Advice on Choosing a Graduate Field of Study

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Re: Advice on Choosing a Graduate Field of Study

#21  Postby Sonoran Lion » Aug 14, 2011 12:40 am

VictorTheSixth wrote:All feuds when giants of the Stock Market collide are very interesting indeed... albeit those who have supremely successful (Soros, Buffet, etc.) tend not to be engaged in attacks for very long. Minus the occasional Right-Wing smear campaign (Buffet and Soros both being Libeals and agnostic/atheist respectively). Yes, you'll find a great deal of the legends of The Market are Atheists of some sort and either vote Liberal or Libertarian.


I'll need to read more about Soros, Buffet, and others.


By the way Sonoran, if you're interested in the Quantitative Analysis field, read: The Logical Trader

I know someone who has done well in this field that swears by it and consider it to be the most influential book he's ever read. I find it very good on the Quantitative Analysis end, but it tends not to be the best for the Financial Modeling end. There's a single book I could recommend to you for the Financial Modeling, but without a firm grasp of Computer Science it would be very hard for you to get revelations from it. You'd have an understanding as to how a system is put together, but you wouldn't understand how to create one or the minute details.


I'll be sure to check out that book, especially if it is recommended. Maybe I'll take a couple CS classes here in the near future.



Also, keep in mind Taleb's strategies do fail, he just doesn't advertise when they do. I know someone who studied under him. The man is infamously arrogant. For someone on Wall Street to gain a reputation for arrogance... that certainly says something! :lol:.


:lol: Sounds like an interesting person... :grin:


That said, Taleb's strategies are essentially the opposite of the ones you'll find in The Logical Trader. Where The Logical Trader tends to take an approach involving trend following, Taleb believes you should go opposite the trend (he has his own system that you can somewhat decipher if you analyze the book hard enough; keyword being somewhat).


I guess I will need to study both methods to see which one I would support.


Also, to make a point to you Sonoran: Both Taleb and the author of The Logical Trader feel that Ivy-leaguers and others like them should be purged from Wall Street all together. They have a firm anti-Academic stance, feeling that a great deal of trading is scientific inquiry and that the biggest key to success (something that George Soros always harps on) is being able to recognize when you're wrong, admit it, and learn from it. Black-Scholes take a much different view on this, which probably is due in no small part to the fact that their entire team was made up of Yale Graduates :P.


I guess Taleb and the author of The Logical Trader feel that those from the Ivy League are not as willing to admit or realize when they are wrong.


If you have anymore questions, feel free to ask me. I'll admit I'm relatively new to the field, but I've had the benefits of one hell of an education. I've been lucky enough to study under one of George Soros's students and one of Taleb's students. This combine with my opportunity to study under one of the original Financial Modelers has given me quite an interesting and unique outlook on this entire field in general.


I will be most sure to keep you in mind if I have any other questions. I do have on question: Why do you have a dismal view of Economic Theory and Degree holders? I think it is important to recognize the weakness of a field of knowledge. One thing I have noticed about economics is that there is no real central theory, but rather various schools of thought.
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For a might-have-been has never been, but a has was once an are".
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Re: Advice on Choosing a Graduate Field of Study

#22  Postby VictorTheSixth » Aug 14, 2011 5:32 am

Sonoran Lion wrote:I'll be sure to check out that book, especially if it is recommended. Maybe I'll take a couple CS classes here in the near future.


Taking some Computer Science classes is always a good idea. Tech literacy comes in handy in more areas than I can properly express.

The book is: The Evaluation and Optimization of Trading Strategies by Robert Pardo.

The man is borderline insane in that book. He legitimately lays out the entire design and knowledge base that someone would require to create a Trading System. Not just a Trading System, but one that actually works very efficiently and curtails a number of "newbie" problems that stupid newbies run into. It surprises me that he doesn't charge more :lol:.


Sonoran Lion wrote:

That said, Taleb's strategies are essentially the opposite of the ones you'll find in The Logical Trader. Where The Logical Trader tends to take an approach involving trend following, Taleb believes you should go opposite the trend (he has his own system that you can somewhat decipher if you analyze the book hard enough; keyword being somewhat).


I guess I will need to study both methods to see which one I would support.


I should tell you, both Taleb and Mark B. Fisher (author of The Logical Trader) are entirely correct in their strategies. If you think about it form a logical prospective, Fisher is correct in that if you follow a trend you can make money. It's all about detecting that trend (i.e. Buy high and sell higher as opposed to buy low and sell high). Also, if you're setting your sights to a clear cut buy-in price and a clear cut exit price, then you're in a good position. Taleb, on the other hand, gambles on sheer entropy. He tends to see a trend, see that it's been continuing unabated for weeks, and then predicts that eventually it's going to end. Usually a trend's reversal is far, far more exciting than a trend itself and therefore Taleb can make 8x returns on his money, meaning that he can afford to lose consistently to make that big profit.

