Book Review: (mis)behavior of markets by Benoit Mandelbrot

This was a fantastic book if you’re interested in a very simple description of Mandelbrot’s work and its relationship to how markets work. I really had no idea until reading this book that CAPM (capital asset pricing model) was so widely regarded as incorrect yet still so widely used. While this is true, Dr. Mandelbrot misleads by making one think its just totally wrong when really it does provide a simple approximate model that is correct to a first order. What he does a great job of pointing though is the subtlety of the different methods…it’s the corner cases that matter the most (the days the market makes most of its movement up or down, those are the days that create the most gains or losses by a SIGNIFICANT margin). He does a great job of explaining intuitively, with figures he calls ‘cartoons’ to describe the multi-fractal behavior of markets.

Recommended. 5/5.

The references at the end of the book provide a compendium of a significant amount of the work Mandelbrot has touched in his lifetime.

natural versus….versus what?

artificial: Made by humans; produced rather than natural. (www.dictionary.com)

I believe the above definition is scientifically bunk. Simply, humans are natural, therefore, the things we produce, whether thoughts, genes, or algorithms are 100% natural. There is no real barrier between the two. The distinguishing is merely a conversational convenience that scientists must avoid to be credible. useful at dinner, useless in scientific inquiry.

Recently, I’ve been reading about folks (mathematicians) and their observations about the stock market and prices in the stock market. During these readings I have come across an issue that seems to lead many into amazement--that human created systems behave similar to natural systems. In this case, the similarities of market movement to turbulence in water or Brownian motion in particles. I feel this is terribly misguided…to separate out things man does as something that is NOT natural when something that occurs that man does not create is natural. the fact is that all of these systems are natural and the fact that a bunch of natural systems can be simulated with other effective models of natural systems is not as amazing as one makes it seem to be.

This has an interesting implication when it comes to silicon products, or software for that matter. At a high level people gaze in amazement at the artifact as if it is artificial..but in reality it is entirely natural and the barrier between the two is imposed by humans as they attempt to categorize and structure the world, not a priori by the world itself. Therefore, a machine, CPU, disk, etc. etc. broken down is created by a set of components that are entirely natural. Artificial flavors are created from natural systems. Genetic engineering is producing natural organisms by an entirely natural process of humans intervening in the ecosystem, just like a bear does when he hunts or when elks select their mates in the woods by genetic engineering (called natural selection but its really an exercise in genetic engineering)…there is no such thing to my knowledge that actually deserves to be called artificial that exists or has been created by humans. we are natural...synthetic fabrics are created by material DUG FROM DEEP IN THE EARTH…..if that is not natural than what is? are you saying because you manipulate it, bend it, stretch it, infuse it that it at some point takes on a different form, that it transitions from natural to artificial? and if so, where in that cycle did this transition occur? or is this one of those porn propositions, “you’ll know it when you see it.” as soon as man manipulates it perhaps? as soon as he takes the natural thing, uses a tree branch as a walking stick, it ceases its naturalness? do you see the flaws in this reasoning?

it matters because it effects perception. we are hung up on an error as a civilization, the distinguishing between things that exist without our intervention and things that exist only after our intervention. Relieving ourselves of this notion relieves us from the guilt of manipulation of our surroundings that engulfs huge swathes of humanity as they raise up in unison against things that are not pure. its not about that. take again the example of flavorings in food. now, it is perfectly reasonable to say ‘this stuff is too far from the tree for my little tummy to process appropriately and too weird for my body and may cause a mutation (which…by the way…is also an entirely natural occurrence). but it is not okay to say ‘this is artificial’. what we do when we actualize ourselves and manipulate the universe is following a natural course, there is nothing artificial about it.

again, I don’t debate the value of the word for conversation, I debate its usefulness in scientific dialog. a scientist cannot say something is artificial any more than a technology can be called inherently good or bad.

Friday's point to ponder...

The primary goal of a software company is to become a media company.
The primary goal of a hardware company is to become a software company.

Just healthy points in the business cycle? The difference? Software companies admit it.

And then...a few weeks later...we have on cnet:

"Indeed, thanks to the iPod, the iTunes Music Store, and other digital-media efforts, Apple’s image as a company has undergone a dramatic shift to the point where the age-old question about Apple—is it a hardware company or a software maker—has morphed into a new query. Is Apple a computer maker or a media company?"

next question.

Religion: Foundations of Christianity for Dummy (Me)

So, what does it take to found a christian sect? I mean, did the lutherans have to petition somebody before they became 'sanctioned'. is there a sanctioning body to make decisions as to which ones are certified? or is anyone able to found one?

the reason this comes up is the following hypothesis: no officially recognized sect of the christian church exists that does not require the recognition of the resurretion of jesus christ. true or false? I believe the heart of confusion comes down to the word 'official', thus my first question, of what happens to make a sect 'official', and with whom is it official.

example is a corporation: ultimately, a corporation becomes official when it registers with the state and has a corportate ID number. relative to the state, at this point forward, it is real.

how does this happen for a church that claims to be 'christian'. can anyone do it? does it just have to incorporate as a non-profit?

just curious.

