Books, Philosophy, Physics, Science

Blind-Sight

In my post on A Plausible God, I cited blind-sight as an example of sensing that does not lead to conscious perception. This remarkable neurological syndrome illustrates the tight interconnection between our sense of reality and consciousness. Larry Weiscrantz and Alan Cowey discovered blind-sight at Oxford about 25 years ago.

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.

Books, Philosophy, Physics, Science

A Plausible God

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In my review of The God Delusion, I promised to post a plausible concept of God. By “a plausible concept,” I mean a concept that doesn’t violate the known principles of science, and should therefore be consistent with the so-called scientific worldview. Mind you, the plausibility of the concept says nothing about its veracity; but it may say something about it being a delusion.

Of all the sciences, physics seems to be the one most at odds with the God concept. Clearly, evolutionary biology is none too happy with it either, if Dawkins is anything to go by. But that analysis is for another post.

Let’s start by analyzing a physicist’s way of “proving” that there is no God. The argument usually goes something like this:

If there is a God who is capable of affecting me in any way, then there should be some force exerted by that God on me. There should be some interaction. Since the interaction is big enough to affect me, I should be able to use this particular interaction to “measure” the God-intensity. So far, I haven’t been able to measure any such God-related force. So either there is no God that affects me in any way, or there is a God that affects me through deviously disguised interactions so that whenever I try to measure the interaction, I’m always fooled. Now, you tell me what is more likely. By Occam’s Razor, the simplest explanation (that there is no God that can affect me) has the highest chance of being right.

While this is a good argument (and one I used to make), it is built on a couple of implicit assumptions that are rather tricky to spot. The first assumption is that we cannot be affected by an interaction that we cannot sense. This assumption is not necessarily true.

Modern cosmology needs at least one other kind of interaction to account for dark matter and dark energy. Let’s call this unknown interaction the dark interaction. Even though we cannot sense the dark interaction, we are subject to it exactly as all other (known) matter is. The existence of this interaction beyond our senses is sufficient to break the physicist’s proof. A plausible God can affect us, without our being able to sense it, through dark interactions.

But that is not the end of the story. The physicist can still argue, “Fine, if we cannot sense this God, how would we know he exists? And why do so many people claim they can feel him?” This argument is based on the assumptions on conscious experience and sensing. The hidden assumptions in the physicist’s questions (again, not necessarily true) are:

  1. Sensing should lead to a conscious perception.
  2. All humans should have the same sense modality.

An example of sensing that does not lead to conscious perception is the syndrome of blind sight. (I will post more on it later). A patient suffering from blind sight can point to the light spot he cannot consciously see. Thus, sensing without conscious perception is possible. The second assumption that all men are created equal (in terms of sensory modality) does not have any a priori reason to be true. It is possible that some people may be able to sense the dark interaction (or some other kind of interaction that God chooses) without being conscious of it.

So it is possible to argue that there is a God that affects us through a hitherto unknown interaction. And that some 95% of us can sense this interaction, and the others are atheists. What this argument illustrates is the plausibility of God. More precisely, it demonstrates the consistency of a concept of God with physics. It is not meant to be a proof of the existence of God. And that is why, despite the plausibility of God, I am still an atheist.

In retrospect, this argument did not have to be so complicated. It boils down to saying that there are limits on our knowledge, and to what is knowable. There is plenty of room for God outside these limits. It is also a classic argument by those who believe in God — you don’t know everything, so how do you know there isn’t a God?

Books, Creative, Philosophy, Science

The God Delusion

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I am an atheist. So I agree completely with all the arguments of The God Delusion. As a review of the book, that statement should be the end of it. But somehow the book gave me a strange feeling of dissatisfaction. You see, you may believe in God. Or you may not. Or you may actively believe that there is no God. I fall in this the last category. But I still know that it is only my belief, and that thought fills me with a humility that I feel Dawkins lacks.

