Looking back at these writings of mine, I feel as though I may have been a bit unfair on us. I did try to blunt my accusations of avarice (and perhaps decadence) by pointing out that it was the general air of insatiable greed of the era that we live in that spawned the obscenities and the likes of Madoff. But I did concede the existence of a higher level of greed (or, more to the point, a more sated kind of greed) among us bankers and quantitative professionals. I am not recanting my words in this piece now, but I want to point out another aspect, a justification if not an absolution.

Why would I want to defend bonuses and other excesses when another wave of public hatred is washing over the global corporations, thanks to the potentially unstoppable oil spill? Well, I guess I am a sucker for lost causes, much like Rhett Butler, as our quant way of tranquil life with insane bonuses is all but gone with the wind now. Unlike Mr. Butler, however, I have to battle and debunk my own arguments presented here previously.

One of the arguments that I wanted to poke holes in was the fair compensation angle. It was argued in our circles that the fat paycheck was merely an adequate compensation for the long hours of hard work that people in our line of work put in. I quashed it, I think, by pointing out other thankless professions where people work harder and longer with no rewards to write home about. Hard work has no correlation with what one is entitled to. The second argument that I made fun of was the ubiquitous “talent” angle. At the height of the financial crisis, it was easy to laugh off the talent argument. Besides, there was little demand for the talent and a lot of supply, so that the basic principle of economics could apply, as our cover story shows in this issue.

Of all the arguments for large compensation packages, the most convincing one was the profit-sharing one. When the top talents take huge risks and generate profit, they need to be given a fair share of the loot. Otherwise, where is the incentive to generate even more profits? This argument lost a bit of its bite when the negative profits (by which I indeed mean losses) needed to be subsidized. This whole saga reminded me of something that Scott Adams once said of risk takers. He said that risk takers, by definition, often fail. So do morons. In practice, it is hard to tell them apart. Should the morons reap handsome rewards? That is the question.

Having said all this in my previous articles, now it is time to find some arguments in our defense. I left out one important argument in my previous columns because it did not support my general thesis — that the generous bonuses were not all that justifiable. Now that I have switched allegiance to the lost cause, allow me to present it as forcefully as I can. In order to see compensation packages and performance bonuses in a different light, we first look at any traditional brick-and-mortar company. Let’s consider a hardware manufacturer, for instance. Suppose this hardware shop of ours does extremely well one year. What does it do with the profit? Sure, the shareholders take a healthy bite out of it in terms of dividends. The employees get decent bonuses, hopefully. But what do we do to ensure continued profitability?

We could perhaps see employee bonuses as an investment in future profitability. But the real investment in this case is much more physical and tangible than that. We could invest in hardware manufacturing machinery and technology improving the productivity for years to come. We could even invest in research and development, if we subscribe to a longer temporal horizon.

Looking along these lines, we might ask ourselves what the corresponding investment would be for a financial institution. How exactly do we reinvest so that we can reap benefits in the future?

We can think of better buildings, computer and software technologies etc. But given the scale of the profits involved, and the cost and benefit of these incremental improvements, these investments don’t measure up. Somehow, the impact of these tiny investments is not as impressive in the performance of a financial institution compared to a brick-and-mortar company. The reason behind this phenomenon is that the “hardware” we are dealing with (in the case of a financial institution) is really human resources — people — you and me. So the only sensible reinvestment option is in people.

So we come to the next question — how do we invest in people? We could use any number of euphemistic epithets, but at the end of the day, it is the bottom line that counts. We invest in people by rewarding them. Monetarily. Money talks. We can dress it up by saying that we are rewarding performance, sharing profits, retaining talents etc. But ultimately, it all boils down to ensuring future productivity, much like our hardware shop buying a fancy new piece of equipment.

Now the last question has to be asked. Who is doing the investing? Who benefits when the productivity (whether current or future) goes up? The answer may seem too obvious at first glance — it is clearly the shareholders, the owners of the financial institution who will benefit. But nothing is black and white in the murky world of global finance. The shareholders are not merely a bunch of people holding a piece of paper attesting their ownership. There are institutional investors, who mostly work for other financial institutions. They are people who move large pots of money from pension funds and bank deposits and such. In other words, it is the common man’s nest egg, whether or not explicitly linked to equities, that buys and sells the shares of large public companies. And it is the common man who benefits from the productivity improvements brought about by investments such as technology purchases or bonus payouts. At least, that is the theory.

This distributed ownership, the hallmark of capitalism, raises some interesting questions, I think. When a large oil company drills an unstoppable hole in the seabed, we find it easy to direct our ire at its executives, looking at their swanky jets and other unconscionable luxuries they allow themselves. Aren’t we conveniently forgetting the fact that all of us own a piece of the company? When the elected government of a democratic nation declares war on another country and kills a million people (speaking hypothetically, of course), should the culpa be confined to the presidents and generals, or should it percolate down to the masses that directly or indirectly delegated and entrusted their collective power?

More to the point, when a bank doles out huge bonuses, isn’t it a reflection of what all of us demand in return for our little investments? Viewed in this light, is it wrong that the taxpayers ultimately had to pick up the tab when everything went south? I rest my case.

In the last couple of weeks, I plunged right into an ocean of economist hands as I sat down to do a minor research into this troubling phenomenon of skyrocketing food prices.

The first “hand” pointed out that the demand for food (and commodities in general) has surged due to the increase in the population and changing consumption patterns in the emerging giants of Asia. The well-known demand and supply paradigm explains the price surge, it would seem. Is it as simple as that?

On the other hand, more and more food crops are being diverted into bio-fuel production. Is the bio-fuel demand the root cause? Bio-fuels are attractive because of the astronomical crude oil prices, which drive up the prices of everything. Is the recent OPEC windfall driving the price hikes? What about the food subsidies in wealthy nations that skew the market in their favour?

Yet another economics hand puts the blame squarely on the supply side. It points an unwavering finger at the poor weather in food producing countries, and the panic measures imposed on the supply chain, such as export bans and smaller scale hoarding, that drive up the prices.