I'll let you follow that to its natural conclusion, Sonoran ;).

Sonoran Lion wrote:

If you have anymore questions, feel free to ask me. I'll admit I'm relatively new to the field, but I've had the benefits of one hell of an education. I've been lucky enough to study under one of George Soros's students and one of Taleb's students. This combine with my opportunity to study under one of the original Financial Modelers has given me quite an interesting and unique outlook on this entire field in general.


I will be most sure to keep you in mind if I have any other questions. I do have on question: Why do you have a dismal view of Economic Theory and Degree holders? I think it is important to recognize the weakness of a field of knowledge. One thing I have noticed about economics is that there is no real central theory, but rather various schools of thought.


Ah, where to begin with Economic Theory and Degree Holders :lol:. For one thing, if GT2211 accidentally comes in here, I must add a disclaimer that I apologies for insulting him so badly. He's a good man with good ideas who has a good head on his shoulders and I feel bad trashing his life's study.


To start with, I have just read it is referred to as "The Dismal Science" and I think I'll be adopting that name for it :P. I've rewritten this paragraph several times because of the fact that there's so much information building up in my mind. To start with, I've met very few Economists who are Historians. If you get a chance, read The Ascent of Money by Neil Furgesson. It is perhaps the greatest Economics book I have ever read in my entire life, mostly because it was written by a historian who chronicled economic systems, theories, and various things attempted in them in the past and present. Let me give you one classic example:

The first Stock Company was The Dutch East Indies Company. It performed brilliantly and everyone made a great deal of money. Then came along The British East Indies Company. It was a government-backed initiative that was run like a Stock Company, only the government had a heavy vested interest, collected taxes, and essentially ran it from behind the scenes. It out competed The Dutch East Indies Company and drove it into extinction within a few years.

No one remembers this, but in my humble opinion, this isn't a victory for government industries over private ones. It's proof that a smartly run financial entity with a good leader, business plan, and people can and will win. It doesn't matter whether this financial entity is a government, a corporation, or a lemonade stand.

It also bothers me how everyone talks of a "Free Market". You may quote me on this, there is always a Free Market no matter where you go. In Soviet Russia there was a Free Market, they called it The Black Market. All the different trades we make are all a part of human nature and nothing will change that. There's been experiments done with chimps giving them token for which they can buy items from a human vendor. They all exhibit the same exact type of behavior that humans do. Some spend the coins as fast as they get them, some hoard them, some seek a middle ground, and some will trade them with other chimps for various goods and services.

Which leads me to my next major problem with Economics. Everything has become purely math-reliant. People pay very little attention to the Keynesian Animal Spirits. In other words, human psychology. Economics tends to ignore fairness and human nature. There was a good example in the book Animal Spirits where they go on about how there was a Chilean Automobile Factory that competed with Toyota. Both of them had the same financial backing, mandate, and came into existence at the same time. The only difference was in the Chilean one the workers were basically forced to work there and no one had any stake in the company, while in Toyota they considered a matter of personal honor and national pride. The keywords "fear" and "mania" have only come into vogue recently.

My next problem is that their math is too simple. Laffer's Curve is laughable with only two-dimensions (tax and GDP). If Economists are going to rely on Math, they need some grand-sweeping ungodly monstrosity of Mathematics that works in eight or nine dimensions. Very few people have the ability to do this, I will tell you. One of my theses when I was an undergrad was making a Heuristic Optimization Algorithm that worked in N-dimensions. The reason it's Heuristic (i.e. A rule of thumb) instead of any kind of theory is because when you hit the 5th dimension you're no longer able to represent your object in the 2nd dimension. You get a strange eye-like shape. That said though, if they're going to go hardline math, they need to really go hardline mathematics.

Then there's the level of stupidity that Economics seems to not only accept, but endorse. Rational Market Theorem (people are rational beings and therefore no regulation is needed on The Market seeing as how people can be relied upon to act rationally) is something that most people just sit there and go "WHAT?!?!?" about. Trickle-Down ignores the fact that the rich got that way because they don't spend their money foolishly. Not to say I fully endorse Keynesian, since the idea of the government throwing out massive amounts of money runs the risk of rampant inflation.

