Good (Taleb) and bad (Triana) reads in economics.

Driven by my relentless, not to mention huge, defeatist streak, I have been reading up on the reason we got ourselves in the economical pickle we are in.
My original interest was sparked by this article in Wired, this one in Nova, and other similar stories, that eventually pointed me to the books of Nassim Nicholas Taleb.

Nassim Nicholas Taleb is a charming, thought-provoking, engaging author, who persuasively presents a very original point of view. So original, in fact, that its impact goes well beyond markets and economics: actually I was most impressed by the scope of what Taleb has to say and its significance with regard to (my) personal life and way of thinking.Taleb is also a poseur, which can occasionally be overbearing, and has multiple chips on his shoulders (which he will discuss only in an oblique way). That this objective faults are easily (well, almost easily) forgiven in view of what he has to say goes entirely to his credit. His best books ("Fooled By Randomness" and "The Black Swan") are very good reads, which I wholeheartedly recommend.

Pablo Triana ("Lecturing Birds on Flying") shares most of Taleb's ideas - at least on the surface - and relentlessly defers to Taleb, who wrote an introduction for his tome - that also happens to be the best part of the book, by the way. He is, however, a very different kettle of fish - and of author. He is pompous to begin with - especially when he is expounding on his accomplishments (either as a student, teacher, or trader) or on his ideas on how to reform Business school and academia in general (based on the old and worn-off paradigms of trenches vs. ivory towers and doers vs. thinkers). He is, in fact, so abstraction averse, that one wonders how he can get on with Taleb who is - for all his professions of pragmatism - a quite abstract fellow himself. With respect to his professed role models, Triana behaves as the archetypal follower (or fanboy, if you will ), with a hard to miss Uriah Heep streak (see how he defers to Steve Shreve).

Triana also comes with a gigantic chip on his shoulder, very squarely aimed at financial economics professors. This is not strange in itself, considering his book is a diatribe against the quantitative financial models that originate - mostly - within those academic circles. It is also a point of view that he shares with Taleb, whose resentment against academic circles is also quite sharp. Triana's core motivation however, are more mundane than Taleb's and eventually much less persuasive.

The biggest reason for his quibbles appears to be that he doesn't like math - which looks a lot like an Oedipus type complex: maybe he failed Calculus in his sophomore year, or was denied tenure at MIT. I did my best to forget this particular, childish reason during my perusal of his book (not easy, given he likes to flash his math loathing at the slightest provocation). For his dislike he also states other, sounder reasons, mostly mutuated from Taleb (reasons that I happen to concur with, by the way). The conclusions he draws however, though superficially similar to Taleb's are actually quite different (in my eye) and much harder to swallow.

Triana worships practitioning traders i.e. - as far as my understanding goes - himself. Because of this unrequited love, one of the hidden purposes of his book is clearly letting practitioners off the hook of the last four or five financial crises, piling all the blame on quantitative traders (quants).

Taleb's take on the recent financial mayhems is "We cannot model, because we do not understand" - at least not now, not with these tools. Tough, stark, but extremely interesting.

Triana goes more like "Short range models are a convenient, as long as they suit me". His trading floor/business school heaven goes more or less like this:

• all quants are devoted to the menial backoffice jobs that the practitioning Trianas have difficulty with: keep computers running, write GUIs in C++ for analytical models of their own devising - after approval and under stric supervision of the practitioners.

• when the rich practitioners retire, they sit on cracker barrels in B-school, recounting war tales to adoring and cutely young students.

How quaint. What does not compute, at least not in my book, is the fact that the people that commissioned, bought, misunderstood and wildly abused the models that Triana abhors are ... the practitioners themselves. Correct, the charming princes that would (if only the modelers let them) fix the evil of analytic finance are the money grabbing types that misused their analytic tools to the point where they blew up the entire economy, and often themselves in the process. So sorry, Pablo, but I cannot find your exculpation very convincing.

Add to this that Triana's style is extremely long winded and particularly effectiv in driving me to impatience. Uncharacteristically - for myself - I found that, by the middle of his book, I was checking the first sentence on every paragrpah to decide if it was worth reading or if it could be skipped without detriment to the general comprehension - skipping was often safe.

So my advice is, don't bother with "Lecturing Birds on Flying" - it won't add much to what you can get from Taleb's books, but it will tax your patience much more. If you need an executive summary, you can read my final impression in another post.

I'll add my .02 euros.

• .01 - One of the irritating things about Triana's approach is that he appears to be persuaded that the situation can be fixed by giving traders more status, whereas I am convinced that the overinflated egoes of the self appointed "masters of the universe" on the Wall Street and other trading floors around the world are largely to blame for the current mess. After their rather spectacular failures, I'd rather see them cut down to the rank of the glorified pork belly merchants that they are. I also believe that, if we returned to calling 'cooks' what are now called 'chefs' and 'taylors' what are now called 'fashion designers', etc. air would be more breathable.