I’m no economist, and I would like just one hand, one opinion, that I can count on. In my untrained view, I suspect that the speculation in commodities market may be driving the prices up. I felt vindicated in my suspicions when I read a recent US senate testimony where a well-known hedge fund manager, Michael Masters, shed light on the financial labyrinth of futures transactions and legal loopholes through which enormous profits were generated in commodity speculation.

The real reasons behind the food crisis are likely to be a combination of all these factors. But the crisis itself is a silent tsunami sweeping the world, as the UN World Food Program puts it.

Increase in the food prices, though unpleasant, is not such a big deal for a large number of Singaporeans. With our first world income, most of us spend about 20% of our salary on food. If it becomes 30% as a result of a 50% increase in the prices, we certainly won’t like it, but we won’t suffer that much. We may have to cut down on the taxi rides, or fine-dining, but it is not the end of our world.

If we are in the top 10% of the households, we may not even notice the increase. The impact of the high food prices on our lifestyle will be minimal — say, a four-star holiday instead of a five-star one.

It is a different story near the bottom. If we earn less than $1000 a month, and we are forced to spend $750 instead of $500 on food, it may mean a choice between an MRT ride and legging it. At that level, the increase in food prices does hurt us as our grim choices become limited.

But there are people in this world who face a much harsher reality as the prices shoot up with no end in sight. Their choices are often as terrible as Sophie’s choice. Which child goes to sleep hungry tonight? Medicine for the sick one or food for the rest?

We are all powerless against the juggernaut of market forces creating the food crisis. Although we cannot realistically change the course of this silent tsunami, let’s at least try not to exacerbate the situation through waste. Buy only what you will use, and use only what you need to. Even if we cannot help those who will invariably go hungry, let’s not insult them by throwing away what they will die yearning for. Hunger is a terrible thing. If you don’t believe me, try fasting for a day. Well, try it even if you do — for it may help someone somewhere.

The topic of conversation on that day was a bit philosophical, and we were eagerly absorbing the words of wisdom emanating from Lee. He was describing to us how the Earth could be considered a living organism. Using insightful arguments and precisely modulated glib articulation (no doubt, forged by years of intellectual duels in world’s best universities), Lee made a compelling case that the Earth, in fact, satisfied all the conditions of being an organism.

Lee Smolin, by the way, lived up to our great expectations in later years, publishing highly acclaimed books and generally leaving a glorious imprint in the world of modern physics. He now talks to global audiences through prestigious programmes such as the BBC Hardtalk, much to our pride and joy.

The point in Lee’s view was not so much whether or the Earth was literally alive, but that thinking of it as an organism was a viable intellectual model to represent the Earth. Such intellectual acrobatics was not uncommon among us physics students.

In the last few years, Lee has actually taken this mode of thinking much farther in one of his books, picturing the universe in the light of evolution. Again, the argument is not to be taken literally, imagining a bunch of parallel universes vying for survival. The idea is to let the mode of thinking carry us forward and guide our thoughts, and see what conclusions we can draw from the thought exercise.

A similar mode of thinking was introduced in the movie Matrix. In fact, several profound models were introduced in that movie, which probably fuelled its wild box-office success. One misanthropic model that the computer agent Smith proposes is that human beings are a virus on our planet.

It is okay for the bad guy in a movie to suggest it, but an entirely different matter for newspaper columnist to do so. But bear with me as I combine Lee’s notion of the Earth being an organism and Agent Smith’s suggestion of us being a virus on it. Let’s see where it takes us.

The first thing a virus does when it invades an organism is to flourish using the genetic material of the host body. The virus does it with little regard for the well-being of the host. On our part, we humans plunder the raw material from our host planet with such abandon that the similarity is hard to miss.

But the similarity doesn’t end there. What are the typical symptoms of a viral infection on the host? One symptom is a bout of fever. Similarly, due to our activities on our host planet, we are going through a bout of global warming. Eerily similar, in my view.

The viral symptoms could extend to sores and blisters as well. Comparing the cities and other eye sores that we proudly create to pristine forests and natural landscapes, it is not hard to imagine that we are indeed inflicting fetid atrocities to our host Earth. Can’t we see the city sewers and the polluted air as the stinking, oozing ulcers on its body?

Going one step further, could we also imagine that natural calamities such as Katrina and the Asian tsunami are the planet’s natural immune systems kicking into high gear?

I know that it is supremely cynical to push this comparison to these extreme limits. Looking at the innocent faces of your loved ones, you may feel rightfully angry at this comparison. How dare I call them an evil virus? Then again, if a virus could think, would it think of its activities on a host body as evil?

If that doesn’t assuage your sense of indignation, remember that this virus analogy is a mode of thinking rather than a literal indictment. Such a mode of thinking is only useful if it can yield some conclusions. What are the conclusions from this human-viral comparison?

The end result of a viral infection is always gloomy. Either the host succumbs or the virus gets beaten by the host’s immune systems. If we are the virus, both these eventualities are unpalatable. We don’t want to kill the Earth. And we certainly don’t want to be exterminated by the Earth. But those are the only possible outcomes of our viral-like activity here. It is unlikely that we will get exterminated; we are far too sophisticated for that. In all likelihood, we will make our planet uninhabitable. We may, by then, have our technological means of migrating to other planetary systems. In other words, if we are lucky, we may be contagious! This is the inescapable conclusion of this intellectual exercise.

There is a less likely scenario — a symbiotic viral existence in a host body. It is the kind of benign life style that Al Gore and others recommend for us. But, taking stock of our activities on the planet, my doomsday view is that it is too late for a peaceful symbiosis. What do you think?

There is only a thin blurry line between the schemes that thrive on other people’s greed and confidence jobs. If you can come up with a scheme that makes money for others, and stay legal (if not moral), then you will make yourself very rich. We see it most directly in the finance and investment industry, but it is much more widespread than that. We can see that even education, traditionally considered a higher pursuit, is indeed an investment against future earnings. Viewed in that light, you will understand the correlation between the tuition fees at various schools and the salaries their graduates command.

