Monthly Archives: June 2007

Standard Deviation is a deviation from reality

I, Baruch, have started reading  Naseem Taleb’s book, The Black Swan, for the second time, having just finished it. People like me will read it because they are interested in markets, but in reality it has as much to do with philosophy, ethics and epistemology. In this, it is relevant to Spinoza students; it joins the corpus that continues the great project of enlightenment: what is real, and what should we do about it?

This book confirms a number of my prior prejudices, and I love anything that does that. As you regular readers (all one of you) know, I run an equity fund. I get paid (not enough) based primarily on how much money I run (a few hundred million dollars) and on the relative performance of that fund against a benchmark (this has always been positive so far, though Taleb would say this might be pure luck). Recently however, I have also started to get paid partly on something called a Sharpe Ratio. This measures my annual performance against the “standard deviation” of my returns over some prescibed period (maybe monthly, daily, I don’t actually know). So if I make, say, 30% in a year, I should not be pleased with myself unless I added just a little bit of performance every day adding up to 30%. If that performance comes in great weekly gobs of 10%, 15%, 20%  or more, accompanied by periodic swingeing losses of 5-15%, then I am in fact, not a winner but a schmuck. You, my punter, get to pocket 30% and buy a yacht, but doing it in an interesting and exciting way is apparently worth less to you than doing it boringly. Presumably also the yacht you buy for exactly the same amount of money which I just made for you “feels” different, the one bought with profits that arose with less volatility being “better”. This was bitter sarcasm, by the way. No-one has yet told me how to make 15%-30% in a stock portfolio without taking risks in a way which leaves me open to big drawdowns. I am just told “keep your Sharpe Ratio up, the consultants love it.”

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NOC all its crackberried up to be

Research in Motion (RIMM) is Baruch’s bugbear. He has missed the stock completely, it is a huge winner, up over 100% in the past 12 months. So he feels some Schadenfreude over their latest client loss.

However, he thinks the main point is being lost amid the ballyhoo of the French government’s decision to ban the use of RIMM’s blackberry by its higher level ministers and those in possession of state secrets. Silly French, say the blogs, often adding unnecessary remarks about cowardice and cheese. Baruch’s own beloved Swiss employer, a venerable private bank which shall remain nameless, and which has on its books a number of clients for whom confidentiality is, shall we say, an important concern, made the decision to do the same for its staff some time ago. Baruch is pleased, not having a blackberry gives him a semblance of privacy while on the road, and a certain curmudgeonly satisfaction; in a small way he feels he is standing athwart the path of history and yelling “Stop!”.

Anyway, the point is not that RIMM’s security set up, where everything goes through a central Network Operating Center (or NOC) is in fact insecure. It has double-super-secret encryption layers piled on each other like onion flesh. It is not that RIMM is untrustworthy, or incompetent. The point is surely that data in the NOC may eventually be subject to a subpeona by a US state agency (in fact, we know going without a subpeona seems to work quite well too). US companies (RIMM is Canadian, but 80% of its business must be in the US) are known to respond favourably to “requests” by the government for access to confidential client data. Verizon and AT&T have no qualms about giving up your secrets to Homeland Security in the name of the GWOT. Why, ask the French, and my IT department, is it safe to assume RIMM would not?

RIMM swears blind it has no access itself to the content of the data that passes through its NOC, but then again, RIMM claims the NOC is the key to the security of its system, filtering dangerous content such as viruses, spam and whatnot through its veeblefitzers and triple-redundant doodads (a technical term, don’t worry). Do you really want to bet they haven’t got a backdoor? Baruch is with the French. This is not a judgement on RIMM, it is the reasonable distrust that any sane foreign government and enterprise with a sensitive client base should have in the good faith of the US government, not just in its current iteration.

Islamic Spinoza wannabes get organised

Seeing so many in the Muslim world getting het up about Salmon Rushdie getting his knighthood makes me think they’re going to go nuts for this new pressure group: the Council of ex-Muslims of Britain.

Actually it begs a question. Is there such a thing as excommunication in Islam? Apparently there is, but it seems in Shia doctrine both parties have to consent to it. This would seem reasonable, humane even, were it not for the instant fatwa of death that often follows.

The Economist. The worst investment adviser ever?

I’ve written before about the tendency of commentators who are Obviously Clever to be negative about the stockmarket, and how in this they are generally completely wrong, at best, or at worst simply confusing. It’s not as if you can use them as contra-indicators because sometimes, just often enough to keep them in business, the stockmarket actually does go down. The negativity is widespread among practictioners and the chattering classes. Some really make clever points (Epicurean Dealmaker never got back to me; maybe he had an associate to torture instead — “now make all these charts Blue, you little shit”. I’ve been there), others merely supply sub-taxi-driver drivel.