There's also things that Economists fail to fully explain. For example, the Japanese "Zombie Economy" where they have a zero interest rate. The reason it works is both a validation and a warning about the full embrace of the Keynesian school. Basically, since people can get loans easily and not have to worry about mounting debt, they're more willing to take out loans. This means that people are more willing to invest in absolutely stupid ideas like a company that makes little plush kitty dolls. Last time I checked, Hello Kitty is a multi-billion dollar industry and the Japanese Government is greatly enjoying the tax revenue that comes from it. Now that is just my opinion that the large amount of free capital leads to a large amount of spending and investment, which in turn leads to new discoveries, etc. etc.

Also, if you haven't read it, you MUST read Freakonomics. They find strange correlations, such as how abortion lowers crime rate, while outlawing it causes the crime rate to skyrocket. Now, to present you an interesting thing, Sonoran: It costs the United States a ridiculously large amount of money to house the criminal population. Those from homes where they're not wanted or from the foster system (it is absolutely horrendous, I have more horror stories than you can imagine since my best friend is from a ummm... "not-so-affluent neighborhood" to put it mildly). If said criminals never come into existence, then suddenly that money is no longer being spent and can be re-purposed for other means. One of their theories why Bill Clinton saw a dramatic drop in crime was because of Roe v. Wade.

I once posed an interesting point to one of my best friends whose an amateur financial modeler: Michele Obama has started a "grow your own garden campaign". Farms are going to suffer horribly as thousands, if not millions, of people start their own gardens. On the other hand, those who sell farm tools are going to be making money as are the people who mine and process the metals for these tools along with their distributors. On the other hand, there were a very nasty series of tornadoes that hit the west. Hundreds of thousands, maybe millions of dollars went into relief. That money will pay workers, it goes to lumber yards, tool makers, delis that the workers frequent, etc.


Which leads me to one of my personal theories. I feel mercantilism's theorem that there is a limited amount of wealth in this world is correct. If we could truly measure economic success (even now a days people are struggling to do that) it would be shown that the whole does not change, but the pieces it is broken into and the distribution of those pieces do. Again, this is my personal theory and you should not take it with any amount of authority. Even I disbelieve it at times :P
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Re: Advice on Choosing a Graduate Field of Study

#23  Postby Sonoran Lion » Aug 14, 2011 9:00 am

VictorTheSixth wrote:
Sonoran Lion wrote:I'll be sure to check out that book, especially if it is recommended. Maybe I'll take a couple CS classes here in the near future.


Taking some Computer Science classes is always a good idea. Tech literacy comes in handy in more areas than I can properly express.

The book is: The Evaluation and Optimization of Trading Strategies by Robert Pardo.

The man is borderline insane in that book. He legitimately lays out the entire design and knowledge base that someone would require to create a Trading System. Not just a Trading System, but one that actually works very efficiently and curtails a number of "newbie" problems that stupid newbies run into. It surprises me that he doesn't charge more :lol:.


Thanks, I will check out that book and hopefully understand as much as I can. Hopefully he doesn't take your comment into consideration and decide to charge more for the book before I get a chance to purchase it (unless I can find it at a library)... ;)



Sonoran Lion wrote:

That said, Taleb's strategies are essentially the opposite of the ones you'll find in The Logical Trader. Where The Logical Trader tends to take an approach involving trend following, Taleb believes you should go opposite the trend (he has his own system that you can somewhat decipher if you analyze the book hard enough; keyword being somewhat).


I guess I will need to study both methods to see which one I would support.


I should tell you, both Taleb and Mark B. Fisher (author of The Logical Trader) are entirely correct in their strategies. If you think about it form a logical prospective, Fisher is correct in that if you follow a trend you can make money. It's all about detecting that trend (i.e. Buy high and sell higher as opposed to buy low and sell high). Also, if you're setting your sights to a clear cut buy-in price and a clear cut exit price, then you're in a good position. Taleb, on the other hand, gambles on sheer entropy. He tends to see a trend, see that it's been continuing unabated for weeks, and then predicts that eventually it's going to end. Usually a trend's reversal is far, far more exciting than a trend itself and therefore Taleb can make 8x returns on his money, meaning that he can afford to lose consistently to make that big profit.

I'll let you follow that to its natural conclusion, Sonoran ;).


It seems both have found their own unique solution to the same situation.



To start with, I have just read it is referred to as "The Dismal Science" and I think I'll be adopting that name for it :P. I've rewritten this paragraph several times because of the fact that there's so much information building up in my mind. To start with, I've met very few Economists who are Historians. If you get a chance, read The Ascent of Money by Neil Furgesson. It is perhaps the greatest Economics book I have ever read in my entire life, mostly because it was written by a historian who chronicled economic systems, theories, and various things attempted in them in the past and present. Let me give you one classic example:

The first Stock Company was The Dutch East Indies Company. It performed brilliantly and everyone made a great deal of money. Then came along The British East Indies Company. It was a government-backed initiative that was run like a Stock Company, only the government had a heavy vested interest, collected taxes, and essentially ran it from behind the scenes. It out competed The Dutch East Indies Company and drove it into extinction within a few years.