When I started writing this column, I thought I was making up this new field called the Philosophy of Money (which, hopefully, somebody would name after me), but then I read up something on the philosophy of mind by John Searle. It turned out that there was nothing patentable in this idea, nor any cash to be made, sadly. Money comes under the umbrella of objective social realities that are quite unreal. In his exposition of the construction of social reality, Searle points out that when they give us a piece of paper and say that it is legal tender, they are actually constructing money by that statement. It is not a statement about its attribute or characteristics (like “This is a glass of water”) so much as a statement of intentionality that makes something what it is (like “You are my hero”). The difference between my being a hero (perhaps only to my six-year-old) and money being money is that the latter is socially accepted, and it is as objective a reality as any.

I conclude this article with the nagging suspicion that I may not have argued my point well enough. I started it with the premise that money is an unreal meta-thing, and wound up asserting its objective reality. This ambivalence of mine may be a reflection of our collective love-hate relationship with money – perhaps not such a bad way to end this column after all.

Put it that way, investment sounds like a positive concept, which it is, in our current mode of thinking. We can easily make it a negative thing by portraying the demand for the investment value of money as greed. It then follows that all of us are greedy, and that it is our greed that fuels the insane compensation packages of top-level executives. Greed also fuels fraud – ponzi and pyramid schemes.

Indeed, any kind of strong feeling that you have can be bought and sold for personal gain of others. It may be your genuine sympathy for the Tsunami or earthquake victims, your voyeuristic disgust at the peccadilloes of golf icons or presidents, charitable feeling toward kidney patients of whatever. And the way money is made out of your feelings may not be obvious at all. Watching the news five minutes longer than usual because of a natural disaster may bring extra fortune to the network’s coffers. But of all the human frailties one can make money out of, the easiest is greed, I think. Well, I may be wrong; it may actually be that frailty that engendered the oldest profession. But I would think that the profession based on the lucrative frailty of greed wasn’t all that far behind.

If we want to exploit other people’s greed, the first thing to ask ourselves is this: why do we want money, given that it is a meta-entity? I know, we all need money to live. But I am not talking about the need part. Assuming the need part is taken care of, we still want more of it. Why? Say you are a billionaire. Why would you want another billion? I think the answer lies in something philosophical, something of an existential angst, although those with their billions would the last ones to admit it. The reason behind this deep-rooted need for more is a quest for a validation, or a justification for our existence, and a meaning and purpose for our life. It is all part of that metaphorical holy grail. I know, it sounds a bit nutty, but what else could it be? The Des Cartes of our time would say, “I have loads of money, therefore I am!”

To be fair, this column won’t give you any get-rich-quick, sure-fire schemes or strategies. What it will tell you is why and how some people make money, and hopefully uncover some new insights. You may be able to put some of these insights to work and make yourself rich – if that’s where you think your happiness lies.

By now, it is clear to most people that they cannot become filthy rich by working for somebody else. In fact, that statement is not quite accurate. CEOs and top executives all work for the shareholders of the companies that employ them, but are filthy rich. At least, some of them are. But, in general, it is true that you cannot make serious money working in a company, statistically speaking.

Working for yourself – if you are very lucky and extremely talented – you may make a bundle. When we hear the word “rich,” the people that come to mind tend to be

1. entrepreneurs/industrialists/software moguls – like Bill Gates, Richard Branson etc.,
2. celebrities – actors, writers etc.,
3. investment professionals – Warren Buffet, for instance, and
4. fraudsters of the Madoff school.

There is a common thread that runs across all these categories of rich people, and the endeavors that make them their money. It is the notion of scalability. To understand it well, let’s look at why there is a limit to how much money you can make as a professional. Let’s say you are a very successful, highly-skilled professional – say a brain surgeon. You charge $10k a surgery, of which you perform one a day. So you make about $2.5 million a year. Serious money, no doubt. How do you scale it up though? By working twice as long and charging more, may be you can make $5 million or $10 million. But there is a limit you won’t be able to go beyond.

The limit comes about because the fundamental economic transaction involves selling your time. Although your time may be highly-skilled and expensive, you have only 24 hours of it in a day to sell. That is your limit.

Now take the example of, say, John Grisham. He spends his time researching and writing his best-selling books. In that sense, he sells his time as well. But the big difference is that he sells it to many people. And the number of people he sells his product to may have an exponential dependence on its quality and, therefore, the time he spends on it.

We can see a similar pattern in software products like Windows XP, performances by artists, sports events, movies and so on. One performance or accomplishment is sold countless times. With a slight stretch of imagination, we can say that entrepreneurs are also selling their time (that they spend setting up their businesses) multiple times (to customers, clients, passengers etc.) All these money-spinners work hard to develop some kind of exponential volume-dependence on the quality of their products or the time they spend on them. This is the only way to address the scalability issue that comes about due to the paucity of time.

Investment professionals (bankers) do it too. They develop new products and ideas that they can sell to the masses. In addition, they make use of a different aspect of money that we touched upon in an earlier column. You see, money has a transactional value. It plays the role of a medium facilitating economic exchanges. In financial transactions, however, money becomes the entity that is being transacted. Financial systems essentially move money from savings and transforms it into capital. Thus money takes on an investment value, in addition to its intrinsic transactional value. This investment value is the basis of interest.

The first indication of the meta-ness of money comes from the fact that it has a value only when we assign it a value. It doesn’t possess an intrinsic value that, for instance, water does. If you are thirsty, you find that water has enormous intrinsic value. Of course, if you have money, you can buy water (or Perrier, if you want to be sophisticated), and quench your thirst.

But we may find ourselves in situations where we may not be able to buy things with money. Stranded in a desert, for instance, dying of thirst, we may not be able to buy water despite our sky-high credit limits or the hundreds of dollars we may have in our wallet. One reason for this inability of ours is obvious – we may be alone. The basic transactional value of money evaporates when we have nobody to transact with.

The second dimension of the meta-ness of money is economical. It is illustrated in the well-worn supply-and-demand principle, assuming transactional liquidity (which is a term I just cooked up to sound erudite, I confess). I mean to say, even if we have willing sellers of water in the desert, they may see that we are dying for it and jack up the price – just because we are willing and able to pay. This apparent ripping off on the part of the devious vendors of water (perfectly legal, by the way) is possible only if the commodity in question is in plentiful supply. We need commodity liquidity, as it were.

