Kategorie Argief: Korporatiewe Life

Dilbert-agtige gedagtes

Laaste Dae Robin Hoods

Die ander dag, Ek kyk na Bill Gates op Die Daily Show met Jon Stewart — my gunsteling TV-show. Gates aangeraak sy planne om miljarde van sy eie dollars spandeer op entstowwe, onderwys en ander humanitêre projekte deur middel van sy grondslag. Dit is duidelik dat passievol oor sy filantropiese pogings, Gates het 'n ligter kant wat tien jaar gelede nie sigbaar was tydens die korporatiewe oorloë van die Microsoft soort.

Miskien Gates is 'n natuurlik passievolle man, of hy skryf klein bedryfstelsels wat sou pas in flop of seekoei diegene wat nêrens pas, hetsy in tegniese innovasie of bemarking towery, of gulsig amassing miljarde of, soos nou, spandeer dit vriendelik. Maar toegeskryf sy filantropie om sy natuurlike passie vir alles wat hy doen is onregverdig, en verminder die waarde daarvan. Na alles, Hy kon gewees het spandeer (of ten minste, probeer om te bestee) sy geld op homself net so hartstogtelik. Dis hoekom ek dink aan hom as 'n hedendaagse Robin Hood, ten spyte van my geeky hekel vir enigiets Microsoft-verwante, wat dalk net 'n geek nou verbond, eerder as 'n praktiese ideologie.

romantiese idee van diefstal uit die ryk en gee dit aan die armes Robin Hood se het 'n kritieke fout. Hy was 'n skelm. Die probleem met wat 'n skelm is dat die volle mag van die regstelsel kan uit te oefen op jou heel onafhanklik van die moraliteit van jou aktiwiteit. In die geval Gate se, dit sou wees embezzling miljarde van Microsoft koffers en verspreiding van dit aan die haweloses, byvoorbeeld. Wat hy gedoen het, plaas, was om geld te maak in die aandelemark (wat, natuurlik, is verduistering van 'n wetlike aard) en dan gee dit aan die armes. Met ander woorde, Hy bly in die stelsel en 'n manier gevind om dit te draai om sy humanitêre doeleindes. As dit is wat hy wou al langs, Kudos aan hom!

Maar wat is dit “stelsel” dat ons moet werk van binne? Dit is 'n betrokke onderwerp vir 'n ander dag. Bly ingeskakel!

Midlife Crisis

In one of my recent posts, an astute friend of mine detected a tinge of midlife crisis. Hy was reg, natuurlik. Op 'n sekere punt, typically around midlife, a lot of us find it boring. The whole thing. How could it not be boring? We repeat the same mundane things over and over at all levels. True, at times we manage to convince ourselves that the mundane things are not mundane, but important, and overlay a higher purpose over our existence. Faith helps. So do human bondages. Maar, no matter how we look at it, we are all pushing our own personal rocks to a mountaintop, only to to see it roll down at the end of the day — knowing that it invariably will. Our own individual Sisyphuses, cursed with the ultimate futility and absurdity of it all. En, as if to top it off, our knowledge of it!

Why did Camus say we went through the Sisyphus life? Ag, Ja, because we got into the habit of living before acquiring the faculty of thinking. By midlife, miskien, 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!

Stel jou voor dat — 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, wat?

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?

Wel, 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. Nou, 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.

Modeling the Models

Mathematical finance is built on a couple of assumptions. The most fundamental of them is the one on market efficiency. It states that the market prices every asset fairly, and the prices contain all the information available in the market. Met ander woorde, you cannot glean any more information by doing any research or technical analysis, or indeed any modeling. If this assumption doesn’t pan out, then the quant edifice we build on top of it will crumble. Some may even say that it did crumble in 2008.