I know the history of economics is one area I would like to specialize in if I decide to get a graduate degree in economics.


No one remembers this, but in my humble opinion, this isn't a victory for government industries over private ones. It's proof that a smartly run financial entity with a good leader, business plan, and people can and will win. It doesn't matter whether this financial entity is a government, a corporation, or a lemonade stand.


I agree. I think the fear most people have in regard to government run institutions is the idea that the government and government employees have different incentives than do those that work in the private sector.


It also bothers me how everyone talks of a "Free Market". You may quote me on this, there is always a Free Market no matter where you go. In Soviet Russia there was a Free Market, they called it The Black Market. All the different trades we make are all a part of human nature and nothing will change that. There's been experiments done with chimps giving them token for which they can buy items from a human vendor. They all exhibit the same exact type of behavior that humans do. Some spend the coins as fast as they get them, some hoard them, some seek a middle ground, and some will trade them with other chimps for various goods and services.


That chimp experiment sounds interesting. Who knows, maybe the study of chimps will lead to a new school of economic thought: The Chimp School of Economics... :grin:


Which leads me to my next major problem with Economics. Everything has become purely math-reliant. People pay very little attention to the Keynesian Animal Spirits. In other words, human psychology. Economics tends to ignore fairness and human nature. There was a good example in the book Animal Spirits where they go on about how there was a Chilean Automobile Factory that competed with Toyota. Both of them had the same financial backing, mandate, and came into existence at the same time. The only difference was in the Chilean one the workers were basically forced to work there and no one had any stake in the company, while in Toyota they considered a matter of personal honor and national pride. The keywords "fear" and "mania" have only come into vogue recently.


I can see how that would be a problem. Since we are dealing with the decisions of people in economics, we would need to consider human nature.


My next problem is that their math is too simple. Laffer's Curve is laughable with only two-dimensions (tax and GDP). If Economists are going to rely on Math, they need some grand-sweeping ungodly monstrosity of Mathematics that works in eight or nine dimensions. Very few people have the ability to do this, I will tell you. One of my theses when I was an undergrad was making a Heuristic Optimization Algorithm that worked in N-dimensions. The reason it's Heuristic (i.e. A rule of thumb) instead of any kind of theory is because when you hit the 5th dimension you're no longer able to represent your object in the 2nd dimension. You get a strange eye-like shape. That said though, if they're going to go hardline math, they need to really go hardline mathematics.


Math is a subject I need to increase my knowledge on. I plan on doing this over the next year or two.


Then there's the level of stupidity that Economics seems to not only accept, but endorse. Rational Market Theorem (people are rational beings and therefore no regulation is needed on The Market seeing as how people can be relied upon to act rationally) is something that most people just sit there and go "WHAT?!?!?" about. Trickle-Down ignores the fact that the rich got that way because they don't spend their money foolishly. Not to say I fully endorse Keynesian, since the idea of the government throwing out massive amounts of money runs the risk of rampant inflation.


I've always felt a little uncomfortable about the assumption that people are rational decision makers. I don't know about any studies done, but I would say that many human decisions are probably better described as a bit irrational if not completely irrational (if rationality could be measured as a sort of continuum :P ).


There's also things that Economists fail to fully explain. For example, the Japanese "Zombie Economy" where they have a zero interest rate. The reason it works is both a validation and a warning about the full embrace of the Keynesian school. Basically, since people can get loans easily and not have to worry about mounting debt, they're more willing to take out loans. This means that people are more willing to invest in absolutely stupid ideas like a company that makes little plush kitty dolls. Last time I checked, Hello Kitty is a multi-billion dollar industry and the Japanese Government is greatly enjoying the tax revenue that comes from it. Now that is just my opinion that the large amount of free capital leads to a large amount of spending and investment, which in turn leads to new discoveries, etc. etc.


I will have to read about the Japanese "Zombie Economy" and maybe about Hello Kitty, too... :grin:


Also, if you haven't read it, you MUST read Freakonomics. They find strange correlations, such as how abortion lowers crime rate, while outlawing it causes the crime rate to skyrocket. Now, to present you an interesting thing, Sonoran: It costs the United States a ridiculously large amount of money to house the criminal population. Those from homes where they're not wanted or from the foster system (it is absolutely horrendous, I have more horror stories than you can imagine since my best friend is from a ummm... "not-so-affluent neighborhood" to put it mildly). If said criminals never come into existence, then suddenly that money is no longer being spent and can be re-purposed for other means. One of their theories why Bill Clinton saw a dramatic drop in crime was because of Roe v. Wade.


