Tag: lookout

Addition to the Model Makers Oath

Paul Wilmott and Emanuel Derman, in an article in Business Week a couple of years back (at the height of the financial crisis) came up with a model-makers oath. It goes:

• I will remember that I didn’t make the world and that it doesn’t satisfy my equations.

• Though I will use models boldly to estimate value, I will not be overly impressed by mathematics.

• I will never sacrifice reality for elegance without explaining why I have done so. Nor will I give the people who use my model false comfort about its accuracy. Instead, I will make explicit its assumptions and oversights.

• I understand that my work may have enormous effects on society and the economy, many of them beyond my comprehension.

While I like this, and try to abide by it, I want to add another point to the oath:

As a quant, it is part of my responsibility that my fellow-quants don’t misuse quantitative models in finance and bring disrepute to my profession. It is my responsibility that I’ll put in my best efforts to be on the lookout for deviant behavour on the part of other quants, and try my best to ensure that they too adhere to these principles.

Go read the full article in the link above (by Wilmott and Derman). It’s a great read. And coming back to the additional point I’ve suggested here, I’m not sure I’ve drafted it concisely enough. Help in editing and making it more concise and precise is welcome.

 

Shopping in New York

When I went shopping in New York on Friday I was reminded of this article by Tim Harford that the bofi had posted as part of a comment on one of my earlier posts. The basic insight in the article (which draws upon some widely cited research – I’ve read about it in several other places) is that too much choice may not be a good thing. That basically if presented with too much choice you are likely to just put NED rather than put effort into making the choice, and so it makes sense on behalf of the marketer to restrict choice.

So on Sunday evening, after having spent most of the day with a bunch of friends I know through an online group, and an hour or so with RG Mani, a very tired me walked into Macy’s, which claims to be the largest store in the world. I don’t dispute that claim – there are some six floors with each floor being the size of an average Big Bazaar. And there are clothes. And clothes. And shoes. And clothes. And more clothes.

Since I was trying to shop not only for myself, I ended up spending a considerable amount of time in the women’s section also. And the problem there was one of plenty. There was so much stuff to look at that it caused intense NED. I ended up just giving up on large sections of the store, and not even looking at even a sample of price tags there (yeah, I’m a cheap guy and was looking only for heavily discounted stuff). I won’t elaborate further on this “too much choice => NED” funda. Read the Harford article for more on that.

I don’t know what the strategy of the store is and whether they had deeply discounted stuff at all. The sample of clothes that I happened to check the price tags of were all extremely expensive. Perhaps the store did have some cheap stuff, but I don’t understand the policy of hiding it somewhere. Is the thinking that people on the lookout for cheap stuff are going to look more carefully and will hence find it? Which means some kind of “skimming” in terms of people’s attention spans? But the problem with this strategy is that by not displaying the cheap front up front, you may end up turning away a lot of people who look for cheap stuff!

Looking through all the huge floors of Macy’s caused me so much NED that when I saw an excellent looking reasonably priced Tommy Hilfiger sweater I didn’t even bother trying it. Maybe if I’d seen that sweater earlier I would’ve owned it now! So much that choice, and size, can do!

On Monday I went to this store called Century 21 near my office and had a more productive shopping experience. They also had both cheap and expensive stuff but they prominently advertised the cheap stuff with prominent “sale” signboards. Much more targeted, much more convenient for the cheap shopper, much more sales which means much more profits. Only thing I wonder is if this strategy of theirs turned away people looking for the higher margin expensive stuff..

You know, I have this condition

My memory cache (talking about my memory, not my computer’s or my laptop) seems to have suddenly diminished. My life seems to have become very Markovian. In fact, a few months back, I used to think that a Markovian existence is the best kind of existence, since in that kind of a situation, you respond to every situation on instinct, don’t make plans, are always on the lookout to optimize, etc. Now that I’ve actually reached close to that state, I don’t know if it’s desirable.

So basically my already weak short-term memory has become weaker. I’ve already talked about one paradox – I’ve traditionally had great long-term memory but awful short-term memory. I remember strange things, dates when those things happened, the colour of the shirt I was wearing when certain things happened, etc. And I typically can’t remember much of what someone told me recently, or what my mom asked me to buy at the market. The explanation I give myself for this is that I’m weak with details – and missing out on details is not as critical when you are talking about long-term stuff as it is in the short term.

Anyways what has been happening to me of late is that days seem very long. Towards the evening of most days, I really can’t remember what I did that morning. Ok, it’s not that bad – I can remember with some effort, but that effort is approximately equal to the effort required to remember what I did a year ago or some such. Once I get into doing a certain activity, I completely forget about everything I was doing prior to that particular activity – it all goes into memory, rather than staying in cache (like it used to earlier).

The most interesting (and scary) part of the deal is that my memory loss seems to be especially bad when it comes to numbers. This evening, I was out shopping for a computer table. I checked out stuff at some four shops, but as soon as I entered one shop, I completely forgot about the prices quoted in the previous shop. So I actually didn’t have a handle on comparative price. Tomorrow, I’ll mostly go buy that table which I liked best, and trust the shopkeeper to rememeber the price that I’ve bargained.

Considering that I’ve traditionally been a “numbers guy” and have a good eye for numbers, this is extremely scary. I just hope it’s some minor problem caused due to something like lack of sleep (i sleep only 8 hours a day) or hunger (i eat at least 6 times a day) and not something more serious. For example, I use a prepaid mobile phone. And each time after a call or a message I see the balance, I don’t know how much I’ve spent becasue I don’t know the previous balance. I remember that the last time I used a pre-paid phone (the same number; back wehn i was at IIMB) I would meticulously keep track of expenses.

While the condition lasts, I seem to be enjoying myself. Days seem so much longer, so I can relax so much more in the given time. I occasionally feel bored, but quickly find myself something to do, and get engrossed in it. I don’t get easily distracted like I used to. I don’t multitask (earlier I was a compulsive multitasker). I’m able to concentrate again, like I used to during the days of blindfold chess in the backbench. I don’t get worried. I don’t remember a thing from my previous jobs – though I’m sure I can pull it up from secondary memory if absolutely required.

But you know, I have this condition..