• .02 - I think that both authors would agree that analytical modeling on some scale is made necessary by the speed of automatic trading: if you use computers as trading tools, you have to feed them models (even uncomplicated, minimal ones) in order to perform trades. However, at the time of their writing, both auhors fail to mention or see (Taleb probably has too much fun programming) what appears to me one of the most important factors of the recent economic gyrations. Namely, that for many years automation induced speed has been compounding demographics induced speed (the increase in number of market players), makes feedback loops unstable. Trading speed is outpacing control and decision-making cycles, and this fuels destructive market crises, quite similar to - or even coinciding with - bank runs. As a consequence, I think that heavy brakes need to be applied: not only analytical models should not be used, but - ideally - computers and even cell phones should be banned from trading floors.

Formazione professionale

Da bravo benpensante, ho passato un paio di giorni a scandalizzarmi dell'intervista televisiva di Terry de Nicolò (che altri chiamano l'intervista shock).

Poi ho capito che dev'essere stato un errore di programmazione. Quasi certamente doveva essere trasmessa tra i corsi di qualificazione professionale e lezioni universitarie che vanno (andavano?) normalmente in onda a tarda ora sul secondo canale.

In quel contesto, non c'è shock, ad esempio:

• "la bellezza ha un valore" - come negarlo, nella sua professione. E dire che quasi tutti hanno capito "la bellezza è un valore";

• "se sei racchia, se fai schifo, te ne devi stare a casa" - Un'imprecisione: puoi anche passeggiare sul marciapiede;

• "devi essere pronto a vendere il c..." (et come, non);

• "devi essere pronto a vendere tua madre" Un po' mi sorprende, ma se c'è domanda, la Terry lo saprà;

• "se vuoi 20,000 euro al mese... se no stai a casa con 2,000 euro al mese" - altra sorpresa, pensavo che per chi esercita in appartamento ci fosse più business;

• "A sinistra è peggio perché lì sono loffi e non pagano" - nozioni di marketing.

Insomma, un buon seminario di aggiornamento professionale.

Una interessante progressione armonica.

E' detta anche "giro di Silvio":
Si-Fa-La minore

Nota: smiley obbligatorio per gli humour-impaired :-)

Il resto è rumore

"Music is always migrating from its point of origin to its destiny in someone’s fleeting moment of experience—last night’s concert, tomorrow’s solitary jog." — Alex Ross —The Rest Is Noise: Listening to the Twentieth Century

"La musica è sempre in viaggio, dal luogo della sua origine al suo destino nella passeggera esperienza di qualcuno — il concerto di ieri sera, la corsa solitaria di domattina." — Alex Ross — Il resto è rumore. Ascoltando il XX secolo

He who lives by the aphorism

He who lives by the aphorism ends up dying by it.

"When someone makes a statement that this in the financial markets should happen every ten thousand years, visibly they are not making a statement based on empirical evidence, or computation of the odds, but based on what? On some model, some theory. Do you ever regard how worrisome it is, when someone makes a statement like that, ``it should happen every ten thousand years'' particularly when the person is not even two thousand years old?" - Nassim Nicholas Taleb

"In the past, most were ignorant, one in a thousand were refined enough to talk to. Today, literacy is higher, but thanks to progress, the media, and finance, only one in ten thousand." - Nassim Nicholas Taleb (from his book of aphorisms, ``The Bed of Procustes'')

"Do you ever regard how worrisome it is, when someone makes a statement like that, ``one in ten thousand people are refined enough to talk to'' when the person probably has attempted to have ``refined'' conversations with not even two thousand people?" - Me

Happy Birthday Jorge Luis.

La Biblioteca de Babel

El universo (que otros llaman la Biblioteca) se componte de un número indefinido, y tal vez infinito, de galerías hexagonales, con vastos pozos de ventilación en el medio, cercados por barandas bajísimas. Desde cualquier hexágono se ven los pisos inferiores y superiores: interminablemente. La distribución de las galerías es invariable. Veinte anaqueles, a cinco largos anaqueles por lado, cubren todos los lados menos dos; su altura, que es la de los pisos, excede apenas la de un bibliotecario normal. Una de las caras libres da a un angosto zaguán, que desemboca en otra galería, idéntica a la primera y a todas. A izquierda y a derecha del zaguán hay dos gabinetes minúsculos. Uno permite dormir de pie; otro, satisfacer las necesidades finales. Por ahí pasa la escalera espiral, que se abisma y se eleva hacia lo remoto. En el zaguán hay un espejo, que fielmente duplica las apariencias. Los hombres suelen inferir de ese espejo que la Biblioteca no es infinita (si lo fuera realmente ¿a qué esa duplicación ilusoria?); yo prefiero soñar que las superficies bruñidas figuran y prometen el infinito... La luz procede de unas frutas esféricas que llevan el nombre de lámparas. Hay dos en cada hexágono: transversales. La luz que emiten es insuficiente, incesante.

[...]

Yo me atrevo a insinuar esta solución del antiguo problema: La biblioteca es ilimitada y periódica. Si un eterno viajero la atravesara en cualquier dirección, comprobaría al cabo de los siglos que los mismos volúmenes se repiten en el mismo desorden (que, repetido, sería un orden: el Orden). Mi soledad se alegra con esa elegante esperanza.