We know that this assumption is not quite right. If it was, there wouldn’t be any transient arbitrage opportunities. But even at a more fundamental level, the assumption has shaky justification. The reason that the market is efficient is that the practitioners take advantage of every little arbitrage opportunity. Met ander woorde, the markets are efficient because they are not so efficient at some transient level.

Mark Joshi, in his well-respected book, “The Concepts and Practice of Mathematical Finance,” points out that Warren Buffet made a bundle of money by refusing to accept the assumption of market efficiency. In werklikheid, the weak form of market efficiency comes about because there are thousands of Buffet wannabes who keep their eyes glued to the ticker tapes, waiting for that elusive mispricing to show up.

Given that the quant careers, and literally trillions of dollars, are built on the strength of this assumption, we have to ask this fundamental question. Is it wise to trust this assumption? Are there limits to it?

Let’s take an analogy from physics. I have this glass of water on my desk now. Still water, in the absence of any turbulence, has a flat surface. We all know why – gravity and surface tension and all that. But we also know that the molecules in water are in random motion, in accordance with the same Brownian process that we readily adopted in our quant world. One possible random configuration is that half the molecules move, sê, to the left, and the other half to the right (so that the net momentum is zero).

If that happens, the glass on my desk will break and it will make a terrible mess. But we haven’t heard of such spontaneous messes (from someone other than our kids, that is.)

The question then is, can we accept the assumption on the predictability of the surface of water although we know that the underlying motion is irregular and random? (I am trying to make a rather contrived analogy to the assumption on market efficiency despite the transient irregularities.) The answer is a definite yes. Natuurlik, we take the flatness of liquid surfaces for granted in everything from the useless lift-pumps and siphons of our grade school physics books all the way to dams and hydro-electric projects.

So what am I quibbling about? Why do I harp on the possibility of uncertain foundations? I have two reasons. One is the question of scale. In our example of surface flatness vs. random motion, we looked at a very large collection, waar, through the central limit theorem and statistical mechanics, we expect nothing but regular behavior. If I was studying, byvoorbeeld, how an individual virus propagates through the blood stream, I shouldn’t make any assumptions on the regularity in the behavior of water molecules. This matter of scale applies to quantitative finance as well. Are we operating at the right scale to ignore the shakiness of the market efficiency assumption?

The second reason for mistrusting the pricing models is a far more insidious one. Let me see if I can present it rather dramatically using my example of the tumbler of water. Suppose we make a model for the flatness of the water surface, and the tiny ripples on it as perturbations or something. Then we proceed to use this model to extract tiny amounts of energy from the ripples.

The fact that we are using the model impacts the flatness or the nature of the ripples, affecting the underlying assumptions of the model. Nou, imagine that a large number of people are using the same model to extract as much energy as they can from this glass of water. My hunch is that it will create large scale oscillations, perhaps generating configurations that do indeed break the glass and make a mess. Discounting the fact that this hunch has its root more in the financial mess that spontaneously materialized rather than any solid physics argument, we can still see that large fluctuations do indeed seem to increase the energy that can be extracted. Net, large fluctuations (and the black swans) may indeed be a side effect of modeling.

Group Dynamics

When researchers and academicians move to quantitative finance, they have to grapple with some culture shock. Not only does the field of finance operate at a faster pace, it also puts great emphasis on team work. It cuts wide rather than deep. Quick results that have immediate and widespread impact are better than perfect and elegant solutions that may take time to forge. We want it done quick rather than right. Academicians are just the opposite. They want to take years to mull over deep problems, often single-handedly, and come up with solutions elegant and perfect.

Coupled with this perfectionism, there is a curious tendency among academic researchers toward creating a “wow” factor with their results, as opposed to finance professionals who are quite content with the “wow” factor in their bonuses. This subtle mismatch generates interesting manifestations. Academics who make the mid-career switch to finance tend to work either alone or in small groups, trying to perfect an impressive prototype. Banking professionals, Aan die ander kant, try to leverage on each other (at times taking credit for other people’s work) and roll out potentially incomplete solutions as early as possible. The intellectual need for a “wow” may be a factor holding back at least some quant deliverables.