It is when the liquidity dries up that the fun begins. The last drop of water in a desert has infinite intrinsic value. This effect may look similar to the afore-mentioned supply-and-demand phenomenon, but it really is different. The intrinsic value dominates everything else, much like the strong force over short distances in particle physics. And this domination is the flipside of the law of diminishing marginal utility in economics.

The thing that looks a bit bizarre about money is that it seems to run counter to the law of diminishing marginal utility. The more money you have, the more you want it. Now, why is that? It is especially strange given its lack of intrinsic value. Great financial minds could not figure it out, but came up with pithy and memorable statements like, “Greed, for lack of a better word, is good.” Although that particular genius was only fictional, he does epitomize much of the thinking in the modern corporate and financial world. Good or bad, let’s assume that greed is an essential part of human nature and look at what we can do with it. Note that I want to do something “with” it, not “about” it – an important distinction. I, intrepid columnist that I am, want to show you how to use other people’s greed to make more money.

Despite such reservations, I decided to write this post on how to live your life — after all, this is my blog, and I can post anything I want. So today, I will talk about how to lead a good life. The first thing to do is to define what “good” is. What do we mean when we call something good? We clearly refer to different attributes by the same word when we apply it to different persons or objects, which is why a good girl is very different from a good lay. One “good” refers to morality while the other, to performance in some sense. When applied to something already nebulous such as life, “good” can mean practically anything. In that sense, defining the word good in the context of life is the same as defining how to lead a good life. Let’s try a few potential definitions of a good life.

Let’s first think of life as a race — a race to amass material wealth because this view enjoys a certain currency in these troubled times that we live in. This view, it must be said, is only a passing fad, no matter how entrenched it looks right now. It was only about fifty years ago that a whole hippie generation rebelled against another entrenched drive for material comforts of the previous generation. In the hazy years that followed, the materialistic view bounced back with a vengeance and took us all hostage. After its culmination in the obscenities of the Madoffs and the Stanfords, and the countless, less harmful parasites of their kind, we are perhaps at the beginning stages of another pendulum swing. This post is perhaps a reflection of this swing.

The trouble with a race-like, competitive or combative view of life is that the victory always seems empty to the victors and bitter to the vanquished. It really is not about winning at all, which is why the Olympian sprinter who busted up his knee halfway through the race hobbled on with his dad’s help (and why it moved those who watched the race). The same reason why we read and quote the Charge of the Light Brigade. It was never about winning. And there is a deep reason behind why a fitting paradigm of life cannot be that a race, which is that life is ultimately an unwinnable race. If the purpose of life is to live a little longer (as evolutionary biology teaches us), we will all fail when we die. With the trials and tribulations of life volleying and thundering all around us, we still ride on, without reasoning why, on to our certain end. Faced with such a fundamental and inevitable defeat, our life just cannot be about winning.

We might then think that it is some kind of glory that we are or should be after. If a life leads to glory during or after death, it perhaps is (or was) a good life. Glory doesn’t have to be a public, popular glory as that of a politician or a celebrity; it could be a small personal glory, as in the good memories we leave behind in those dear to us.

What will make a life worthy of being remembered? Where does the glory come from? For wherever it is, that is what would make a life a good life. I think the answer lies in the quality with which we do the little things in life. The perfection in big things will then follow. How do you paint a perfect picture? Easy, just be perfect first and then paint anything. And how do you live a perfect life? Easy again. Just be perfect in everything, especially the little things, that you do. For life is nothing but the series of little things that you do now, now and now.

Logic in the form of Occam’s Razor should direct us to the latter possibility. But logic doesn’t apply to many or most of the fundamental hypotheses of life, which answer to a different set of rules. They answer to the mythos, the sum total of the intangible knowledge and wisdom passed down from the past, from the ancient, forgotten masters talking to us through our teachers and folklore, through the structure of our languages and the backdrop of our thoughts, and through the very foundation of our sense of being and consciousness. The mythos tell us that we do have free will, and the logic that came later is powerless to break this notion. So it may be that these words that flow out of my pen into this notepad and later to your computer screen were all predetermined and I had no choice but to write then down. But it certainly is not the way I feel. I do feel as though I can delete any word here. Heck, I can delete the whole post if I want to.

On the side of logic, I will describe an experiment that casts doubt on our notion of free will. From neuroscience, we know that there is a time lag of about half a second between the moment “we” take a decision and the moment we become aware of it. This time lag raises the question of who is taking the decision because, in the absence of our conscious awareness, it is not clear that the decision is really ours. In the experimental setup testing this phenomenon, the subject is hooked up to a computer that records his brain activities (EEG). The subject is then asked make a conscious decision to move either the right hand or the left hand at a time of his choosing. The choice of right or left is also up to the subject. The computer always detects which hand the subject is going to move about half a second before the subject is aware of his own intention. The computer can then order the subject to move that hand — an order that the subject will be unable to disobey. Does the subject have free will in this case?

In fact, I wrote about it in my book, and posted it here some time ago. In that post, I added that free will might be a fabrication of our brain after the real action. In other words, the real action takes place by instinct, and the sense of decision is introduced to our consciousness as an afterthought. Some of my readers pointed out that being unaware of a decision was not the same as having no free will over it. For instance, when you drive, you take a series of decisions without really being aware of them. It doesn’t mean that these decisions are not yours. Good point, but does it really make sense to call a decision yours when you don’t have any control over it, even if you would take the same decision if you did? If something flies into your eyes, you will flinch and close your eyes. Good survival instinct and reflex. But given that you cannot control it, is it a part of your free will?

A more elaborate example comes from hypnotic suggestion. I heard this story from one of the lectures by John Searle — a man was hypnotically instructed to respond to the word “Germany” by crawling on the floor. After the hypnosis session, when the man was lucid and presumably exercising his free will, the trigger word was used in a conversation. The man suddenly says something like, “I just remembered, I need to remodel my house, and these tiles look great. Mind if I take a closer look?” and crawls on the floor. Did he do it of his own volition? To him, yes, but to the rest, now.

