- Taleb, Nassim Nicholas.
The Black Swan.
New York: Random House, 2007.
ISBN 978-1-4000-6351-2.
-
If you are interested in financial markets, investing,
the philosophy of science, modelling of socioeconomic
systems, theories of history and historicism, or the
rôle of randomness and contingency in the unfolding
of events, this is a must-read book. The author largely
avoids mathematics (except in the end notes) and makes
his case in quirky and often acerbic prose (there's something
about the French that really gets his goat) which works
effectively.
The essential message of the book, explained by example in
a wide variety of contexts is (and I'll be rather more
mathematical here in the interest of concision) is that while
many (but certainly not all) natural phenomena can be well
modelled by a Gaussian (“bell curve”) distribution,
phenomena in human society (for example, the distribution of
wealth, population of cities, book sales by authors, casualties in
wars, performance of stocks, profitability of companies,
frequency of words in language, etc.) are best described
by scale-invariant power law distributions. While Gaussian
processes converge rapidly upon a mean and standard deviation
and rare outliers have little impact upon these measures, in
a power law distribution the outliers dominate.
Consider this example. Suppose you wish to determine the mean height
of adult males in the United States. If you go out and pick 1000
men at random and measure their height, then compute the average,
absent sampling bias (for example, picking them from among college
basketball players), you'll obtain a figure which is very close to
that you'd get if you included the entire male population of the
country. If you replaced one of your sample of 1000 with the
tallest man in the country, or with the shortest, his inclusion
would have a negligible effect upon the average, as the difference
from the mean of the other 999 would be divided by 1000 when computing
the average. Now repeat the experiment, but try instead to compute mean
net worth. Once again, pick 1000 men at random, compute the net
worth of each, and average the numbers. Then, replace one of the
1000 by Bill Gates. Suddenly Bill Gates's net worth dwarfs that
of the other 999 (unless one of them randomly happened to be
Warren Buffett, say)—the one single outlier dominates the
result of the entire sample.
Power laws are everywhere in the human experience (heck, I even
found one in
AOL search queries),
and yet so-called “social scientists” (Thomas Sowell
once observed that almost any word is devalued by
preceding it with “social”) blithely assume that
the Gaussian distribution can be used to model the variability
of the things they measure, and that extrapolations from
past experience are predictive of the future. The entry
of many people trained in physics and mathematics into the field
of financial analysis has swelled the ranks of those who naïvely
assume human action behaves like inanimate physical systems.
The problem with a power law is that as long as you haven't yet seen the
very rare yet stupendously significant outlier, it looks pretty much like
a Gaussian, and so your model based upon that (false) assumption
works pretty well—until it doesn't. The author calls these
unimagined and unmodelled rare events “Black Swans”—you
can see a hundred, a thousand, a million white swans and consider
each as confirmation of your model that “all swans are white”,
but it only takes a single black swan to falsify your model, regardless
of how much data you've amassed and how long it has correctly predicted
things before it utterly failed.
Moving from ornithology to finance, one of the most common causes
of financial calamities in the last few decades has been the appearance
of Black Swans, wrecking finely crafted systems built on the
assumption of Gaussian behaviour and extrapolation from the past.
Much of the current calamity in hedge funds and financial derivatives
comes directly from strategies for “making pennies by
risking dollars” which never took into account the possibility
of the outlier which would wipe out the capital at risk (not to mention
that of the lenders to these highly leveraged players who thought
they'd quantified and thus tamed the dire risks they were taking).
The Black Swan need not be a destructive bird: for those who
truly understand it, it can point the way to investment success.
The
original business concept
of Autodesk was a bet on a Black
Swan: I didn't have any confidence in our ability to predict
which product would be a success in the early PC market, but I
was pretty sure that if we fielded five products or so, one
of them would be a hit on which we could concentrate after the
market told us which was the winner. A venture capital fund
does the same thing: because the upside of a success can be vastly
larger than what you lose on a dud, you can win, and win big, while
writing off 90% of all of the ventures you back. Investors can
fashion a similar strategy using options and option-equivalent
investments (for example, resource stocks with a high cost of
production), diversifying a small part of their portfolio across
a number of extremely high risk investments with unbounded upside
while keeping the bulk in instruments (for example sovereign debt) as
immune as possible to Black Swans.
