Daily Tao

All look the same. A month looks like a day, one set of days like another. In fact, at a first approximation, you could not readily tell without the labels which line was which. That clicks with something else. Having acquired an interest in financial markets after my move to New York, I started chatting with the Wall Street pros. There is something funny, one told me: In the newspaper, all price charts look alike. Sure, some go up; some down. But daily, monthly, annually—there is no big difference in the overall look of it. Strip off the dates and price markers, and you could not tell which was which. They were all equally wiggly. “Wiggly” is hardly a scientific term—and until I developed fractal geometry years later, there was no good way to quantify so vague a notion as wiggly. But that is exactly what we can now see in the cotton data: a fractal pattern. Here, the fractal scaling up and down is not being done to a shape—the florets of a broccoli or the triangles of a Sierpinski gasket. Rather, it is being applied to a different sort of pattern, the way prices vary. The very heart of finance is fractal.

The essence of this book is about Mandelbrot’s work with fractals and how it is used in the study of financial markets. A simple explanation of what fractals are is patterns that are self-similar at various scales. In the context of financial markets, a daily, weekly and yearly price chart would be indistinguishable to each other and will display the same chracteristics of swings, ups and downs.

How does that help us? Fractals are simply another methodology of understanding and explaining the characteristics of financial markets. I’ll be sharing more passages from his book over the next few days.

Once you drop the assumption of homogeneity, new and complicated things happen in your mathematical models of the market. For instance, assume just two types of investors, instead of one: fundamentalists who believe that each stock or currency has its own, intrinsic value and will eventually sell for that value, and chartists who ignore the fundamentals and only watch the price trends so they can jump on and off bandwagons. In computer simulations by economists Paul De Grauwe and Marianna Grimaldi at the Catholic University of Leuven, in Belgium, the two groups start interacting in unexpected ways, and price bubbles and crashes arise, spontaneously. The market switches from a well-behaved “linear” system in which one factor adds predictably to the next, to a chaotic “non-linear” system in which factors interact and yield the unanticipated. And that is with just two classes of investors. How much more complicated and volatile is the real market, with almost as many classes as individuals?

Understanding the intrinsic value of a company/business that is traded might not lend much help in predicting its stock price. In this passage, even simulations of 2 different classes of investors, 1 that focuses on fundamentals and 1 that focuses on pure technical (charts) can lead to unpredictable swings in the stock price as they impact each other.

What more in the today’s world, where not only do we have various classes of investors, but social movements and online communities (as is the case of GameStop and Reddit). As the number of actors influencing the prices of stocks increase, there is bound to be increased unpredictability of stocks.

The bones in the human face don’t stop growing in our 20s, unlike other bones in the body. They can expand and remodel into our 70s, and likely beyond. Which means we can influence the size and shape of our mouths and improve our ability to breathe at virtually any age. To do this, don’t follow the diet advice of eating what our great-grandmothers ate. Too much of that stuff was already soft and overly processed. Your diet should consist of the rougher, rawer, and heartier foods our great-great-great-great-great-great-grandmothers ate. The kinds of foods that required an hour or two a day of hard chewing. And in the meantime, lips together, teeth slightly touching, and tongue on the roof of the mouth.

The above summarizes the key message of the book. Breath slowly, 5 seconds in, 5 seconds out. Our jaws impact the quality of our breathing, and we should eat raw and tougher foods to ensure that the bones in our face and jaw stay strong. And apparently, keeping your tongue on the roof of your mouth may actually help reshape your jawline and help you breath and sleep better without snoring.

In the early 2000s, Dr. Xavier Woorons, a French physiologist at Paris 13 University, found a flaw in these studies. The scientists critical of the technique had measured it all wrong. They’d been looking at athletes holding their breath with full lungs, and all that extra air in the lungs made it difficult for the athletes to enter into a deep state of hypoventilation. Woorons repeated the tests, but this time subjects practiced the half-full technique, which is how Buteyko trained his patients, and likely how Counsilman trained his swimmers. Breathing less offered huge benefits. If athletes kept at it for several weeks, their muscles adapted to tolerate more lactate accumulation, which allowed their bodies to pull more energy during states of heavy anaerobic stress, and, as a result, train harder and longer. Other reports showed hypoventilation training provided a boost in red blood cells, allowing athletes to carry more oxygen and produce more energy with each breath. Breathing way less delivered the benefits of high-altitude training at 6,500 feet, but it could be used at sea level, or anywhere. Over the years, this style of breath restriction has been given many names—hypoventilation, hypoxic training, Buteyko technique, and the pointlessly technical “normobaric hypoxia training.” The outcomes were the same: a profound boost in performance.* Not just for elite athletes, but for everyone.