So, how do we know for sure that our sense of free will is not an elaborate scam that our brain is perpetrating on “us” (whatever that means!)

Now I am actually pushing the argument a bit further. But think about it, how can the spaceless, massless, material-less entities that are our intentions make real changes in the physical world around us? In writing this post, how can I break the laws of physics in moving things around quite independent of their current state just because I want to?

Is free will an epiphenomenon — something that emerges after-the-fact? A good analogy is that of froth riding on the waves on a beach. The froth may be thinking, “Oh my god, what a tough life! I have to haul all these big waves back and forth. Every day of my life, no break, no vacation!” But that is not what is going on. The waves are just sloshing around, and the froth just happens to emerge. Are our lives just moving along on their own preordained paths, while we, like the epiphenomenal froth, think that we have control and free will?

This sounds like a really silly question, I know. When you want to write a blessed post, you just pick up a blessed pen and write the blessed thing (using “bless” the same way Whoopi Goldberg used it in one of her movies). What is so strange or philosophical about it? This is exactly what I would have said a week ago before reading up some stuff on the philosophy of mind.

How exactly do I write? The pen is made up of matter. It doesn’t move on its own volition and make words. We know it from physics. We need a cause. Of course, it is my hand that is moving it, controlled by a set of precise electro-chemical reactions. And what is causing the reactions? The neurons fining in my brain — again, interactions in the material world. And what causes the particular precise patterns of neuronal firing? It is, of course, my mind. My neurons fire in response to the ideas and words in my mind.

Hold on, not so fast there, Skippy! My mind is not a physical entity. The most physical or material statement we can make about the mind or consciousness is that it is a state of the brain — or a pattern of neuronal firings. My intention to write a few words is again a spatial and temporal arrangement of some neurons firing — nothing more. How do such patterns result in changes in the physical, material world?

We don’t find this issue so puzzling because we have been doing forever. So we don’t let ourselves be amazed by it — unless we are a bit crazy. But this problem is very real. Note that if my intention of writing resulted only in my imagination that I am writing, we don’t have a problem. Both the cause (the intention) and the effect (the imagination) are non-material. And this line of thinking does provide a solution to the original problem — just assume that everything is in one’s mind. Nothing is real. Everything is Maya, and only one’s mind exists. This is the abyss of solipsism. As a philosophical stance, this idea is consistent and even practical. I wrote a book loosely based on the notion that nothing is real — and aptly called it The Unreal Universe.

Unfortunately, solipsism is quite wrong. When I say, “Everything is in my mind, nothing else is real,” all you have to say is, “I agree, I hear you!” And boom, I am wrong! For if you agree, there is at least one more mind other than mine.

So solipsism as a solution to the puzzle that the non-material intention in a mind can make physical changes in the world is less than satisfactory. Then the other solution, of course, is to say that intentionality is illusory. Free will doesn’t exist; it is only a figment of our imagination. In other words, I didn’t really intend to write this post, it was all preordained. It is just that after-the-fact, I kind of attribute free will to it and pretend that I meant to do it.

Strange as it may seem, there are some strong indications that this statement may be true. I will write another post (with or without free will) to list them.

The current view in thinking about mind and brain is in an analogy with a digital computer. Mind is a program (software), and brain is the a computer (hardware) on which it runs. It sounds right, and seems to explain quite a bit. After all, a computer can control complex precision-equipment based on programs running on it. But there is a deep philosophical reason why this analogy is totally wrong, but that will be another post.

The lack of correlation between wisdom and worldly rewards is unsettling, especially to those who are foolish enough to consider themselves wise. Why is it that the love of wisdom wouldn’t translate to glory, riches and creature comforts? The reason, as far as I can tell, is a deep disconnect between philosophy and life — as a wise (but distinctly unphilosophical) friend of mine put it in one of those hazy late-night stupors of the graduate years, “Philosophy to real life is what masturbation is to sex.” Yes, the masses see the love of wisdom as pointless intellectual masturbation. This view is perhaps echoed in what Russell said once:

Philosophy busies itself with things that seem obvious, to come up with something grandiose. This apparent obsession with trivialities is a false impression. Dispelling this impression is the purpose of this post. Let me start by pointing out one fact. Philosophy is at the root of everything that you do. You live a good, moral life? Or even a lousy, greedy one? Your behavior, choices and reasons are studied in Ethics. You are a quant, or do stuff technical or mathematical? Logic. Into physics and worship Einstein? You cannot then ignore the metaphysical aspects of space and time. Lawyer? Yeah, Rhetorics. Knowledge worker? Epistemology defines what knowledge is. Artist? Fashion designer? Work in the movie industry? We got you covered in Aesthetics. You see, every avenue of human endeavor has a philosophic underpinning to it.

Pointing out this underpinning is, in reality, not as big a deal as I make it out to be. It is merely a matter of definition. I define philosophy to be whatever it is that “underpins” all aspects of life, and then point out this underpinning as evidence of its importance. The real value of philosophy is in structuring our thoughts and guiding them, for instance, in perceiving the speciousness and subtle circularity of my underpinning-therefore-important argument. Philosophy teaches us that nothing stands own its own, and that there are structures and schools of thought that illuminate questions that befuddle us. There are scaffolds to support us, and giants on whose shoulders we can stand to see far and clear. To be sure, some of these giants may be facing the wrong way, but it is again the boldness and independence that come with philosophy that will help us see the errors in their ways. Without it, learning becomes indoctrination, and in our quest to assimilate information into wisdom, we get stuck somewhere in between — perhaps at the level of knowledge.

All this discussion still doesn’t give us a clue as to the disquieting connection between philosophy and bankruptcy. For when a great man voices his existential anguish as, “I think, therefore I am,” we can always say (as we often do), “Good for you mate, whatever works for you!” and go about our life.

Love of wisdom perhaps facilitates its acquisition, and the purpose of wisdom is only wisdom. It is very much like life, the purpose of which is merely to live a little longer. But without philosophy, how do we see the meaning of life? Or lack thereof?