But for a really serious case of ants in the pants, you can’t do better than the Buttonwood column in the Economist. The latest one is not on the web yet. Let me describe it from a copy of the print version which I keep next to my toilet:

Signs of the Beast is the title. 2 evil yellow eyes peer out at you from the dark in the accompanying illustration. Despite the rise in assets of the past few years (fought at every step by the Economist) things are “almost been too good to be true”. Investors may be complacent. The “grubby” bargain between high saving Asians and high spending Americans may break down. Steven Roach. Carry trade unwinding. 3 things to panic about when they happen: i) yen ii) spreads iii) inflation. OK, sure, “equities may be the asset class best placed to withstand inflation”, BUT “a world in which inflation, bond yields and short rates were trending higher would be the complete opposite of that which has prevailed in the long bull run”. We’re screwed, or rather you are.

A more priceless regurgitation of received wisdom and consensus hand-wringing I never yet did read. All the more amusing that the day the Economist went to press (I think it is Thursday), the few down days in the market which had inspired the piece were paid off with a major high volume, late day rally to new highs with another big follow-through on Friday, when this edition fell into my letterbox.

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Bisybackson

Apologies for blogging hiatus. Baruch’s wife went back to work. It doesn’t just mean fewer hot dinners when your beloved correspondent returns, exhausted from a hard day lens-grinding, but also a range of new duties such as baby feeding, child entertaining, baby washing, child washing, child catching before child washing, hula dancing, cooking, shopping, pizza-sourcing, reading out loud, and guarding against horrible monsters living in closets.

Anyway, these are all impediments to philosophising Spinoza didn’t have to deal with, which is my excuse for not yet having developed a new system of thought to take humanity to the next level of development, as he did. Nevertheless, my mind remains active and engaged. Coming up on Ultimi Barbarorum:

  • The Economist: possibly the worst investment adviser ever. Buttonwood gets a deserved fisking, I hope.
  • Didn’t Empirica go bust? Naseem Taleb’s new book. What does it all mean?
  • Baruch plows through the Tractatus. This is slow going, however, as he is trying to read it off his computer; he is too cheap to actually buy it.

Stay tuned, absolute excitement is imminent!

We LURVE Rebecca Goldstein, but aren’t so sure about Peter Berkowitz

Without Rebecca, I, Baruch, would not be Spinoza-blogging with my dear colleague Bento. She is the writer who introduced me to the other great philosophical love of my intellectual life, the first being Hayek. More on this later, as soon as I have finished the Theological-Political Treatise.

Anyway, one Peter Berkowitz likes her too. I was alerted to this in my daily Andrew Sullivan browse. Sullivan himself is I sense warming to Spinoza — “no one has ever captured the intractability of the theologico-political problem like Spinoza,” he writes (he must know what that means, I guess), but his own belief in a providential god remains non-negotiable. Never mind; Andrew Sullivan is still a Fellow-Collegiant.

Berkowitz’ review is a curious one, though. He sets out to slay some dragons wholly unconnected to Goldstein’s book, by singling out from the get-go

best-selling author Sam Harris in The End of Faith and Letters to a Christian Nation, distinguished Oxford University biologist Richard Dawkins in The God Delusion, and all-star journalist and irrepressible man-of-letters Christopher Hitchens in God Is Not Great (who,) are mad as hell about the persistence of belief in God, and they don’t want to take it anymore. Religion, for them, is the root of a great portion of the evil in the world. They decry faith as certainly false and clearly irrational, sustained today, as ever, by ignorance, obscurantism, credulity, cowardice, and, not least, the sinister skill with which crafty clerics exploit the all-too-human craving for the comforting illusion that the suffering and injustices of this world will be corrected in another. 

Spinoza, he believes, in the Theological-Political Treatise, was out to make the world safer for religion, to make the “suggestion that liberty of thought and discussion is good and necessary because it protects faith”, and “that religion and liberty are allies”. In the end he concludes, bizarrely to my mind, that by their contempt for all forms of religious belief and their intolerance of all its practitioners, Dawkins, Harris and Hitchens

put forward a critique of religion that renders the world smaller and narrower based on claims to knowledge that far exceed their evidence and argument. They do not respect either the varieties or the limits of human understanding. They are the ones betraying Spinoza. (my emphasis)

Spinoza as the friend to organised religion is a reading of his works which I do not understand to be possible. Personal religion and knowledge of god, yes. But to think that in his time this would have been viewed as anything but tantamount to atheism would be wrong. I think Berkowitz realises he may have gone too far too, for later on he throws cold water over the whole project of the Ethics. He thinks Spinoza’s”Presumption of Reason”, the idea that excludes the “inexplicably given” as Goldstein puts it, shows too much faith in logic. It makes a claim that there is nothing outside logic, that nothing is simply “just there”. This is a “flaw”, as it is a merely claim open to “reasonable doubt”. For Berkowitz it undermines the whole enterprise; “lacking strict logical necessity. . . Spinoza’s system falls short of its own explicit requirements.”