Book Review: Softwar An Intimate Portrait of Larry Ellison and Oracle

Larry Ellison. Before reading this book, the last guy in the world I thought I shared anything in common with would have been Larry Ellison, the CEO of Oracle. I figured he was a slick sales guy. Not that great, just a business savvy corporate dude. Easy to understand, single minded in purpose. Stereotypes: arrogant, egotistical (okay, maybe i do have something in common after all). Turns out he’s far more interesting than that. I knew he was into cars, planes, and the fun stuff his financial success has brought him. I did not know about his children, his struggles with Oracle and weathering the ebb and flow of the tech industry, his dedication to his family in Chicago. The book was just as much about Larry as it was about Oracle, apropos given building an organization of this nature becomes just as much an extension of yourself as any people you may bring into the world.

I did not know that Larry at heart is a technologist interested in doing things right….a software engineer at heart. He despises the pandering the sales teams require, unintellectual annual boondoggles to Vegas, and other things he determined long ago to have little value but resigns to them as part of having to have folks like that who work for him. He’d rather spend his time (and money) on the engineers and programmers that work at the company. He invests himself in making superior product. The book reveals many discussions with CEOs around the world and Larry’s feelings about them. these discussions gave insight into how their minds work and how Larry, being a very effective salesman himself, pitches each generation of Oracle product. it also gives deep insight into the complexity the software they build at Oracle embodies and why it’s a ‘hard problem’ to design the tools and technologies Oracle builds.

I also respect the integrity with which the books at Oracle have been managed through the years. No funny games. Here’s a successful company story, but that success has countless failures as a means to an end. and that is an important lesson. The failures of Microsoft and Intel make front page of all the ‘free financial news’…the mostly worthless press releases and mindfree content from Fortune and the Motley Fool. Its easy to see the good and bad of these products because everyone has to deal with them to get through their day. What they fail to see is the behind the scenes tools like DB2, SAP, Oracle, etc…the databases where all the worlds information lives. Reading this book allowed me to get an inside perspective on a part of the software industry I’ve really had very little interaction besides a small company I worked for in college and a brief fling with a startup I founded that we shut down after about 6 months.

For me, this book was 500 gripping pages I consumed in a week. I was engrossed and have to give it a 5/5 stars for me. However, I really think most people would not like this book and I understand completely why it was 80% off the cover price. for most people the intimate chronological story of a man and his database would be considered boring, but I was engrossed.

Nerd.

Cheers Larry. its been a long road, and you made me feel a little less…different.

To IM or not to IM

So, on several occasions now, folks have been asking me to use IM at work. and i'm torn. in a way, i see the value of the quick exchanges it can provide...but i also see that it could wreak havoc on productivity and produce expectations i have no intention of exceeding. technolgoy is always a two way sword and beneifts are context dependent. for some, i say 'yes', this makes my life better. for others, i reject them. i don't want cable tv, i DO want high speed internet. i do want messaging on my phone for friends, i DO NOT want it from co-workers (friend has precedence, so a friend co-worker is okay). also, clearly at a conference or something its also okay for work but not while i'm working on deliverables. NO. send it, and i will respond/read it when i can.

email for work is okay during the workday, NOT okay on the weekend. and so now i have this IM thing, does this mean if i am on at night and such and such has a question....they will think rude of me if i ignore them. and what if i am doing things at work that are more important than explaining what NTSC is or why your vertex buffer can't have 100,000 vertices....for these questions you can email me and i will get to them when i have an opening between higher precedence projects.

an analogy would be a professor trying to get his work done. HE HAS OFFICE HOURS. this is when you can come and ask the questions you have, not randomly in the middle of the day. it distracts you from higher value thinking and working, constructively actualizing yourself in a way that Maslow would smile.

seems to me this is an issue of what i want to be in my life..tech support (tactical) or creating new ideas and new innovations (strategic). IM facilitates tactical performance and is actually DETRIMENTAL to strategic time. i WANT tactical to be less of my life, not more. it seems IM gives value to those around me but provides ME with little value. am i missing something here? sure, there is some merit to making those around me more productive but in the end their output is a second order in terms of performance, its MY output that is most important to how i am measured.

so IM seems a lot like 'chat' when i was in school. chat was novel for awhile, but any rational person that needs info quick can pick up the phone and call me or send a quick email. i chatted with people on line for awhile, but when the novelty wore off and my finacnes improved and long distance fees dropped....just pick up the phone.

and as far as messenger, it seems email is more optimal IN MY SITUATION. not always, again, if i was tech support it would be fine. another time i think it would be valueble is if i was, for example, on a team working on a project like a new SDK or an API or something like that where somebody is trying to figure out who broke the build or if billy is in his office so he can stop by to talk about a new feature, etc. etc. email allows me to answer the questions asyncrhonously and when i am not in these situations.

anyway...thoughts???? maybe i'm not seeing some of the value.

Better than Google Search?