Why did Camus say we went through the Sisyphus life? Ah, yes, because we got into the habit of living before acquiring the faculty of thinking. By midlife, perhaps, our thinking catches up with our innate existential urges, and manifests itself as a crisis. Most of us survive it, and as Camus himself pointed out, Sisyphus was probably a happy man, despite having to eternally push the rock up the slope. So let’s exercise our thinking faculty assuming it is not too dangerous.

Most of us have a daily life that is some variation of the terse French description — metro, boulot, dodo. We commute to work, make some money for ourselves (and more for somebody else), eat the same lunch, sit through the same meetings, rush back home, watch TV and hit the sack. Throw in a gym session and an overseas trip once in a while, and that’s about it. This is the boring not merely because it really is, but also because this is what everybody does!

Imagine that — countless millions of us, born somewhere at some point in time, working hard to acquire some money, or knowledge, or fame, or glory, or love — any one of the thousands of variations of Sisyphus’s rock — only to see it all tumble down to nothingness an another point in time. If this isn’t absurd, what is?

If I were to leave this post at this point, I can see my readers looking for the “Unsubscribe” button en masse. To do anything useful with this depressing idea of futile rock-pushing rat-race, we need to see beyond it. Or have faith, if we can — that there is a purpose, and a justification for everything, and that we are not meant to know this elusive purpose.

Since you are reading this blog, you probably don’t subscribe to the faith school. Let’s then look for the answer elsewhere. With your permission I will start with something Japanese. Admittedly, my exposure to the Japanese culture comes from Samurai movies and a couple of short trips to Japan, but lack of expertise has never stopped me from expressing my views on a subject. Why do you think the Japanese take such elaborate care and pride in something as silly as pouring tea?

Well, I think they are saying something much deeper. It is not that pouring tea is important. The point is nothing is important. Everything is just another manifestation of the Sisyphus rock. When nothing is important, nothing is unimportant either. Now, that is something profound. Pouring tea is no less (or more) important than writing books on quantitative finance, or listening to that old man attempting the Susannah song on his mouth-organ on Market Street. When you know that all rocks will come tumbling down just as soon as you reach the pinnacle of your existence, it doesn’t matter what rock you carry with you to the top. As long as you carry it well. And happily.

So I try to write this blog post as well as I possibly can.

“Well, I predict that if you think about it long enough you will find yourself going round and round and round and round until you finally reach only one possible, rational, intelligent conclusion. The law of gravity and gravity itself did not exist before Isaac Newton. No other conclusion makes sense. And what that means is that that law of gravity exists nowhere except in people’s heads! It’s a ghost! We are all of us very arrogant and conceited about running down other people’s ghosts but just as ignorant and barbaric and superstitious about our own.”

[This quote is from an online version of Zen and the Art of Motorcycle Maintenance.]

Time, on the other hand, has no direct sensory backing. And for this reason, it becomes quite difficult to get a grip over it. What is time? We sense it indirectly through change and motion. But it would be silly to define time using the concepts of change and motion, because they already include the notion of time. The definition would be cyclic.

Assuming, for now, that no definition is necessary, let’s try another perhaps more tractable issue. Where does this strong sense of time come from? I once postulated that it comes from our knowledge of our demise — that questionable gift that we all possess. All the time durations that we are aware of are measured against the yardstick of our lifespan, perhaps not always consciously. I now wonder if this postulate is firm enough, and further ruminations on this issue have convinced me that I am quite ignorant of these things and need more knowledge. Ah.. only if I had more time.

In any case, even this more restricted question of the origin of time doesn’t seem to be that tractable, after all. Physics has another deep problem with time. It has to do with the directionality. It cannot easily explain why time has a direction — an arrow, as it were. This arrow does not present itself in the fundamental laws governing physical interactions. All the laws in physics are time reversible. The laws of gravity, electromagnetism or quantum mechanics are all invariant with respect to a time reversal. That is to say, they look the same with time going forward or backward. So they give no clue as to why we experience the arrow of time.

Yet, we know that time, as we experience it, is directional. We can remember the past, but not the future. What we do now can affect the future, but not the past. If we play a video tape backwards, the sequence of events (like broken pieces of glass coming together to for a vase) will look funny to us. However, if we taped the motion of the planets in a solar system, or the electron cloud in an atom, and played it backward to a physicist, he would not find anything funny in the sequences because the physical laws are reversible.

Physics considers the arrow of time an emergent property of statistical collections. To illustrate this thermodynamic explanation of time, let’s consider an empty container where we place some dry ice. After some time, we expect to see a uniform distribution of carbon dioxide gas in the container. Once spread out, we do not expect the gas in the container to coagulate into solid dry ice, no matter how long we wait. The video of CO2 spreading uniformly in the container is a natural one. Played backward, the sequence of the CO2 gas in the container congealing to solid dry ice in a corner would not look natural to us because it violates our sense of the arrow of time.

The apparent uniformity of CO2 in the container is due to the statistically significant quantity of dry ice we placed there. If we manage to put a small quantity, say five molecules of CO2, we can fully expect to see the congregation of the molecules in one location once in a while. Thus, the arrow of time manifests itself as a statistical or thermodynamic property. Although the directionality of time seems to emerge from reversible physical laws, its absence in the fundamental laws does look less than satisfactory philosophically.

You may consider the distinction between the two just another one of those philosophical hairsplittings, but it really is not. What space is, and even what kind of entity space is, has enormous implications in physics. For instance, if it is relational in nature, then in the absence of matter, there is no space. Much like in the absence of any family members, you have no family. On the other hand, if it is a container-like entity, the space exists even if you take away all matter, waiting for some matter to appear.

So what, you ask? Well, let’s take half a bucket of water and spin it around. Once the water within catches on, its surface will form a parabolic shape — you know, centrifugal force, gravity, surface tension and all that. Now, stop the bucket, and spin the whole universe around it instead. I know, it is more difficult. But imagine you are doing it. Will the water surface be parabolic? I think it will be, because there is not much difference between the bucket turning or the whole universe spinning around it.