I'll have to read Freakonomics, it does sound interesting.


I once posed an interesting point to one of my best friends whose an amateur financial modeler: Michele Obama has started a "grow your own garden campaign". Farms are going to suffer horribly as thousands, if not millions, of people start their own gardens. On the other hand, those who sell farm tools are going to be making money as are the people who mine and process the metals for these tools along with their distributors. On the other hand, there were a very nasty series of tornadoes that hit the west. Hundreds of thousands, maybe millions of dollars went into relief. That money will pay workers, it goes to lumber yards, tool makers, delis that the workers frequent, etc.


Sounds like an interesting point. If the people that start their own gardens are able to save money by doing so, then that would seem to increase their wealth. This would enable them to spend the difference somewhere else in the market (assuming they don't save a portion of it). Consumers would be benefited in that scenario, which would be a net benefit to society (assuming an increase in jobs from the increase in wealth of consumers is efficient for the farmers who lost work). I don't see a net benefit in the tornado situation. It appears to be a shift of demand from one group of businesses to another group of businesses.


Which leads me to one of my personal theories. I feel mercantilism's theorem that there is a limited amount of wealth in this world is correct. If we could truly measure economic success (even now a days people are struggling to do that) it would be shown that the whole does not change, but the pieces it is broken into and the distribution of those pieces do. Again, this is my personal theory and you should not take it with any amount of authority. Even I disbelieve it at times :P


Do you mean that if the whole is considered, the winners in an economy will match the losers in terms of wealth?
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Because a could-be is a maybe that is reaching for a star.
I would rather be a has-been than a might-have-been, by far,
For a might-have-been has never been, but a has was once an are".
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Re: Advice on Choosing a Graduate Field of Study

#24  Postby VictorTheSixth » Aug 18, 2011 9:24 pm

Sorry for a late reply, Sonoran; a combination of work, real life, and enjoying some gladiatorial combat in the Political forum.

It seems both have found their own unique solution to the same situation.


I will say this, if you combine both Taleb and Fisher's approaches, then you'd have one group of strategies that consistently lose small amounts of money, but make massive amounts of profit when all hell breaks loose, while you have another group of strategies that consistently make decent amounts of money, but suffer when all hell breaks loose.

I know the history of economics is one area I would like to specialize in if I decide to get a graduate degree in economics.


You'll be in a better position than any of the current economists to make predictions and offer theory.

I agree. I think the fear most people have in regard to government run institutions is the idea that the government and government employees have different incentives than do those that work in the private sector.


As Nassim Taleb points out in Black Swan, never trust someone who has an incentive to cut corners :P. That said, the government operates just like a business does. It wants a fee (taxes) for goods and services (keeping you safe from marauding lunatics/criminals, proactively searching for lunatics/criminals trying to cause mass damage, giving us roads to drive on, making sure we have clean water, etc.). I sometimes question what would happen if people started running the government like a business instead of... well... a government :P

That chimp experiment sounds interesting. Who knows, maybe the study of chimps will lead to a new school of economic thought: The Chimp School of Economics... :grin:


:lol:

If you start this school, just remember to cite me!

Math is a subject I need to increase my knowledge on. I plan on doing this over the next year or two.


Good luck. I don't know if I'll be able to offer you any help, but I'm always a PM away.

I don't see a net benefit in the tornado situation. It appears to be a shift of demand from one group of businesses to another group of businesses.


Ah, but the destruction brings all manner of people, all manner of businesses, all manner of interests, etc. It also gives the local businesses the ability to cater to these new people and expand.

I think I should have told a bit more of the full story with that. Basically, they had two economic strategists on. One Democrat, one Republican. The Republican one was all "slash and cut", the Democratic one was all "stimulus! More money!". Then the story about Michelle Obama came on, then the one about the tornadoes. I noted with irony that the green initiative would cause quite a bit of devastation with the farming industry and then I noted how the tornadoes helped the economies by shifting money being spent there and creating a new series of markets and opening up niches that needed to be filled.

Basically, I had a nice, nice laugh at how in the Economic World "good" things can have a completely and totally devastating effect on the economy, while "bad" things can have a wonderful effect. Something no one wants to comment on ;).


Do you mean that if the whole is considered, the winners in an economy will match the losers in terms of wealth?