Now that sounds like a simple assertion which Berkowitz does not properly examine.  It should be clear to anyone the Ethics is the core statement of what Spinoza was on about, so it is odd Berkowitz uses what most people think of as a secondary text, the Treatise, to make his point about Spinoza. I believe it is because he has an inaccurate understanding of the Ethics and Spinozan thought: remember, Spinoza states flat out at the beginning of the book that there is some ultimate “substance”, which he calls god, the ultimate cause of all the “effects” which make up the world. That sounds like something “inexplicably given”. A “substance” is in Chapter I, Definition 3 “what is in itself and conceived through itself. . . whose concept does not require the concept of another thing , from which it must be formed.” The whole structure of the Ethics rests on this definition holding true, and that such a substance exists. And, as I have made clear before, if you assume that ultimate substance is the nature of logic itself, the ultimate rule by which the world and reality and everything works, we come back to logic itself as the great “skyhook”, in Dawkin’s phrase. In the beginning was logos. The circle is squared, system retains its integrity, the project is back on track. There is no system of thought that exists which does not rest on assumption; but insofar as every system of thought worth its name, and every religion that likes to consider itself a system of thought, rests at some point in its operation on the operations of logic, and cause and effect remaining effective, I don’t think we can find a better one anywhere. At least, you can’t construct a logical argument to deny it.

So in this review what do we really have? A reviewer concerned to get at a set of people never mentioned in the book he is reviewing. A misunderstanding of the philosopher who is the subject of the book, based on what looks like a selective reading in favour of the reviewer’s preconceived notions about religion, to enlist the philosopher and the book in a struggle against ideas they would be more likely to side with rather than against (I note that here I am imagining Rebecca Goldstein, but I believe her boyfriend Pinker is a Dawkinist). It’s not very good, is it?

 Still, I imagine we are both very grateful that Peter Berkowitz has chosen to write about Spinoza at all, aren’t we Bento? He clearly knows it is important, and it made me think. I can forgive him a lot of stuff because of that.

Barking in Kentucky

Documenting the mass idiocy that is American religious extremism is like shooting fish in a barrel. Take this unfailingly polite BBC article for example:

I was at the Creation Museum in Kentucky, the day after it opened, a moment evangelicals should really have been celebrating with great gusto. And to an extent they were. [...]

[One parent] asked me almost plaintively whether I was convinced by the museum’s planetarium where the sun was created after the Earth. I had to be honest and say that I was not, but I felt quite sorry as I did.

I like the idea of these people being embarrassed in public by the utter outrageousness of their beliefs. I wonder if the museum, by attempting to make flesh what was until now a mere figment of their imagination, might not have an effect opposite to the intended one.

Cheers, Bento.

Hitchens vs. Hitchens, indeed

Hi Baruch,

I obviously had to buy Christopher Hitchens’s god is not Great and while I am only partway through it, I am happy to report that so far it is by far the best anti-religious tract of the recent spate. He elevates the genre to literature. And he is one of us! I obviously went looking for any mention of Spinoza in the index, and sure enough, he gets a couple of pages of glowing praise, along these lines:

This derided heretic is now credited with the most original philosophical work ever done on the mind/body distinction, and his meditations on the human condition have provided more real consolation to thoughtful people than has any religion.

Christopher, all is forgiven. You have redeemed yourself. Welcome back into the fold.

Not welcome is his brother, who Does Not Get It At All, and makes this clear in an embarrassing, cringeworthy essay in the Daily Mail. Seriously, these are arguments??

For all I know, Christopher is absolutely right – my prayers are pointless and a meaningless oblivion awaits. But if he is right, what a dispiriting, lowering truth it is.

And:

But why should atheists care, or use such terms as “good” and “virtue” anyway?

If we are weak and poor, we can all summon up self-interested decency, behaving in a kind way, in public, towards those from whom we hope for decency in return.

But as soon as we have the power to do evil, we generally do. What is to stop us, unobserved, doing and planning acts of selfish unkindness against others, as so many of us do – for example – in office politics?

So, if religion didn’t exist, we’d have to invent it. Stunning. Are we sure these two are related?

The Opening in the President’s Mind

Astonishing interview with only The PRESIDENT by my favourite US national columnist (and Baruch’s and Bento’s chum), writer of the only column worth reading in the independent-thought-free-zone that is the WSJ op-ed page, Kim Strassel. I have to say I agree with every word he says here (and I suspect only here).

The interview is mostly astonishing because of this; on immigration he seems to know and understand what he’s talking about. Having listened to him on so many other topics, where he seems, to be frank, something less than engaged, it seems that what is different here is that the policy also comes from personal experience:

“America is a country whose soul is constantly renewed by people pursuing what has been labeled the American Dream. It’s an amazing country where people can come with nothing except for God-given talent and a deep desire to improve their family’s lives and succeed.” He notes his time in Texas, and how many Latinos he saw arrive, whose offspring “rose to positions of prominence and became significant contributors to our society.”  

How can such a sensible-sounding person be such a disastrous public figure otherwise? I think his problem could be that he is simply not intellectual enough, and lacks the ethical bottom to understand how what he has wrought detracts so very much from what the US is actually for (“We are a country of law, and we ought to uphold the law.” Hm). Complex abstract reasoning may be what fails him, as well as the ability to change course when the previous atavistically chosen position is falsified. Abstract reasoning is precisely what we need where we are forced to make decisions where we have limited information. The personal level is where he excels, clearly, but the impossibility of meeting all the people he needs to and them being able to ignore the public persona when they do is his tragedy. It is an object lesson in the necessity of a liberal education and having the classics jammed into one. It is the result of the Closing of the American Mind. Allan Bloom is not a dick.