Filosofie van Geld

Underlying all financial activity are transactions involving money. The term “transactions” means something philosophically different in economics. It stands for exchanges of goods and services. Geld, in economic transactions, has only a transactional value. It plays the role of a medium facilitating the exchanges. In financial transactions, egter, 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.

Gegewe dat die belegging waarde is ook gemeet en teruggekeer in terme van geld, kry ons die idee van saamgestelde rente en “om geld te werk.” Diegene wat geld vraag opbrengste het wat gebaseer is op die belegging risiko wat hulle bereid is om te aanvaar. En die rol van die moderne finansiële stelsel word een van die balansering van hierdie risiko-beloning vergelyking.

We should keep in mind that this signification of money as investment entity is indeed a philosophical choice that we have made over the past few centuries. Other choices do exist — Islamic banking springs to mind, although its practice has be diluted by the more widely held view of money as possessing an investment value. It is fascinating to study the history and philosophy of money, but it is a topic that calls for a full-length book on its own right. Understanding money at its most fundamental level may in fact enhance our productivity — which is again measured in terms of the bottom line, consistent with the philosophy of money that enjoys currency.

Terug na Blogging…

It has been a while since I wrote anything on my blog. That doesn’t mean that I wasn’t writing. In werklikheid, I was very busy with my tweede boek. I managed to send in the draft manuscript to John Wiley & Sons a couple of weeks ago, but only after the associated sleep deprivation had become a more or less habitual insomnia. I also finished everything I wanted to do on the plugin front. Nou, I am ready to blog again.

The habitualization of insomnia is probably not in vain. John Wiley and Co will get back to me with their comments and suggestions, which will keep me busy for a couple of months again working on the book. The book, Beginsels van Kwantitatiewe Ontwikkeling, is an attempt to find the niche at the intersection of computer science, mathematical finance, and the business of trading and making money. I felt that this niche was being neglected, and the void thus created may have been the proverbial straw on the camel’s back that precipitated the current financial meltdown. In setting its sight at such a large problem from its lofty soapbox, the book indeed starts with an ambitious goal, but perhaps a timely one.

On the plugin development front, my latest contribution is a translator for other plugins. It will be of interest to fellow plugin authors and their international users. It is a fairly nifty piece of software, if I may say so myself. If you want to take a quick look, here it is. Maklik Translator and my other gem, Tema Tweaker, may not become as popular as my other plugins (which help bloggers make money through AdSense), but they showcase ideas and programming wizardry that few other plugins do. As you can tell, I’m rather proud of them.

Back to blogging now, coming up in the next few days will be an analysis of the philosophy of money (an idea for my next book), the reasons behind quantitative professionals’ failings, and a comparison of the work-culture in a corporate machine and the idyllic (but poorly compensated) academic life. Ag, how I miss those days. There is an old Chinese saying: Be careful what you wish for; you may get it!

Glybane

Maar, hierdie uitspraak van ontken bonus aan die hele maatskappy gedurende slegte tye nie heeltemal reg nie werk, vir 'n verskeidenheid van interessante redes. Eerste, laat ons kyk na die geval van die AIG EVP. AIG is 'n groot firma, met sake-eenhede wat onafhanklik van mekaar funksioneer, amper soos afsonderlike finansiële instellings. As ek aangevoer dat AIG ouens geen bonus moet kry, want die firma uitgevoer abysmally, mens kon wys daarop dat die finansiële markte as 'n geheel het erg sowel. Beteken dit dat geen personeel in enigeen van die banke enige bonus moet maak, selfs as hul spesifieke bank het okay? En waarom daar ophou? Die hele ekonomie is sleg nie. So, moet ons selfs uit al prestasie-aansporings? Sodra ons begin gaan bepaal dat die pad, Ons beland op 'n glybaan na sosialisme. En ons almal weet dat die idee nie die pan uit so goed.

