you see someone on public transit who is unecessarily rude to another passenger. Maybe you see a co-worker dropping the ball yet again. Maybe your parents are too involved or uninvolved in your life. Maybe your new or existing love interest failed to do something, or didn't do something quite right. Or, maybe you yourself failed to live up to a tenent of your life.

The point is that every day is filled with potential opportunities to observe, first hand, how expectations don't get met.

The natural counter to the above is that each day also presents abundant opportunities to see expectations being met. But, the question becomes, are the two types of opportunity equivalent. To that question, I would say absolutely not!

When an expectation is not met there is a notable sense of dissapointment - it may be small, but it might also be huge. The dissapointment may be most pronounced when it applies to ourself, when we fail to do as we think we should.

On the flipside, when an expectation is met, there is little joy, pleasure, or positive reflection. After all, the behaviour was expected, or put another way, it was the baseline of what we were willing to accept.

So, in essence, we have structured a scenario that at best keeps us in a neutral state (when people meet our expectations), but is heavily sided toward being negative (when expectations are not met).

So what to do? Do we simply remove expectations of ourselves and others from the equation of life? No, I don't think so. The result would be pure anarchy. To varying degrees, we all modify our behaviour according to what others deem acceptable and in this way, maybe our eccentricities are curtailed. Whether this is good or bad is open to debate, but I would suggest that within reason it is a good thing. In a way, expectations are a means of ascribing accountability to one another. Were we without them, we would have no accountability to others, and the world would truly be dog eat dog.

So if living with expectations is a huge challenge, and divorcing ourselves of them is not in the cards, what are we to do?

I think the solution is two fold. Firstly, do not act so quickly to scorn if an expectation is not met. By and large people aren't out to dissapoint intentionally. You might find some people that are, but I would suggest that they are an aberration, and not representative of the norm. Appreciate that there are likely reasons for the failure and that the person may in fact be struggling with meeting differing sets of expectations, perhaps those of yours and their own.

The other key element in all of this of course is to articulate what your expectations are of others. After all, how can others be expected to know what u expect, especially if your expectations are appreciably different from their own and/or of the people they most often associate with. Of course this is much more easily done with people you interact with often and is more difficult with the stranger on the street.

So, at the end of the day, I think the key is not to get too hung up on expectations, and to share the ones that truly are of consequence to you. But try to make your list of expectations a small one indeed, for the best of all concerned.

That is my two cents for the day.

The Madness -- It Came, it went.

Every March, one of the greatest sports spectacles on the planet takes place – the men’s NCAA Division 1 basketball tournament.

For the uninitiated, this tournament consists of 64 teams that compete in a single elimination format that ultimately leads to the crowning of the national champion. Teams are grouped into four divisions and within each, the sixteen teams are ranked 1 through 16. Although the rankings (or seedings) theoretically give you a sense of how the teams will do, it is rare that the four #1 seeds advance to the Final Four – please disregard 2008.

Where this tournament differs most from the pro competition, in my opinion, is the fact that these athletes are hungrier. I once hear a stat that 1 in 5 US college players go on to professional ball. That means that for many this tournament is their chance to show case their skills and get to the gravy train that is professional ball. Keep in mind that even making the tournament is an accomplishment as there are far more than 64 division 1 teams in the US. As such, these guys put their everything into the game and leave NOTHING behind. For many, there simply will be no next year, no second chance, no Mulligans!

This year I was on vacation when the time came to make my tournament picks for our company office pool. As such, I had exactly one hour to do my research and make my picks after a day of touring southern cali. It is difficult for us north of the 49th to track college hoops by watching team as TV coverage is scant at best. Nonetheless, I barreled into the business centre at the hotel I was staying at, printed out my bracket, and made my picks. The final result is shown in the attached image.

Amazingly enough, I made some excellent picks. Through the first round I selected 27/32 matchup correctly, and carried on to choose three out of the final four teams. MSU over Louisville was a key pick that proved to come true. Of course, I was blindsided as well. I didn’t expect Pitt to lose prior to the Final Four, and certainly did not see Oklahoma dismantling Syracuse with surgeon-like efficiency – I still have nightmare about that game.

Ultimately, though, there was just no stopping #1 North Carolina. Michael Jordan’s alma matter represented in fine fashion disposing of a solid MSU team in a final game that was anything but in question.

In the end, I was lucky enough to lead my corporate office pool wire to wire, giving me a 1000% return on my initial wage – nice!

The one knock I have against the tournament is simply this. In advance of it, the anticipation builds. During it, the excitement is intense all consuming. But, all too soon, the tournament is over, and we are left wanting more, sadly relegated to waiting another eleven months to repeat the process all over again. Before we know it, we are left watching CBS’s famous “One Shining Moment” video ( ), and reliving the brief, but intense tourney, in a sub two minute clip.
As this year’s tourney has come and gone, I leave you with my two cents on the tourney:

· Blake Griffon is a powerhouse and will be an excellent NBA player. I can’t think of the last time I saw someone jump high enough to graze the side of their face on the backboard foam – and the fact that he is ½ white is all the more amazing! This isn’t to suggest that white men can’t jump, but rather, that as a white man with a vertical that has seen better days, my hats are off to Blake.
·Tyler Hansbrough looks possessed when he plays– his eyes just might pop out of his head one day. Either that, or he might burst into tears at any moment – not sure which. It is also funny to me that while he is undoubtedly a basketball phenom and will likely to be named NCAA’s college player of the year, I can honestly say that in looking at him, he doesn’t look like a baller to me. Sure, he is 6’9” which naturally gives him a bball bend, but he almost looks too physically large, and doesn’t look super athletic to me. Prior to seeing him play I would actually guess him to slow and uncoordinated.
·When was the last time player benches were sunken below the floor level as they were in the final games?
·How great was it that Obama filled out a tournament bracket and made is such a public event. Can you imagine, even for second, W doing that? Genius, I tell you, genius. And, not only that, but he had the vision to pick UNC to win --- what a leader!