Now, it is one thing to say that the concept of God is inconsistent with the worldview you have developed, perhaps with the help of science. The concept is indeed very inconsistent with my own personal worldview, which is why I am an atheist. But it is quite a different matter to discount the concept as a delusion. I believe that our knowledge is incomplete. And that there is plenty of room for a possible God to hide beyond the realms of our current knowledge. Does it mean that we should call our ignorance God and kneel before it? I don’t think so, but if somebody does, that is their prerogative.

You see, it is all a question of what your worldview is. And how much rigor and consistency you demand of it. So, what is a worldview? In my opinion, a worldview is the extension of your knowledge. We all have a certain amount of knowledge. We also have a lot of sensory data that comes in every moment that we have to process. We do most of this processing automatically, without conscious effort. But some of the higher level data and information that we encounter merit a closer analysis. How do we do it, given that we may not know much about it? We use our commonsense, our pre-conceived notions, the value systems our parents and teachers left in us and so on. One of these things that we use, or perhaps the totality of these things, is our worldview.

Let’s take an example. Douglas Adams tells us that dolphins are actually smarter than us and have regular inter-galactic communication. Well, we have no way of refuting this claim (which, of course, is only a joke). But our worldview tells us that it is unlikely to be true. And we don’t believe it — as though we know it is not true.

Another example, one that Bertram Russell once cited. Scripture tells us that faith can move mountains. Some people believe it. Science tells us that a nuclear blast can, well, move mountains. Some people believe that too. Note that most people haven’t directly witnessed either. But even for those who believe in the faith-mountain connection, nuclear energy moving mountains is far more plausible a belief. It is just a lot more consistent with our current worldview.

Now, just because God is a delusion according to Dawkins’s worldview (or mine, for that matter), should you buy it? Not unless it is inconsistent with yours as well. Worldviews are hard to change. So are our stances vis-a-vis God and science, when seen as belief-systems — as the movie Contact vividly illustrates. If you missed it, you should watch it. Repeatedly, if needed. It is a good movie anyway.

It is true what they say about a scientific worldview being inconsistent with any sensible notion of a god. But worldviews are a funny thing. Nothing prevents you from tolerating inconsistencies in your worldview. Although Dawkins goes to some length to absolve Einstein of this lack of consistency, the conventional wisdom is that he did believe in God. The truth of the matter is that our collective knowledge (even after adding Einstein’s massive contribution) is limited. There really is plenty of room beyond its limits for God (or eight million gods, if I were to believe my parents), as I will try to show in my next post.

That, however, is only the tip of the iceberg. Once we admit that there are limits to our knowledge, and to what is knowable, we will soon find ourselves staring at other delusions. What is the point it discounting a God delusion, while embracing a space-delusion? In a universe that is unreal, everything is a delusion, not just God. I know, you think it is just my sanity that is unreal, but I may convince you otherwise. In another post.

Books, Philosophy

Helen Keller

The story of Helen Keller is the story of the dark reality that traps you in the absence of your senses. It is also an illustration of the role of language in breaking out of that darkness. Born a healthy child on June 27, 1880 in Alabama, Helen Keller was a perfectly happy baby — until the tender age of 19 months, when she was stricken with a strange illness that “they called acute congestion of the stomach and brain.” The terrible illness left her blind and deaf — “closed my eyes and ears and plunged me into the unconsciousness of a new-born baby,” as she would later write in her autobiography.

Disconnected from the physical world, Helen was trapped in her dark, silent reality (or the lack thereof). She did not even have thoughts or words in her mind, because the tragedy happened before she started talking. She could not learn from her parents like normal children, because she was blind and deaf. There were no special schools at that time for disadvantaged children like her. When she was seven, Helen’s parents contacted Alexander Graham Bell, the inventor of the telephone, who was also an educator of the deaf. Through his help, they found Anne Sullivan to tutor Helen. Anne Sullivan had special methods of making hand signs to spell out objects. Sadly, none of these tricks worked with Helen for a few frustrating months. She could not make the connection between the hand movements and the objects. It looked as though Helen would be doomed to her dark reality for ever. Here is how she made the connection and broke free from darkness. (This block quote is from Helen Keller’s autobiography “The Story of my Life,” which was ffirst published in 1903 and is in the public domain according to the US copyright laws.)