In my humble opinion, yes.

One thing that they make mention in my new copy of Ascent of Money is that the new emerging theories are all about evolution and revolve around the idea that economy mirrors biology. I am inclined to agree entirely. One of those being that there's one massive resource (the planet) that ultimate is host to all manner of competing organisms with niches opening and closing at different intervals. I feel that everything, in the end, turns out to be equal with only redistribution. Just like in biology. I'm a firm believer in The Red Queen Hypothesis as well and feels it definitely applies to everything economic:

Warning: If you're archnaphobic take a deep breath before loading this page. There are red mites on a spider here
http://en.wikipedia.org/wiki/Red_Queen%27s_Hypothesis

Basically, to sum it up: Every species in the entire world, is in a constant arms race against one another. Every sub-species is in constant competition with one another. Every single organism is in competition with one another. Should anything slow down or lose its edge, it will die.



By the way Sonoran, I have never asked, what is your ultimate goal? If you're looking to get into Financial Modeling or Quantitative Analysis, I may be able to advise to a school that may be able to help you. One that actually has a good Financial Modeler/Quant program and is not a cash-maker. What do I mean by that? NYU, a very respected school, offers a Quantitative Analysis Masters Program that Nassim Taleb always crashes.

He literally sits in the class, tells the Professors that they are wrong about everything (for example, that Random Market Hypothesis is entirely wrong seeing as how it can be statistically shown that the first 15 minutes of the open are the high or low of the day about 20% of the time; if I wasn't under NDA I could comment more on this), and that they should do something useful with their lives instead of teaching this garbage. Whenever a professor tries to argue with him, Taleb points out he has millions in the bank, while said professor is living off a teacher's salary. The result of this is Taleb failing/withdrawing from the program repeatedly and a great deal of the students for this program leaving it because they realize it's a waste of time and money.

If you want to be a researcher/theorist, there's not much I can really do to help you or offer in the way of advice, I hate to say.
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Re: Advice on Choosing a Graduate Field of Study

#25  Postby Sonoran Lion » Aug 19, 2011 5:56 am

VictorTheSixth wrote:Sorry for a late reply, Sonoran; a combination of work, real life, and enjoying some gladiatorial combat in the Political forum.


Understandable... :grin:


It seems both have found their own unique solution to the same situation.


I will say this, if you combine both Taleb and Fisher's approaches, then you'd have one group of strategies that consistently lose small amounts of money, but make massive amounts of profit when all hell breaks loose, while you have another group of strategies that consistently make decent amounts of money, but suffer when all hell breaks loose.


I will have to really look into both approaches. I attempted to obtain the books you recommended, but they are all currently checked out of my university's library.


I agree. I think the fear most people have in regard to government run institutions is the idea that the government and government employees have different incentives than do those that work in the private sector.


As Nassim Taleb points out in Black Swan, never trust someone who has an incentive to cut corners :P. That said, the government operates just like a business does. It wants a fee (taxes) for goods and services (keeping you safe from marauding lunatics/criminals, proactively searching for lunatics/criminals trying to cause mass damage, giving us roads to drive on, making sure we have clean water, etc.). I sometimes question what would happen if people started running the government like a business instead of... well... a government :P


I could see some areas of conflict that may arise from running the government like a business. Such as how to handle goods/services that are non-excludable and/or non-rivalrous. They would have to keep a system of taxation in place as charging for personal use of such services could be a bit tricky if not almost impossible. Plus, I believe most people want services such as the police, fire fighters, and medical services to service anyone in need and not exclude them based on whether or not they paid or can pay for the service. If you charge people individually for such services, but mandate that anyone can make use of such service, you'll run into the problem of freeriders and the services will be underfunded. A more efficient solution would be to implement a tax to cover the costs of such services, or refuse to render services to those that haven't previously paid for the service or are unwilling/unable to pay for the services at the time they are to be rendered. Since I believe society as a whole would prefer to help out people needing emergency services regardless of whether or not they have paid or can pay for the service, I would say that a tax of some sort would be the preferred method.


That chimp experiment sounds interesting. Who knows, maybe the study of chimps will lead to a new school of economic thought: The Chimp School of Economics... :grin:


:lol:

If you start this school, just remember to cite me!


:lol: Don't worry, we'll be sharing that Nobel Prize in Economics.


Math is a subject I need to increase my knowledge on. I plan on doing this over the next year or two.


Good luck. I don't know if I'll be able to offer you any help, but I'm always a PM away.


Thanks, I will keep that in mind.


I don't see a net benefit in the tornado situation. It appears to be a shift of demand from one group of businesses to another group of businesses.