There is much more to this book than the matters upon which I have
chosen to expound here. What you need to do is lay your hands on this
book, read it cover to cover, think it over for a while, then read it
again—it is so well written and entertaining that this will be a
joy, not a chore. I find it beyond charming that this book was
published by Random House.
- Hendrickx, Bart and Bert Vis.
Energiya-Buran.
Chichester, UK: Springer Praxis, 2007.
ISBN 978-0-387-69848-9.
-
This authoritative history chronicles one of the most bizarre episodes
of the Cold War. When the U.S. Space Shuttle program was launched in 1972,
the Soviets, unlike the majority of journalists and space advocates in the
West who were bamboozled by NASA's propaganda, couldn't make any sense
of the economic justification for the program. They worked the numbers, and
they just didn't work—the flight rates, cost per mission, and most
of the other numbers were obviously not achievable. So, did the Soviets
chuckle at this latest folly of the capitalist, imperialist aggressors and
continue on their own time-proven path of mass-produced low-technology
expendable boosters? Well, of course not! They figured that even if their
wisest double-domed analysts were unable to discern the justification for
the massive expenditures NASA had budgeted for the Shuttle, there must
be some covert military reason for its existence to which they hadn't
yet twigged, and hence they couldn't tolerate a shuttle gap
and consequently had to build their own, however pointless it looked on the surface.
And that's precisely what they did, as this book so thoroughly documents,
with a detailed history, hundreds of pictures, and technical information which
has only recently become available. Reasonable people can argue about the
extent to which the Soviet shuttle was a copy of the American (and since
the U.S. program started years before and placed much of its design data
into the public domain, any wise designer would be foolish not to profit by
using it), but what is not disputed is that (unlike the
U.S. Shuttle) Energiya was a general purpose heavy-lift launcher which had
the orbiter Buran as only one of its possible payloads and was one of the most
magnificent engineering projects of the space programs of any nation,
involving massive research and development, manufacturing, testing,
integrated mission simulation, crew training, and flight testing
programs.
Indeed, Energiya-Buran was in many ways a better-conceived program for space
access than the U.S. Shuttle program: it integrated a heavy payload cargo launcher
with the shuttle program, never envisioned replacing less costly expendable boosters
with the shuttle, and forecast a development program which would encompass
full reusability of boosters and core stages and both unmanned cargo and manned
crew changeout missions to Soviet space stations.
The program came to a simultaneously triumphant and tragic end: the Energiya
booster and the Energiya-Buran shuttle system performed flawless missions
(the first Energiya launch failed to put its payload into orbit, but this was
due to a software error in the payload: the launcher performed nominally from
ignition through payload separation).
In the one and only flight of Buran (launch and landing video, other launch views) the orbiter was placed into its intended orbit and
landed on the cosmodrome runway at precisely the expected time.
And then, in the best tradition not only of the Communist Party of the Soviet Union but of
the British Labour Party of the 1970s, this singular success was rewarded by
cancellation of the entire program. As an engineer, I have almost unlimited admiration
for my ex-Soviet and Russian colleagues who did such masterful work and who
will doubtless advance technology in the future to the benefit of us all.
We should celebrate the achievement of those who created this magnificent space
transportation system, while encouraging those inspired by it to open the
high frontier to all of those who exulted in its success.
- Sinclair, Upton.
Dragon's Teeth. Vol. 2.
Safety Harbor, FL: Simon Publications, [1942] 2001.
ISBN 978-1-931313-15-5.
-
This is the second half of the third volume in Upton Sinclair's
grand-scale historical novel covering the years from 1913 through
1949. Please see my
notes on the first half for details on the
series and this novel. The second half, comprising books
four through six of the original novel (this is a print on
demand facsimile edition, in which each of
the original novels is split into two parts due to
constraints of the publisher), covers the years 1933 and 1934,
as Hitler tightens his grip on Germany and persecution of the
Jews begins in earnest.