Until next year, I leave you with my favourite moment of the tourney:

http://www.youtube.com/watch?v=otKxYdQVpew&feature=related

Booyah!

Pet Peeves - Group Think

So, it is time to vent. One thing that annoys me to no end is Group Think. Why is it that people have a penchant for acting like lemmings? Is the concept of individual, and dare I say, prospective thought, a thing of the past?

You see examples of this all around you, but what has brought it to my attention yet again was a seminar I recently attended. Noting an advertisement and happening to have a free night, I elected to attend a seminar on stock trading by Robert Kiyosaki of Rich Dad, Poor Dad fame. Having read the book and concluding that he had some valid, albeit not overly complex, points, I figured attending couldn’t hurt.

For those of you considering attending such a seminar, don’t. I will give you the entire message in the following bullets:

Successful trading is achieved by:

a) Using fundamental analysis to pick your companies
b) Using technical analysis to time your buying and selling points (they are big fans of the Moving Average Convergence / Divergence, the Stochastic, and the Moving Average itself).
c) Using software to facilitate both a) and b)

Fair enough, nothing really alarming about the messaging here, all pretty solid. But, then the pitch follows. Pay $500 for a course to learn how to use the Rich Dad, Poor Dad proprietary software tools (can’t imagine you get an education on anything but how to click here, then there), and then pay $40 per month to get market data from eSignal that fuels the software.
Maybe it is a good deal for some, I suppose that is a matter of perspective. But what amazes me about the situation was the tricks incorporated into the presentation that seemed to successfully up the urgency for the call to action (i.e buy).

Firstly, they put out insufficient seats for the number of people registered. Then, of course, they have to add seats during the presentation, thereby conveying the idea of an intense demand. Did I mention that despite having registered online, my name was NOT on the list? Maybe an innocent mistake, then again, maybe not.

The speaker then builds rapport with audience by eliciting from them via the use of inane questions such as “who wouldn’t like a return of 1000% in these tough economic times”, to which the audience coos “yes, yes”. Honestly, what is that? I swear he could of asked if $10 more valuable than $5 and people would have chimmed in just as enthusiastically.

He also leveraged the public’s familiarity with Warren Buffets wealth to make points in favour of his pitch (i.e. use Fundamental Analysis), but then proceed to slam the Buy and Hold philosophy that gave Warren his riches. Amazingly, nobody challenged this notable inconsistency.

He throws out random technical terms to the audience as a means of connecting with them and demonstrating his knowledge of the topic at hand. “Candlesticks”, “Shoulders”, “RSI”, etc. Uhmmm, did anyone notice that he kept saying “I don’t have time to go into this tonight due to time constraints”? People, please, are you mere puppets?

Near the end of the session he suggests that anyone interested in signing up for the 3-day course can move to the back of the room and sign up, as space is limited. Apparently, there was nothing the speaker could do in terms of adding additional sessions to the city’s calendar. Are you kidding me, Rich Dad, Poor Dad has a business model that has no flexibility to adjust course offerings to meet the demand? Come on people, give me a break!!! In fairness, this was a brilliant use of social proof! He prefaced the call to sign up by saying “for those of you convinced that this is right for you; if you know you need this in your life”. In so doing, he subtly suggests that these people are more together than those who opt not to sign up for the course. How many people wanna bet that a good number of those people signing up for the course were plants?

In the end then, what is my beef? Am I upset with Rich Dad, Poor Dad? Not really. They are a business and have a sales system that effectively uses weapons of influence to get people to buy their services. While they are certainly manipulating people that aren’t aware of it, I sadly don’t expect much more from a business. At the end of the day, business is about taking a product or service to a market and getting them to purchase. We would all like to think that our decisions are free of external influence, but in reality, is not the whole focus of business schools to get people to par their money in exchange for a product or service? If you concede that, you will hopefully also concede that there are few limits as to what they will do to make that happen, manipulation included.

Truthfully, my disappointment lies with the human race, and in particular, with the fact that so many of us are susceptible to these types of games. True, we do concede to a house advantage whenever we attend such a seminar, but nonetheless, I would hope for better for us. Perhaps, my message really boils down to the following:

·Remain objective in your thinking and do not assume that everything presented to you is factual and accurate
·Believe in yourself, and do not assume that the people who are acting around you are somehow more intelligent, or have figured something out.
·Realize that it is rare in life that you have to buy or do something right this minute and that no other opportunity such as this will come along again in your life. Leave that type of thinking for matters of love, not for transaction based decisions.

VB Out……

USS Midway

So recently, I was lucky enough visit the USS Midway aircraft carrier. What to say?? It was off da hook!


Ship specifics:

• 3500 crew


• Flight deck - 4.2 acres and ~1000 feet


• Displacement - 100,000 tonnes


• The Chief Petty Officer has the best food on the ship, and the captain has to ask permission to visit his living area


• Engine is the same as in the Mighty Mo


• It missed WWII by days --- that must have been TOUGH for the crew!

The tour is self-paced and wickedly informative, so if you are in San Diego, you gotta drop by for sure!

Those are my Two Cents for the day

Money Shot

Every once in a while you snap a photo that is really unique and that you might even think would be worthy of being a screensaver.


This past week, I took one such shot (at least I think so). Taken at about 30,000 feet and just north of San Diego, the photo shows a hurricane-like break in the cloud cover just as the sun was setting for the day.
















Total Money!

That is all I have for Two Cents on this day!