-- Jorge Luis Borges (Jorge Francisco Isidoro Luis Borges Acevedo) (August 24, 1899 – June 14, 1986)

No cheating ma...

That's 33,600

Riscoprire Pitigrilli

"Poiché siamo sulla via delle confidenze, riconosco di aver assecondato il teppismo del lettore. Mi spiego: per la strada, quando scoppia un litigio o avviene un incidente della circolazione, scaturisce improvvisamente dalle viscere della terra un individuo che cerca di dare un'ombrellata a uno dei due contendenti, che generalmente è l'automobilista. Il teppista ignoto ha sfogato il suo rancore latente. Così nei libri: il lettore che non ha idee o le ha allo stato amorfo, quando trova una frase pittoresca, fosforescente o esplosiva, se ne innamora, l'adotta, la commenta con un punto esclamativo, con un 'bene!', un 'giusto!', come se egli l'avesse sempre pensata così, e quella frase fosse l'estratto quintessenziale del suo modo di pensare, del suo sistema filosofico. Egli 'prende posizione', come diceva il Duce. Io gli offro il modo di prendere posizione senza scendere nella giungla delle varie letterature." Pitigrilli, "Dizionario Antiballistico"

Così facebook (o con internet), e i suoi stuoli di fanboys.

Rediscovering Pitigrilli

"As I am in a confidential mood, I will acknowledge I have been going along with my reader's hooliganism. Explanation: during every street side discussion, or car accident, a character appears, as if from underground, and tries to hit one of the contendents (generally the car driver) with his umbrella. This unknown hooligan does nothing else then venting his latent aggressiveness. So with books: a reader devoid of ideas (or endowed with rather amorphous ideas) reads a sentence - picturesque, striking, unusual - falls in love with it, takes it in, and comments it with an exclamation mark: 'right on!' 'my feelings exactly!'. It's as if that it had always been his thought, and that sentence the expression of his true inner feelings, his philosophy on the subject. As the Duce used to say, he 'take a position'. I offer the reader a way to 'take a position' without the inconvenience of negotiating the jungle of the various literatures." Pitigrilli, "Dizionario Antiballistico"

So it is with facebook (or the internet) and its flock of fanboys.

Xen hotplugging of USB devices in passthrough

Xen's management of USB devices in passthrough (especially for HVM guests, such as windows machines) sucks like a tornado. (kvm's does not shine either, for mostly the same reasons). Among other shortcomings, hotplugging does not work: unplug the device, or turn off your printer, and it disappears - for good. Plugging it in/turning it on will not bring it back into your domU.

The situation can be improved upon using udev rules and a script.

Udev file: /etc/udev/rules.d/99-zlocal:

  SUBSYSTEM=="usb", SYSFS{idVendor}=="0951", SYSFS{idProduct}=="1646", \ 
   ENV{idDomU}="mosaico", ENV{idVendor}="0951", ENV{idProduct}="1646",\
   RUN+="/usr/local/bin/xen-usb-hotplug mosaico 0951 1646"

(Translation:
if subsystem is usb, vendor 0951 and product 1646 - this numbers can be found with lsusb - put some stuff in the environment and insert a program in the run chain for this event)

The program goes like this::

#!/bin/bash

PROMPT="xen-usb-hotplug(ORION):"
XM=/usr/sbin/xm
logger "${PROMPT} HOTPLUGGING"
logger "${PROMPT} started with environment: $(env)"
DOMU=$1
VENDOR=$2
PRODUCT=$3
#if CLI parameters are unavailable, try to use environment

[[ x${DOMU:=$idDomU}       == x ]] && { logger -p user.error "${PROMPT} DOMU is not set"; exit 0 ;    }
[[ x${VENDOR:=$idVendor}   == x ]] && { logger -p user.error "${PROMPT} VENDOR is not set"; exit 0 ;  }
[[ x${PRODUCT:=$idProduct} == x ]] && { logger -p user.error "${PROMPT} PRODUCT is not set"; exit 0 ; }
if [[ x$ACTION != xadd ]]; then
  logger "${PROMPT} ${XM} usb-del  $DOMU host:${VENDOR}:${PRODUCT}"
  ${XM} usb-del  $DOMU host:${VENDOR}:${PRODUCT}
else
  logger "${PROMPT} ${XM} usb-add  $DOMU host:${VENDOR}:${PRODUCT}"
  ${XM} usb-add  $DOMU host:${VENDOR}:${PRODUCT}
fi

This sets some service variables, grabs parameters from the CLI, and - if action equals "add", uses "xm usb-add" to stuff the device in the approrpiate domU.
Note that the "remove" part is purely ornamental, because - when unplugged - the device has different information, and the rule is not triggered.
Also note that, to be complete, one would need to discriminate among devices with same vendor and prodID. This is left as an exercise to the reader.

Note: I owe part of what above (essentially the idea of using udev to run a script on usb insertion) to a - since disappeared - blog note by Lorenzo Simionato.