Nog 'n punt oor die huidige bonus skema is dat dit reeds verberg in dit dieselfde tyd segmentering dat ek gespot in my vorige post. True, die tyd segmentering is deur die jaar, eerder as deur die maand. As 'n handelaar of 'n uitvoerende doen goed in een jaar, Hy saai die belonings as groot bonus. As hy mors die volgende jaar, seker, hy nie enige bonus te kry, Maar hy het nog sy basiese salaris tot die tyd wat hy laat gaan. Dit is soos 'n gratis oproep opsie geïmpliseer in alle bank werk 'n hoë-vlieg.

Sulke gratis oproep opsies bestaan ​​in al ons-time gesegmenteer sienings van die lewe. As jy 'n bedrieglike, Ponzi-skema miljardêr, al wat jy hoef te doen is om die opsporing ontsnap totdat jy sterf. Die vloek van kapitalisme is dat bedrog is 'n sonde net ontdek, en tot dan, jy geniet 'n ryk lewe. Hierdie keer element baan die weg vir 'n ander glybaan na bedrog en korrupsie. Weer, dit is iets soos 'n call-opsie met onbeperkte onderstebo en 'n nadeel dat een of ander manier is vloer, beide in duur en intensiteit.

Daar moet 'n gelukkige balans tussen hierdie twee glibberige hange wees — een teen abnormaal sosialisme, en die ander rigting kannibaal korrupsie. Dit lyk vir my soos die hele finansiële stelsel wisselvallig is geleë op 'n metastabiele balans tussen hierdie twee. Dit gegly net op een van die hellings verlede jaar, en ons is almal probeer om tou dit terug na die punt sit nie. In my romantiese fancy, Ek dink 'n gelukkiger en meer stabiele ewewig bestaan ​​dertig of veertig jaar gelede. Was dit in die opponerende ekonomiese ideale van die Koue Oorlog? Of was dit in die welsyn van die staat konsepte Europa, waar regerings stewig beheer die bevelvoerder hoogtes van hulle ekonomieë? As dit so is, kan ons verwag van China (of Indië, of Latyns-Amerika) oor 'n broodnodige teenwig te bring?

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Winsdeling

Onder al die argumente vir stewige bonusse, die mees oortuigende is die een op die wins generasie en deel. Wins vir die kliënte en belanghebbendes, As gegenereer deur 'n bepaalde uitvoerende, moet met hom gedeel. Wat is verkeerd met dat?

Die laaste argument vir bonus aansporings sal ons kyk na hierdie een is in terme van wins (en daarom aandeelhouerswaarde) generasie. Wel, aandeelhouerswaarde in die huidige finansiële onrus het so 'n pak slae geneem dat geen sane bank uitvoerende sou dit aan te bied as 'n argument. Wat is dan links is 'n eerder smal definisie van wins. Hier raak dit moeilik. Die winste vir die meeste finansiële instellings was onpeilbaar. Die argument van die AIG uitvoerende is dat hy en sy span het niks te doen met die verlies maak aktiwiteite het, en hulle moet die beloofde bonus. Hulle distansieer hulself van die debakel en kerf uit hul klein nis wat nie bydra tot dit. Sulke segmentering, hoewel dit klink soos 'n logiese standpunt, is nie heeltemal reg. Om sy dwaling sien, laat ons probeer 'n tyd segmentering. Kom ons sê 'n handelaar het uiters goed vir 'n paar maande maak groot winste, en deurmekaar gedurende die res van die jaar eindig met 'n algehele verlies. Nou, veronderstel hy argumenteer, “Wel, Ek het goed gedoen vir Januarie, Maart en Augustus. Gee my 300% vir diegene maande.” Niemand gaan die argument te koop. Ek dink wat van toepassing is op die tyd moet ook van toepassing op die ruimte (jammer, sake-eenhede of bateklasse, Ek bedoel). Indien die firma swak presteer, miskien al bonusse moet verdwyn.