Ah, but the destruction brings all manner of people, all manner of businesses, all manner of interests, etc. It also gives the local businesses the ability to cater to these new people and expand.


I agree that there will be business and industries that will benefit from disasters or wars, but I will have to agree with the more libertarian/Austrian School economists in that while some people may benefit, society as a whole doesn't because those that benefit are doing so at the expense of others or other industries.



I think I should have told a bit more of the full story with that. Basically, they had two economic strategists on. One Democrat, one Republican. The Republican one was all "slash and cut", the Democratic one was all "stimulus! More money!". Then the story about Michelle Obama came on, then the one about the tornadoes. I noted with irony that the green initiative would cause quite a bit of devastation with the farming industry and then I noted how the tornadoes helped the economies by shifting money being spent there and creating a new series of markets and opening up niches that needed to be filled.

Basically, I had a nice, nice laugh at how in the Economic World "good" things can have a completely and totally devastating effect on the economy, while "bad" things can have a wonderful effect. Something no one wants to comment on ;).


I can see the irony in the immediate view of the effects of disasters (something bad) as compared to events considered generally good. Where I find the two situations really come into light is when we look beyond the immediate effects.

I liken the story on Michelle Obama's gardening thing to creating a more efficient means of creating a good in terms that it will cost less money to obtain the good (food) through a private garden rather than purchasing it from farmers. I make this assumption because I don't see why people would grow their own gardens (outside of people who enjoy gardening) if gardening would cost the same or more than purchasing the same food from a farmer. If we assume that enough people start growing their own gardens that it decreases the demand for the farmers products, it would be devastating to the farmers. But the loss of jobs to farmers will be offset by the increase in jobs in other economic industries due to consumers having freed up more money (from their savings due to growing a garden) to spend on other goods. This would seem to increase aggregate demand and the wealth of the consumers. This is of course a rather simplistic view of the situation.

In the tornado story, certain businesses and industries of the economy are benefited in that there is an increase in demand for their goods and services. The consumer is hurt because instead of spending money on say a computer, they must replace what they have lost in the disaster. So while this helps the businesses that will be providing what the consumer lost it will be hurting the businesses that would have provided what the consumer could of spent their money on instead. There is no overall increase in aggregate demand or wealth for society as a whole in the tornado story as compared to the Michelle Obama one.


Do you mean that if the whole is considered, the winners in an economy will match the losers in terms of wealth?


In my humble opinion, yes.

One thing that they make mention in my new copy of Ascent of Money is that the new emerging theories are all about evolution and revolve around the idea that economy mirrors biology. I am inclined to agree entirely. One of those being that there's one massive resource (the planet) that ultimate is host to all manner of competing organisms with niches opening and closing at different intervals. I feel that everything, in the end, turns out to be equal with only redistribution. Just like in biology. I'm a firm believer in The Red Queen Hypothesis as well and feels it definitely applies to everything economic:

Warning: If you're archnaphobic take a deep breath before loading this page. There are red mites on a spider here
http://en.wikipedia.org/wiki/Red_Queen%27s_Hypothesis

Basically, to sum it up: Every species in the entire world, is in a constant arms race against one another. Every sub-species is in constant competition with one another. Every single organism is in competition with one another. Should anything slow down or lose its edge, it will die.


That is a very interesting view and one I will need to look more into. Economics and biology do seem to overlap wuite a bit when it comes to understanding and acknowledging competition's role. I am in the process of reading Matt Ridley's The Red Queen so maybe as I continue reading it I will look for parallels between the ideas expressed in his book and economics.



By the way Sonoran, I have never asked, what is your ultimate goal? If you're looking to get into Financial Modeling or Quantitative Analysis, I may be able to advise to a school that may be able to help you. One that actually has a good Financial Modeler/Quant program and is not a cash-maker. What do I mean by that? NYU, a very respected school, offers a Quantitative Analysis Masters Program that Nassim Taleb always crashes.

He literally sits in the class, tells the Professors that they are wrong about everything (for example, that Random Market Hypothesis is entirely wrong seeing as how it can be statistically shown that the first 15 minutes of the open are the high or low of the day about 20% of the time; if I wasn't under NDA I could comment more on this), and that they should do something useful with their lives instead of teaching this garbage. Whenever a professor tries to argue with him, Taleb points out he has millions in the bank, while said professor is living off a teacher's salary. The result of this is Taleb failing/withdrawing from the program repeatedly and a great deal of the students for this program leaving it because they realize it's a waste of time and money.

If you want to be a researcher/theorist, there's not much I can really do to help you or offer in the way of advice, I hate to say.