One day, while I was playing with my new doll, Miss Sullivan put my big rag doll into my lap also, spelled “d-o-l-l” and tried to make me understand that “d-o-l-l” applied to both. Earlier in the day we had had a tussle over the words “m-u-g” and “w-a-t-e-r.” Miss Sullivan had tried to impress it upon me that “m-u-g” is mug and that “w-a-t-e-r” is water, but I persisted in confounding the two. In despair she had dropped the subject for the time, only to renew it at the first opportunity. I became impatient at her repeated attempts and, seizing the new doll, I dashed it upon the floor. I was keenly delighted when I felt the fragments of the broken doll at my feet. Neither sorrow nor regret followed my passionate outburst. I had not loved the doll. In the still, dark world in which I lived there was no strong sentiment or tenderness. I felt my teacher sweep the fragments to one side of the hearth, and I had a sense of satisfaction that the cause of my discomfort was removed. She brought me my hat, and I knew I was going out into the warm sunshine. This thought, if a wordless sensation may be called a thought, made me hop and skip with pleasure.

We walked down the path to the well-house, attracted by the fragrance of the honeysuckle with which it was covered. Some one was drawing water and my teacher placed my hand under the spout. As the cool stream gushed over one hand she spelled into the other the word water, first slowly, then rapidly. I stood still, my whole attention fixed upon the motions of her fingers. Suddenly I felt a misty consciousness as of something forgotten — a thrill of returning thought; and somehow the mystery of language was revealed to me. I knew then that “w-a-t-e-r” meant the wonderful cool something that was flowing over my hand. That living word awakened my soul, gave it light, hope, joy, set it free! There were barriers still, it is true, but barriers that could in time be swept away.

The mystery of language is at the genesis of reality; it is what sweeps away the dark barriers standing between us and our conscious awareness of reality. It took Helen Keller out of nothingness into a world of reality, and if it is not the Word in “The Word was God,” I will never know what is.

Photo by The Library of Congress

Philosophy

What is the Word?

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I know very little about religion. Although my smart-ass comments may appear, once in a while, as profound, I’m really ignorant in matters of theology and religion. After all, I have no formal background in these fields that scholars spend their whole life exploring. So, forgive me if this post comes across as pontificating on something I’d better leave to the scholars; but I cannot help wondering what the Word is. I mean, when they say, “In the beginning, there was the Word,” what exactly is the word?

The verse, John 1:1 “In the beginning was the Word, and the Word was with God, and the Word was God”, is again something people have spent much time researching and pondering over. My cursory search unearthed a couple of lines of thought. These lines were mostly concerned with the accuracy of the translation of the verse from Greek, which was complicated by the lack of “the” or “a” articles in the original language. So the verse could be translated as, for instance, “The Word was the God,” consistent with the monotheist notion of Christianity. Or it could be “The Word was a god,” giving quite a different, perhaps pagan, coloration to the issue.

For obvious (atheistic) reasons, I am not interested in this aspect of the verse, nor in these lines of thought. I found another translation, allegedly more literal, that went like, “When the beginning began, the Word was already there.” This suited my purpose better. Still, what exactly was this Word?

My understanding of this statement is as follows. In the philosophy of language, it can be argued that life, universe and everything exists in language, in thoughts, in your brain. The term “language” as defined here doesn’t just mean the communication tool, it also encompasses your thoughts and ideas. It is the vehicle of your thought process. In the absence of language, you have no thoughts, only animal instincts. You have no conscious awareness, only unthinking reactions to your surroundings. You don’t know that you exist, you don’t know that the world exists. The nothingness that engulfs you in the absence of a language is most poignantly depicted in the inspiring story of Helen Keller, coming up in a few days.