The playboy hero Lanny Budd finds himself in Germany trying
to arrange the escape of Jewish relatives from the grasp of
the Nazi tyranny, meets Goebbels, Göring, and eventually
Hitler, and discovers the depth of the corruption and depravity
of the Nazi regime, and then comes to experience it directly when
he becomes caught up in the
Night
of the Long Knives.
This book was published in January 1942, less than a month
after Pearl Harbor. It is remarkable to read a book written
in a time when the U.S. and Nazi Germany were at peace and
the swastika flag flew from the German embassy in Washington
which got the essence of the Nazis so absolutely correct
(especially the corruption of the regime, which was overlooked
by so many until Albert Speer's books decades later). This is
very much a period piece, and enjoyable in giving a sense of how
people saw the events of the 1930s not long after they happened.
I'm not, however, inclined to slog on through the other novels
in the saga—one suffices for me.
- Butterfield, Jeremy.
Damp Squid.
Oxford: Oxford University Press, 2008.
ISBN 978-0-19-923906-1.
-
Dictionaries attempt to capture how language (or at least the
words of which it is composed) is used, or in some cases
should be used according to the compiler of the
dictionary, and in rare examples, such as the
monumental
Oxford English Dictionary (OED),
to trace the origin and history of the use of words over
time. But dictionaries are no better than the source material
upon which they are based, and even the OED, with its millions
of quotations contributed by thousands of volunteer readers, can only
sample a small fraction of the written language. Further,
there is much more to language than the definitions of
words: syntax, grammar, regional dialects and usage,
changes due to the style of writing (formal, informal,
scholarly, etc.), associations of words with one another,
differences between spoken and written language, and
evolution of all of these matters and more over time.
Before the advent of computers and, more recently, the
access to large volumes of machine-readable text afforded
by the Internet, research into these aspects of linguistics
was difficult, extraordinarily tedious, and its accuracy
suspect due to the small sample sizes necessarily used in
studies.
Computer linguistics sets out to study how a language is actually
used by collecting a large quantity of text (called
a corpus), tagged with identifying information useful
for the intended studies, and permitting measurement of the statistics
of the content of the text. The first computerised corpus was
created in 1961, containing the then-staggering number of one million
words. (Note that since a corpus contains extracts of text, the
word count refers to the total number of words, not the number of
unique words—as we'll see shortly, a small number of words
accounts for a large fraction of the text.) The preeminent
research corpus today is the
Oxford
English Corpus which, in 2006, surpassed two billion words
and is presently growing at the rate of 350 million words a
year—ain't the Web grand, or what?
This book, which is a pure delight, compelling page turner,
and must-have for all fanatic “wordies”, is a light-hearted
look at the state of the English language today: not what it
should be, but what it is. Traditionalists
and fussy prescriptivists (among whom I count myself) will be
dismayed at the battles already lost: “miniscule”
and “straight-laced” already outnumber “minuscule”
and “strait-laced”, and many other barbarisms and
clueless coinages are coming on strong. Less depressing and more
fascinating are the empirical research on word frequency
(Zipf's Law
is much in evidence here, although it is never cited by name)—the ten
most frequent words make up 25% of the corpus, and the top one
hundred account for fully half of the text—word origins,
mutation of words and terms, association of words with one
another, idiomatic phrases, and the way context dictates the
choice of words which most English speakers would find almost
impossible to distinguish by definition alone. This amateur astronomer
finds it heartening to discover that the most common noun modified
by the adjective “naked” is “eye” (1398
times in the corpus; “body” is second at 1144 occurrences).
If you've ever been baffled by the origin of the idiom “It's
raining cats and dogs” in English, just imagine how puzzled
the Welsh must be by “Bwrw hen
wragedd a ffyn” (“It's raining old women
and sticks”).
The title? It's an example of an “eggcorn”
(p. 58–59): a common word or phrase which mutates
into a similar sounding one as speakers who can't puzzle out its original,
now obscure, meaning try to make sense of it. Now that the
safetyland culture has made most people unfamiliar with explosives,
“damp squib” becomes “damp squid” (although,
if you're a squid, it's not being damp that's a
problem). Other eggcorns marching their way through the language
are “baited breath”, “preying mantis”,
and “slight of hand”.
- Smith, L. Neil, Rex F. May, Scott Bieser, and Jen Zach.