Soos ons in die laaste post van die reeks sal sien, hierdie argument vir en teen stewige aansporings is 'n moeilike een met 'n paar verrassende implikasies.

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Talent behoud

Selfs nadat ons afslag harde werk en inherente intelligensie as die basis van vrygewige vergoedingspakkette, ons nog nie heeltemal gedoen.

Die volgende argument ten gunste van stewige bonusse bied aansporings as 'n middel van die behoud van die bogenoemde talent. Kyk na die stand van sake van die finansiële markte, die algemene publiek kan verstaanbaar quip, “Wat talent?” en wonder hoekom niemand wil om dit te behou. Dit geïmpliseer kritiek ondanks, behoud talent is 'n goeie argument.

As 'n vriend van my geïllustreer met 'n voorbeeld, veronderstel jy het 'n groot restaurant hoofsaaklik danksy 'n oortreffende sjef. Alles gaan honky Dory. Toe, uit die bloute, 'n idiot kok van jou brand af die hele instelling. Jy, natuurlik, sak agterkant van die kok se, maar sou dalk graag die sjef behou oor jou betaalstaat sodat jy het 'n kans om dit groot weer eens die stof gaan lê. True, jy nie 'n restaurant te hardloop, maar jy nie wil hê jou mededinger sy hande te kry op jou ace sjef. Goeie argument. My vriend verdere toegegee dat wanneer jy openbare befondsing het, die vergelyking verander. Jy het waarskynlik nie meer enige sê oor krediteure, want die geld was nie joune nie.

Ek dink die vergelyking veranderinge vir 'n ander rede sowel. Wanneer al die restaurante in die dorp pretty much is afgebrand, waar is jou kosbare sjef gaan om te gaan? Miskien is dit nie groot bonusse vir hom nou behou.

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Talent en intelligensie

In die laaste post, Ek het aangevoer dat hoe hard ons werk het nie veel om te doen met hoeveel beloning moet ons maai. Na alles, daar is taxi-bestuurders wat langer en harder werk, en selfs meer ongelukkige siele in die krotbuurte van Indië en ander arm lande.

Maar, Ek threading op werklike dun ys wanneer ek vergelyk, egter skuins, senior bestuurders te cabbies en slum honde. Hulle is (die uitvoerende, dit is) duidelik 'n baie meer talentvolle, Dit bring my by die beroemde talent argument vir bonusse. Wat is hierdie talent ding? Is dit intelligensie en artikulasie? Ek het nie eens met 'n taxi-bestuurder in Bangalore wat vlot was in meer as 'n dosyn tale as uiteenlopend as Engels en Arabies. Ek ontdek sy verborge talent deur 'n ongeluk toe hy gekraak het op iets wat my pa vir my gesê — 'n private grap in ons omgangstaal, wat ek selde 'n nie-moedertaal poging. Ek kon nie help om te dink dan — gegee 'n ander plek en 'n ander tyd, hierdie cabbie sou gewees het 'n professor in linguistiek of iets. Talent kan 'n noodsaaklike voorwaarde vir sukses (en bonus), maar dit is beslis nie 'n voldoende een. Selfs onder slum honde, ons kan genoeg talent vind, indien die Oscar-bekroonde film is iets om te gaan deur. Hoewel, die hoofkarakter in die fliek nie, maak sy miljoen dollar bonus, maar dit was eers fiksie.

In die werklike lewe, egter, gelukkige ongelukke omstandighede speel 'n meer kritiese rol as talent om ons op die regte kant van die inkomste verdeel. Vir my, dit lyk dom 'n reg om die beloning gebaseer op 'n persepsie van talent en intelligensie te eis. Heck, intelligensie self, Maar ons dit definieer, is niks anders as 'n gelukkige genetiese ongeluk.

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