Now, let’s imagine that we empty the universe. There is nothing but this half-full bucket. Now it spins around. What happens to the water surface? If space is relational, in the absence of the universe, there is no space outside the bucket and there is no way to know that it is spinning. Water surface should be flat. (In fact, it should be spherical, but ignore that for a second.) And if space is container-like, the spinning bucket should result in a parabolic surface.

Of course, we have no way of knowing which way it is going to be because we have no way of emptying the universe and spinning a bucket. But that doesn’t prevent us from guessing the nature of space and building theories based on it. Newton’s space is container-like, while at their heart, Einstein’s theories have a relational notion of space.

So, you see, philosophy does matter.

I remember feeling, in my dream, “Yeah, right! The right song just happened to be playing!” Way too skeptical even in my dreams. Not to mention that there is not such song (as far as I know). If you think this dream is weird, I once dreamed up an unknown (and non-existent) word while reading a book. I even tried looking up the word when I woke up, but in vain, of course.

One of my top dreams was when I was invited to the White House by President Bush (junior) right after his inauguration. As I stepped into what appeared to be a decent sized living room, the President was walking down a flight of stairs. And he asked me, “So. Do you still think I’m dumb?” Now, how did he know how I felt?

Coming back to my time-dying dream, there is something else that is a bit weird. I mean, one would normally say, “If I died now, I would die a happy man” or something to that effect. Why would “time” die? Is it my secret conviction that when one dies, one’s “time” also dies? That there is no common, universal time, but only our own, individual, personal times? Perhaps. I’m not talking about Newton’s universal times vs. Einstein’s relative time. There is something philosophical here that is just beyond my grasp. Like a name at the tip of your tongue. These are deep waters, and I really need to learn more. Back to school, some day…

The fanciest of my dreams? I was James Bond once. Complete with a bicycle that turned into a wooden canoe when I hit the local beach.

Stepping back a bit, rationality is quintessentially a worldview. By rational, we mean things that seem normal to our commonsense. So the notion of a nuclear bomb moving or obliterating a mountain is rational, although we have never seen it. You believe it because it is consistent with your worldview. I believe it too, trust me. I was a nuclear physicist not too long ago.

And a god (or faith) moving mountains is clearly ludicrous to our rationality. I’m not asking people to give equal rational weight to faith and bomb moving mountains. I’m merely encouraging them to examine why they believe in one and not the other. Calling one more rational is just another way of saying that you choose to believe one more than the other. Why?

Thinking along those lines, I come to the conclusion that it is only a question of worldviews or belief systems. I personally subscribe to your worldview based on rationality as well, which is why I consider myself also an atheist (although one of my readers thought I was merely confused )

A god as an old man hiding behind the clouds is not consistent with our worldview. But it may have been a metaphor for something else. Let me explain. We have these abstract concepts of happiness, perfection, grief etc. Are these things real? Should we believe they exist? Such questions don’t make too much sense because these concepts are all in our minds. But then, what isn’t?

Let’s take perfection, for instance. Let’s say we assign some human form to it, so that we could explain it to a child or something. We then call it, say, the goddess of perfection or whatever. Over generations, for whatever reason, the notion of perfection disappears from our awareness, but the metaphor of the goddess remains. Now, to somebody who believes in the reality perfection, and therefore the existence of the goddess, it is not a delusion. In that belief system, in that context and worldview, it makes perfect sense. But in the absence of the abstract concept of perfection, the goddess becomes a delusion.

I believe that a large part of our collective wisdom is handed down in the form of such metaphors. Instead of dismissing them as delusions because their context is gone, we should perhaps try harder to rediscover the lost concepts. I also believe such metaphors exist in other fields that seem to work well. Take, for instance, the Qi concept in traditional Chinese medicine, the five elements (or three body types) in Ayurveda and so on. To the extent that traditional Chinese medicine and Ayurveda work, there has to be some knowledge buried in those practices. If we write off their basis merely because their metaphors are not consistent with our rationality, we may be writing off some potential sources of new or forgotten knowledge.

In addition, I believe that some of our smarter geniuses indeed see delusional metaphors in what we take to be supremely real.

In “Principles of Quantitative Development”, Thulasidas has offered a contribution that is somewhat unique in the literature associated with the field of Quantitative Development. In that specialised, narrow domain, technical books abound. Most such titles are concerned with the intricacies of the application of specific programming language to the problems of financial engineering or, expositions of advanced mathematics as used in the pricing models of exotic financial derivative products. Thulasidas however has taken a very different tact. Focusing instead on what he terms “the big picture”, Thulasidas offers us his insights into the role of Quantitative Development in the broader context of a bank’s “trading platform”. Armed with such insights, he shows us how an understanding of the varied usages of the trading platform can and should be used to influence and shape its design.

In the opening chapters, the book is concerned with defining what is meant by the term “trading platform”. In doing so, Thulasidas necessarily reviews the “architecture” of a bank from the point of view of a Quantitative Developer. That is, he discusses the nature and interactions of the front, middle and back offices of a bank, the different roles that professionals in each of those areas satisfy and how each of their respective needs induce a different set of requirements on the trading platform. Moving on, he reviews the nature of trades, the so-called trade “life cycle” and how different views of a trade are required as a function of the life cycle and the business role of the user.

Having established a broad understanding of the requirements for a trading platform, Thulasidas turns his attention to translating those requirements into design decisions for trading platforms. Along the way he considers such aspects of design as choice of programming languages, issues relating to scalability and extensibility, security and auditing, representations for market and trade data and a trading platform’s macro architecture whilst all the way remaining focussed on ensuring that all business needs identified in the earlier chapters are given consideration and catered for.

Going from the general to the specific, Thulasidas in later chapters introduces a flexible derivatives pricing tool (the source code for which accompanies the book). This program in itself will no doubt serve as an excellent starting point for Quantitative Development teams charged with the production of an in-house trading platform. Perhaps of even greater benefit though is Thulasidas’s critique of the pricing tool, that is, in his explanation of how the supplied program fails to meet the requirements of a complete trading platform and how the program needs to be extended in order to be considered one. In this way, the line of thought of earlier chapters is reinforced and brought sharply into focus.

