Week 9: Mixing Metaphors

As I'm reading everyone's blog posts, and seeing how everything is beginning to wind down, I keep having to go take a few deep breaths and think calming thoughts.  It's crazy how fast this project has gone!

I'm still doing some work with the sandpiles (next week I will be working to determine if their dynamics behave differently at different frequencies projected by a speaker system) but I don't think the actual experimental results will play a role in my final product or presentation.  (Rather, the things I've learned about sandpiles and avalanche dynamics will be larger factors.)  On the reading front, I still have one-and-a-half more books to read (one-half about sandpiles and the markets; one about fractals and the markets) and I've started work on my final paper and presentation!

On that front, I'm planning to have my final paper rough draft finished by this coming Thursday, and then after that I'll start on the presentation.  (I'm hoping that having everything already outlined in the paper will make the presentation easier, but I guess we'll see.)

And then... I'll be done?

As long as we're talking about things giving me anxiety issues, fitting my presentation into twenty minutes is going to be a bit of a bear.  I'm guessing I'll be talking about as fast as those prescription drug commercial narrators, where they try to tell you the side effects as fast as possible so you don't have time to wonder why you'd take headache medicine if it's going to give you diarrhea, nausea, and dizziness.

This week, I will be discussing the work of Nassim Taleb, who I mentioned a few weeks ago.  I read his book The Black Swan, which concerns unpredictable events, both in and outside the markets.

Taleb argues that events that are considered by most to be extremely rare (for example, a black swan) are actually more common than would be expected.  He goes on to detail different events that he considers to be black swans; most of them take place in the financial markets.  (It turns out that his "black swans" become metaphors for the fat-tailed distributions I've been going on about for the last few weeks.)

However, what distinguishes Taleb's work is that he argues that these events are not only extreme (and therefore occur more often than a typical bell curve would have us believe) but he also argues that these events are inherently unpredictable.

This is where a friend of Taleb's, a French physicist named Didier Sornette, comes in.  Sornette, who has background in geophysics and other modeling involving critical events, agrees with Taleb about extreme events being a more common occurrence than the traditional bell curve would lead us to believe.  However, he argues that rather than being silent-but-deadly black swans, these events would be better-represented by Dragon Kings; if you "listen" the right way, you can hear them coming.

Sornette can back his claim up; he's actually predicted the last few financial crises (and made quite a bit of money off of it, too.)  If you guys are interested, you can watch his Ted Talk here.  It's really interesting, and in my opinion, makes a  better case for Dragon Kings than for Black Swans.

Hope you all are having a great week!