In my view, the “Word” that was there in the beginning is language, the ensemble of your thoughts and ideas, and the thought-processing mechanism. It creates our reality. Before we had language, we had no reality; we had nothing. And John 1:1 is a statement of intention to attribute this world of reality, or the opposite of nothingness, created by language to God. And, to me, this statement is the clearest proof that the saint knew how god was born. Obviously, I am rushing in where angels fear to tread. This view of mine will not be embraced (or even tolerated) by anybody who believes in the theological meaning attached to this text of scripture. And to them, I humbly point out that it is just a view, a mere mortal’s view at that! It probably only goes to show that “The devil can cite Scripture for his purpose!”

Columns, Corporate Life, Physics, Quantitative Finance, The Wilmott Magazine

Modeling the Models

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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. In other words, 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. In other words, 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 fact, 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, say, 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. Of course, 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, where, through the central limit theorem and statistical mechanics, we expect nothing but regular behavior. If I was studying, for instance, 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. Now, 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. Similarly, large fluctuations (and the black swans) may indeed be a side effect of modeling.

Columns, Corporate Life, Quantitative Finance, The Wilmott Magazine, Work and Life

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, on the other hand, 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.

Columns, Coming Soon, Corporate Life, Quantitative Finance, The Wilmott Magazine

Philosophy of Money

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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. Money, in economic transactions, has only a transactional value. It plays the role of a medium facilitating the 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.

Given that the investment value is also measured and returned in terms of money, we get the notion of compound interest and “putting money to work.” Those who have money demand returns based on the investment risk they are willing to assume. And the role of modern financial system becomes one of balancing this risk-reward equation.

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.

Columns, Corporate Life

Back to Blogging…

It has been a while since I wrote anything on my blog. That doesn’t mean that I wasn’t writing. In fact, I was very busy with my second book. 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. Now, 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, Principles of Quantitative Development, 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. Easy Translator and my other gem, Theme 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. Ah, how I miss those days. There is an old Chinese saying: Be careful what you wish for; you may get it!

Columns, Corporate Life, Quantitative Finance, The Wilmott Magazine

Slippery Slopes

But, this dictum of denying bonus to the whole firm during bad times doesn’t work quite right either, for a variety of interesting reasons. First, let’s look at the case of the AIG EVP. AIG is a big firm, with business units that operate independently of each other, almost like distinct financial institutions. If I argued that AIG guys should get no bonus because the firm performed abysmally, one could point out that the financial markets as a whole did badly as well. Does it mean that no staff in any of the banks should make any bonus even if their particular bank did okay? And why stop there? The whole economy is doing badly. So, should we even out all performance incentives? Once we start going down that road, we end up on a slippery slope toward socialism. And we all know that that idea didn’t pan out so well.

Another point about the current bonus scheme is that it already conceals in it the same time segmentation that I ridiculed in my earlier post. True, the time segmentation is by the year, rather than by the month. If a trader or an executive does well in one year, he reaps the rewards as huge bonus. If he messes up the next year, sure, he doesn’t get any bonus, but he still has his basic salary till the time he is let go. It is like a free call option implied in all high-flying banking jobs.

Such free call options exist in all our time-segmented views of life. If you are a fraudulent, Ponzi-scheme billionaire, all you have to do is to escape detection till you die. The bane of capitalism is that fraud is a sin only when discovered, and until then, you enjoy a rich life. This time element paves the way for another slippery slope towards fraud and corruption. Again, it is something like a call option with unlimited upside and a downside that is somehow floored, both in duration and intensity.

There must be a happy equilibrium between these two slippery slopes — one toward dysfunctional socialism, and the other toward cannibalistic corruption. It looks to me like the whole financial system was precariously perched on a meta-stable equilibrium between these two. It just slipped on to one of the slopes last year, and we are all trying to rope it back on to the perching point. In my romantic fancy, I imagine a happier and more stable equilibrium existed thirty or forty years ago. Was it in the opposing economic ideals of the cold war? Or was it in the welfare state concepts of Europe, where governments firmly controlled the commanding heights of their economies? If so, can we expect China (or India, or Latin America) to bring about a much needed counterweight?

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