The financial industry has fascinated me for a few years, but I am rather new to financial modeling. I will read the materials you suggested, as well as others, and see if financial modeling and quantitative analysis really interests me.

:lol: It would be interesting to attend the NYU class that Taleb crashes. I would be most interested in the exchange between Taleb and the professor.

I do find research appealing and hope to get a good amount of experience researching in grad school. That way I'll know if it is something I would really enjoy doing for a career. I will be taking several computer science courses to get a better feel for programming and modeling (I do believe they do modeling in CS).

Thank you for your help. I have learned a lot and have become interested in financial modeling as a possible career... :grin:
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Because a could-be is a maybe that is reaching for a star.
I would rather be a has-been than a might-have-been, by far,
For a might-have-been has never been, but a has was once an are".
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Re: Advice on Choosing a Graduate Field of Study

#26  Postby VictorTheSixth » Aug 20, 2011 3:45 pm

Well Sonoran, I don't have time to give a fully reply, but I'd be remiss if I didn't say this: Financial Modeling probably has very little to do with modeling in Computer Science. Unless you're making a computer program that has a human-interface, there's very, very little reason to use 3-dimensional or even 2-dimensional modeling technology.

Also, me looking out for you, please send me the course description and the school you're going to take these classes at. Do it over PM for privacy concerns. Some schools have excellent Computer Science programs, while others... well, I've out-competed Ivy-League Graduates (minus MIT grads) when jockeying for positions in Financial Modeling and I didn't go to an Ivy league school by any means. I happened to go to a little known college that's known for its excellent beyond peer Computer Science Majors. My college also happened to have on staff one of the original Financial Modelers and a Theoretical Algebra Professor who has a great deal of knowledge in Quantitative Analysis (NDA prevents me from saying whether or not he helped out a certain student who got an internship at a relatively large firm and therefore got to learn a great deal about the various forms of Quantitative Analysis out there ;)). Between the two Professors you get a better education than most schools can offer in this field (There's an old saying that goes: "Those who can, do. Those who can't, teach". These two men can do and they teach).

One of the big reasons I ask if this is an area you'd want to go into is because the college I went to is starting to gain a reputation for training peerless Financial Modelers and Quantitative Analysts. It's one of the few places I've come across that specifically offers a specialized course in Financial Modeling, which even Taleb could not crash :P. If this is something you'd want to get into and you find yourself to have any talents for programming or mathematics, then you'd want to check it out.
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Re: Advice on Choosing a Graduate Field of Study

#27  Postby Sonoran Lion » Aug 21, 2011 2:24 am

I most definitely need to learn more about financial modeling and the type of modeling they do in computer science.

Thank you for the offer. I will message you here soon after I have looked over my university's CS program website and all. I am not taking any classes this semester, but I plan on starting classes in the spring of 2012 if I am able (financial constraints may prevent me). Your school sounds like a good school to attend. Do they offer a graduate program in computer science?

I will be sure to check out your college, especially if I find that I have talent in programming or mathematics.
"I would rather be a could-be if I cannot be an are,
Because a could-be is a maybe that is reaching for a star.
I would rather be a has-been than a might-have-been, by far,
For a might-have-been has never been, but a has was once an are".
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Re: Advice on Choosing a Graduate Field of Study

#28  Postby VictorTheSixth » Aug 21, 2011 4:41 am

Sonoran Lion wrote:I most definitely need to learn more about financial modeling and the type of modeling they do in computer science.

Thank you for the offer. I will message you here soon after I have looked over my university's CS program website and all. I am not taking any classes this semester, but I plan on starting classes in the spring of 2012 if I am able (financial constraints may prevent me). Your school sounds like a good school to attend. Do they offer a graduate program in computer science?

I will be sure to check out your college, especially if I find that I have talent in programming or mathematics.


No graduate programs in Computer Science, however some of our CS Professor moonlight at a nearby Technology University. They use the material from their undergraduate classes to teach the Master's Program there :P.
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Re: Advice on Choosing a Graduate Field of Study

#29  Postby Joe09 » Sep 10, 2012 7:00 pm

We are continuously told as Physics students we have a better chance of getting a job in the fiance/economic sector than graduates with finance/economic degrees.
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Re: Advice on Choosing a Graduate Field of Study

#30  Postby Ihavenofingerprints » Sep 11, 2012 1:09 am

Joe09 wrote:We are continuously told as Physics students we have a better chance of getting a job in the fiance/economic sector than graduates with finance/economic degrees.


:lol: yea, I sometimes get physics students to help me with economics homework. The maths we use is a piece of cake for you guys.
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