Not Even Wrong

The third book I recently read that has some math or physics content is Wall Street Journal reporter Scott Patterson’s The Quants: How a New Breed of Math Whizzes Conquered Wall Street and Nearly Destroyed It. It’s a very lively and entertaining telling of a story which features quite a few mathematicians who have gone on to make (and then sometimes lose) absurd amounts of money using mathematical models to try and exploit market inefficiencies. Jim Simons and his large group of mathematicians and other Ph.D.s at Renaissance play a significant role, and among other mathematicians who make an appearance is Neil Chriss, co-author of Representation Theory and Complex Geometry, one of the most well-known books on geometric representation theory (now available as a “Birkhauser Classic”).

Patterson’s story emphasizes heavily the relationship to gambling. He writes extensively about Ed Thorp, who developed the theory of card-counting, did well with this at casinos, then moved on to the hedge fund business. Just about everyone profiled in Patterson’s book is described as having read and been inspired by Thorp’s 1962 book on card-counting (Beat the Dealer). Many of them are serious poker players, and the book opens by describing the scene at the one of the recent Wall Street Poker Night Tournaments. These are yearly events (Chriss and Simons are among the organizers) that bring together quants and professional poker players to play high-stakes poker, with proceeds donated to Math for America.

The subtitle of the book puts the blame for the financial crisis on this kind of activity, but there’s not much evidence given to justify this. Most of the book is about various hedge funds, and the stories of failure are pretty much the same old story of Long Term Capital Management’s failure back in 1998. Finding some sort of market inefficiency and exploiting it tends to work for a while, but sooner or later either others start doing the same thing or patterns change, sometimes very quickly. If one has gotten greedy and started using too high levels of leverage, one can get in trouble fast. The best-run hedge funds (for instance, Renaissance) managed to stay out of trouble, others didn’t. How much of a public problem all this is remains unclear. To a large extent the failures just lead to some rich people (and universities like Harvard) becoming less rich, while some hedge-fund owners and employees see their income go down but get to keep the fees earned while they were taking too much risk. It’s very clear why a lot of mathematicians and physicists go into this.

None of this though seems to have had a determining part in the disastrous financial crisis of recent years and its ongoing effects. The book has little to say about a more significant failure that involved a different group of quants, those responsible for the bad mathematical models used to justify the mortage securitization business. From what I can tell, there the story is that if there’s a lot of money to be made creating a financial instrument carrying large risks obscured by complexity, it’s not hard to find people willing to help you sell it by creating bad mathematical models of its behavior.

The story of The Quants is a remarkable one, whether or not the people described have some responsibility for the current state of the financial industry and the dangers still embedded in it. While reading the book I couldn’t help thinking that it would be a good idea if the best of them would play a little less poker and take on another pro bono task, that of coming up with a good understanding of the current pathologies of the financial system, and models useful in the task of figuring out how to change it to something more socially desirable.

The second book about physics or math that I finished reading recently is Anil Ananthaswamy’s The Edge of Physics: A Journey to Unlock the Secrets of the Universe. The author has a blog devoted to the topic of the book, as well as a web-site, which includes some wonderful photos of the experiments discussed.

The bulk of the book is devoted to the author’s description of his travels to visit experimental projects around the world devoted to learning more about cosmology, particle physics, dark matter and dark energy. These include CDMS at the Soudan Mine in Minnesota, the Lake Baikal neutrino telescope in Siberia, the Very Large Telescope at Cerro Parranal in Chile, Mauna Kea in Hawaii, the Square Kilometer Array in South Africa, BESS at McMurdo Bay and IceCube at the South Pole in Antarctica, as well as the LHC and Planck satellite. Ananthaswamy is a quite good writer, and does an excellent job of describing the settings of the experiments and what they are trying to measure, as well as the scientists who are working on them.

Unfortunately though, he doesn’t stick to the impressive experimental story going on, but wraps everything in a heavy dose of string theory/multiverse hype. None of the experiments he visited actually are capable of saying anything about string theory or the question of whether or not there is a multiverse. Most of them are investigating subjects like dark matter, which are of great potential interest, but have nothing at all to do with string theory or the multiverse. The only one for which there have been claims of such relevance are cosmological measurements of the spatial curvature of the universe, with Susskind claiming a prediction of the sign (but not the magnitude, experimentally it seems to be zero). This “prediction” actually doesn’t work, see this paper.

It’s too bad that among the string theorists Ananthaswamy interviewed, none included the many prominent ones such as Gross or Witten, or pretty much anyone at Princeton (see for example the book by Gubser reviewed in the previous posting) who could have explained to him the actual situation. So, if you’re interested in what’s going on at the experimental frontiers of this subject, this is a good book to read, as long as you skip all the parts about theory…

Update: Ananthaswamy describes here how decided to deal with the problem of writing about experiments, yet wanting to address string theory.