Roswell, Texas.
Round Rock, TX: Big Head Press, [2007] 2008.
ISBN 978-0-9743814-5-9.
-
I have previously mentioned this story and even
posted
a puzzle
based upon it. This was based upon the
online
edition, which remains available for free. For me,
reading anything, including a comic book (sorry—“graphic
novel”), online a few pages a week doesn't count as reading
worthy of inclusion in this list, so I deferred listing it until
I had time to enjoy the trade paperback edition, which has been
sitting on my shelf for several months after its June 2008
release.
This rollicking, occasionally zany, alternative universe story
is set in the libertarian Federated States of Texas, where, as
in our own timeline, something distinctly odd happens on
July 4th, 1947 on a ranch outside the town of Roswell. As
rumours spread around the world, teams from the Federated
States, the United States, the California Republic, the
Franco-Mexican Empire, Nazi Britain, and others set out to
discover the truth and exploit the information for their own
benefit. Involved in the scheming and race to the goal
are this universe's incarnations of
Malcolm Little,
Meir Kahane,
Marion Morrison,
Eliot Ness,
T. E. Lawrence,
Walt Disney,
Irène Joliot-Curie,
Karol Wojtyla,
Gene Roddenberry, and
Audie Murphy,
among many others. We also encounter a most curious character
from an out of the way place L. Neil Smith fans will recall
fondly.
The graphic format works very well with the artfully-constructed
story. Be sure to scan each panel for little details—there
are many, and easily missed if you focus only on the text. The only
disappointment in this otherwise near-perfect entertainment is
that readers of the online edition will be dismayed to discover
that all of the beautiful colour applied by Jen Zach has been flattened
out (albeit very well) into grey scale in the print edition. Due
to the higher resolution of print, you can still make out things
in the book edition which aren't discernible online, but it's a
pity to lose the colour. The publisher
has
explained the economic reasons which compelled this decision,
which make perfect sense. Should a “premium edition” come
along, I'll be glad to part with US$40 for a full colour copy.
- Trevor-Roper, Hugh.
Hitler's War Directives.
Edinburgh: Birlinn, [1964] 2004.
ISBN 978-1-84341-014-0.
-
This book, originally published in 1964, contains all of Adolf Hitler's
official decrees on the prosecution of the European war, from preparations
for the invasion of Poland in 1939 to his final exhortation to troops
on the Eastern Front of 15th April 1945 to stand in place or die. The
author introduces each of the translated orders with an explanation
of the situation at the time, and describes subsequent events.
A fifteen page introduction explains the context of these
documents and the structure of the organisations to which they were
directed.
For those familiar with the history of the period, there are few revelations
to be gained from these documents. It is interesting to observe the
extent to which Hitler was concerned with creating and substantiating
the pretexts for his aggression in both the East and West, and also
how when the tide turned and the Wehrmacht was rolled back from Stalingrad
to Berlin, he focused purely upon tactical details, never seeming to
appreciate (at least in these orders to the military, state, and party)
the inexorable disaster consuming them all.
As these are decrees at the highest level, they are largely composed of
administrative matters and only occasionally discuss operational items;
as such one's eyes may glaze over reading too much in one sitting. The
bizarre parallel structure of state and party created by Hitler is evident
in a series of decrees issued during the defensive phase of the war in which
essentially the same orders were independently issued to state and party
leaders, subordinating each to military commanders in battle areas. As the
Third Reich approached collapse, the formal numbering of orders was abandoned,
and senior military commanders issued orders in Hitler's name. These are
included here using a system of numbering devised by the author. Appendices
include lists of code names for operations, abbreviations, and people whose
names appear in the orders.
If you aren't well-acquainted with the history of World War II in Europe,
you'll take away little from this work. While the author
sketches the history of each order, you really need to know the big
picture to understand the situation the Germans faced and what
they knew at the time to comprehend the extent to which Hitler's orders evidenced
cunning or denial. Still, one rarely gets the opportunity to read the
actual operational orders issued during a major conflict which ended
in annihilation for the person giving them and the nation which
followed him, and this book provides a way to understand how ambition,
delusion, and blind obedience can lead to tragic catastrophe.