Jake pointed me to a new search tool in beta:

www.rollyo.com

The Apprentice: Season One

The Apprentice: Season 1

After finishing Lost: Season One I moved onto the Apprentice. This show ROCKS. a few lessons (perhaps remedial to some, but reinforced here with example): everybody has a set of strengths and weaknesses. do not forget this. nobody is flawless. this show allows us see how those people with the pretty smiles as you walk down the street can be downright evil…or stupid in many cases. I’d like to say it fails to amaze me how bad some of these people who hold these rather powerful sounding titles are so bad as leaders. And watching my own stereotypes coming to the fore. And who is left after 8 episodes? well, the good looking ones, imagine that? here, I’m reminded of what my good friend Mike always told me about work: those that have looks have it easier. who was the first person eliminated? the MD brainiac whose interpersonal skills rivaled that of a Chihuahua or the person I respect most: the girl, Kristi, with the long blond hair who took the fall and refused to respond in a negative way, refused to point the finger at her team, even after the grilling by Trump—SHE DID THE RIGHT THING. And perhaps Donald did the right thing: if the leader is willing to take the fall they have to take it, but she is demonstrated character beyond the others who are much less developed. Another interesting pint was that early on, when the teams were divided with men on one side and women on the other, that the women gravitated to using their sexuality to gain advantage. I was also surprised to see Donald give a slap on the wrist for this action…I am curious what would have happened had he not stepped in.

Some observations: When Donald talks, he is no bull. very straight shooter. remains quiet until what he has to say creates value, short circuits long winded defenses. the first show, the project manager made an interesting move from a game theory perspective when he chose two people: to ensure the right one was eliminated he picked a second that clearly had no business being chosen as a candidate for ‘firing’. I was disappointed when the boy from Idaho didn’t cross into a grey area, he simply DID THE WRONG THING when asked to follow the agreement he made to put the number of the unit he wanted to rent when they were discussing this issue, and even more disappointed later when he felt this action was okay. it is also NOT acceptable to pawn a person off as something they are not…it was implied by their actions he was some kind of hero. this one is more grey but come on…in the end we have to sleep with ourselves at night folks…would I bring it up as an idea? sure, but does it get implemented? hell no, this should not have been acceptable after scrutiny by the team. and the copy salesman…how could he not review the information on the client he was going to see? how? I just can’t fathom this if you want to make a sale. he’s a freakin’ salesman. maybe he has some ‘it doesn’t matter, sales are made from a person to a person’, but then again, he’s a copy salesman, and I have no idea how successful he is in RL (real life). its also interesting to see how elimination is a function of leadership traits, and that is how they are reviewed. even if you royally screw up something as tammy did several times, they were innocuous and it wasn’t until she didn’t hold the line and admitted being ‘duped’ that she was eliminated.

So, I’m about halfway through..let’s see how the rest of the shows go.

Lost: Season One

I haven’t had cable for about 4 years now. I’ve found this to be a relief. Previous to that I was quite the TV junkie. In fact, it was to the point I actually had multiple TVs going in the same room while doing other random surfing on the ‘innernet’. Recently I have been re-introduced to the weekly serial by renting them at the local Hollywood Video. I have made it through Season 1 of Lost which I found quite enjoyable. Making the island a character in the series turned the series into something very interesting. Given the writers fascination with star trek in their youth I expect the island to take on some science fiction-esqueness as it progresses. I think this was born out when the wandering invisible security guard was shown to be at least partially robotic (the mechanical arm sound as it grabbed a main character). its fun, and interesting to watch the flashbacks that dig into how people got here to this place. I don’t find this series as intellectually interesting as The Apprentice but I do find it entertaining.

Book Review: Stranger Than Fiction: True Stories

I read an uninspiring book recently, Stranger than Fiction: True Stories. Chuck Chuck Chuck…you did so good with Fight Club that I thought I’d give you another shot. I read your ‘biography’ of Portland called Fugitives and Refugees, which was of interest to me and anybody else interested in the bowels of the beautiful city of Portland but was hardly a masterpiece. This book follows a similar trend of paying a writer disproportionate amounts of money for their stream of consciousness (excuse me, isn’t that what BLOGGING is for?). I am actually quite surprised its actually legal..i mean did an editor actually say this was good enough to kill a tree for? if you want my time I require more insight, more depth, and more critical thinking that this. I truly enjoyed fight club as a movie, and I got a kick out of Fugitives and Refugees. but this book is not good, and the funny thing is…the people in the book are not even that weird which would be the point of a book about things stranger than fiction. Here I share the intellectual climax:

"What's coming is a million new reasons not to live your life. you can deny your possibility to succeeed and bame it on something else. you can fight against everything--Margaret Thatcher, property owners, the urge to open tha door mid-flight...everything you pretend keeps you down. You can live Kierkegaard's inauthentic life. Or you can make what Kierkegaard called your Leap of Faith, where you stop living as a reaction to the circumstances and start living as a force for what you say should be."

0 out of 5 stars, not recommended. I’ve heard good things about Lullaby, and Chuck’s a Portland native, so I’ll give him another try. if fight club came out of this guy he’s got something up there and just didn’t show it this time.