Throughout the book, Thulasidas manages to convey his ideas with remarkable eloquence and lucidity. Understanding is enhanced by numerous rich graphics outlining processes and their design (both in the software and work-flow sense). The reader’s attention and interest is never lost and a great deal of entertainment is to be found in the numerous side-bars, the “Big Pictures” (in effect an enjoyable mini-series of magazine style articles in their own right).

As Thulasidas himself notes, the subject matter of his book is broad. Accordingly, the potential readership of this title is equally broad. Notably, Quantitative Developers at the beginning of their careers stand most to gain from this book. The fact is though that even the most seasoned of banking professionals would profit from its reading. Quantitative Developers, Quantitative Analysts, Traders, Risk Managers, IT professionals and their Project Managers, individuals considering switching from academia or other industries to a career in banking… Readers from each and all of these groups will find Thulasidas’s work informative and thought provoking.

To be fair, this post won’t give you any get-rich-quick, sure-fire schemes or strategies. What it will tell you is why and how some people make money, and hopefully uncover some new insights. You may be able to put some of these insights to work and make yourself rich — if that’s where you think your happiness lies.

By now, it is clear to most people that they cannot become filthy rich by working for somebody else. In fact, that statement is not quite true. CEOs and top executives all work for the shareholders of the companies that employ them, but are filthy rich. At least, some of them are. But, in general, it is true that you cannot make serious money working in a company, statistically speaking.

Working for yourself — if you are very lucky and extremely talented — you may make a bundle. When we hear the word “rich,” the people that come to mind tend to be (a) entrepreneurs/industrialists/software moguls — like Bill Gates, Richard Branson etc., (b) celebrities — actors, writers etc., (c) investment professionals — Warren Buffet, for instance, and (d) fraudsters of the Madoff school.

There is a common thread that runs across all these categories of rich people, and the endeavors that make them their money. It is the notion of scalability. To understand it well, let’s look at why there is a limit to how much money you can make as a professional. Let’s say you are a very successful, highly-skilled professional — say a brain surgeon. You charge $10k a surgery, and perform one a day. So you make about $2.5 million a year. Serious money, no doubt. How do you scale it up though? By working twice as long and charging more, may be you can make $5 million or $10 million. But there is a limit you won’t be able to go beyond.

The limit comes about because the fundamental economic transaction involves selling your time. Although your time may be highly-skilled and expensive, you have only 24 hours in a day to sell. That is your limit.

Now take the example of, say, John Grisham. He spends his time researching and writing his best-selling books. In that sense, he sells his time as well. But the big difference is that he sells it to many people.

We can see a similar pattern in software products like Windows XP, performances by artists, sports events, movies and so on. One performance or accomplishment is sold countless times. With a slight stretch of imagination, we can say that entrepreneurs are also selling their time (that they spend setting up their businesses) multiple times (to customers, clients, passengers etc.) This is the only way to address the scalability issue that comes about due to the paucity of time.

Investment professionals (bankers) do it too. They develop new products and ideas that they can sell to the masses. In addition, they make use of a different angle that we discussed in the Philosophy of Money. They focus on the investment value of money to make oodles of it. It not so much that they take your money as deposits, lend it out as loans, and earn the spread. Those simple times are gone for good. The banks make use of the fact that investors demand the highest possible return for the lowest possible risk. Any opportunity to push this risk-reward envelope is a profit potential. When they make money for you , they demand their compensation and you are happy to pay it.

Put it that way, investment sounds like a positive concept, which it is, in our current mode of thinking. We can easily make it a negative thing by portraying the demand for the investment value of money as greed. It then follows that all of us are greedy, and that it is our greed that fuels the insane compensation packages of top-level executives. Greed also fuels fraud – ponzi and pyramid schemes.

There is a thin blurry line between the schemes that thrive on other people’s greed and confidence jobs. If you can come up with a scheme that makes money for others, and stay legal (if not moral), then you will make money. You can see that even education, traditionally considered a higher pursuit, is indeed an investment against future earnings. Viewed in that light, you will understand the correlation between the tuition fees at various schools and the salaries their graduates command.

Blindness can be physiological, when the physical eye is not functioning properly. Or it can be neurological, when the eye is fne but the visual signal processing is impaired. For example, if our right visual cortex is damaged, we are blind on the left side. When examining a patient with such a neurological blindness on one side, Weiscrantz shined a little spot of light on the patient’s blind side. Weiscrantz then asked the patient to point to it. The patient protested that he could not see it and could not possibly point to it. Weiscrantz asked him to try anyway. The patient then proceeded to point accurately to the spot of light that he could not consciously perceive.

After hundreds of trials, it became obvious that the patient could point correctly in ninety-nine percent of trials, even though he claimed on each trial that he was only guessing. How did the patient determine the location of an invisible object and point to it accurately? The neurological reason is that we all have two visual pathways. The new visual pathway goes through the visual cortex. The old, backup pathway runs through our brain stem to the superior colliculus.

The cause of our patient’s blindness was that his visual cortex was damaged, and it did not get the signals from one eye and its optic nerves. But the signals took the parallel route to the superior colliculus, using the old pathway. This rerouting allowed him to locate the object in space and guide his hand accurately to point to the invisible object. What this syndrome of blind-sight shows us is that only the new visual pathway leads to a conscious experience. While the old pathway is perfectly usable (for survival, for instance), it does not lead to a conscious experience of vision.

An interesting neurological condition, no doubt. But blind-sight is more than that. It is a rather confounding philosophical conundrum. The spot of light that the patient could see — was it real? Sure, we know it was real. But what if all of us were blind-sighted? If some of us started developing a semblance of awareness as a result of our blind-sight, would we believe them, or call them delusional? If there are senses that we can be unaware of, how sure can we be of the “sensed”? Or of our “delusions”?

This post is an edited version of section in The Unreal Universe. The information comes from The Emerging Mind: Reith Lectures on Neuroscience (BBC Radio, 2003) given by V. S. Ramachandran, the director of the Center for Brain and Cognition, San Diego, CA, USA. My book refers to several examples of physiological brain anomalies and their perceptual manifestation from this lecture series.