Key takeaway, to slow down your breathing and intentionally take in less oxygen when exercising to grow your endurance. You might feel like shit doing it, but it is supposed to lead to long-term benefits for your endurance and health, while also elevating the positive impact of your exercise. Also, in this book, it mentions that even if we take in slow breaths (i.e every 5-6 seconds), we still get more than enough oxygen for our needs.

And here we are. Ninety percent of children have acquired some degree of deformity in their mouths and noses. Forty-five percent of adults snore occasionally, and a quarter of the population snores constantly. Twenty-five percent of American adults over 30 choke on themselves because of sleep apnea; and an estimated 80 percent of moderate or severe cases are undiagnosed. Meanwhile, the majority of the population suffers from some form of breathing difficulty or resistance.

Following up from the previous post. This books talks about how a modern diet (where we have moved from chewing hard stuff like nuts and meats towards soft foods like grains, porridges and vegetables) have impacted the development of the size of our jaws. This has thus led to more breathing problems for us. Its really interesting how traits that have helped humans in their evolution (such as the size of our heads and vocal ability) + trends in diet and environment have caused many of the health problems we have (such as asthma) in the modern world.

Evolution doesn’t always mean progress, Evans told me. It means change. And life can change for better or worse. Today, the human body is changing in ways that have nothing to do with the “survival of the fittest.” Instead, we’re adopting and passing down traits that are detrimental to our health. This concept, called dysevolution, was made popular by Harvard biologist Daniel Lieberman, and it explains why our backs ache, feet hurt, and bones are growing more brittle. Dysevolution also helps explain why we’re breathing so poorly. To understand how this all happened, and why, Evans told me, we need to go back in time. Way back. To before Homo sapiens were even sapiens. Strangely, sadly, the same adaptations that would allow our ancestors to outwit, outmaneuver, and outlive other animals—a mastery of fire and processing food, an enormous brain, and the ability to communicate in a vast range of sounds—would obstruct our mouths and throats and make it much harder for us to breathe. This recessed growth would, much later, make us prone to choke on our own bodies when we slept: to snore.* None of this mattered to the early humans, of course. For tens of thousands of years, our ancestors would use their wildly developed heads to breathe just fine. Armed with a nose, a voice, and a supersized brain, humans took over the world.

In the world that we live in today, evolution is no longer that of survival of the fittest. Just like how pets that are “cuter” get to pass on their traits, many of the traits that might affect our health are also passed down. In this book, Nestor first talks about how evolution, and our traits that allowed us to out-survive and outdo other animals also cause us trouble in our modern bodies.

To round off the book, Martin Ford speaks about the threat of increasing unemployment and how this actually empowers corporations, who can easily switch between states or countries that offer them the best tax policies and subsidies.

One solution he speaks about is that of a Universal Basic Income. He believes that states/countries should set up their Sovereign Wealth Fund and use these proceeds to fund it. Such an idea should be worth testing out as human output continues to get more productive than ever.  Universal Basic Income can be set at extremely low levels, and we can use that to test out the impacts on employment and mental health on the populace.

The reality is that awarding more college degrees does not increase the fraction of the workforce engaged in the professional, technical, and managerial jobs that most graduates would like to land. Instead, the result very often is credential inflation; many occupations that once required only a high school diploma are now open only to those with a four-year college degree, the master’s becomes the new bachelor’s, and degrees from nonelite schools are devalued. We are running up against a fundamental limit both in terms of the capabilities of the people being herded into colleges and the number of high-skill jobs that will be available for them if they manage to graduate. The problem is that the skills ladder is not really a ladder at all: it is a pyramid, and there is only so much room at the top. Throughout our economy and society, machines are gradually undergoing a fundamental transition: they are evolving beyond their historical role as tools and, in many cases, becoming autonomous workers. Carr views this as dangerous and would presumably like to somehow put a stop to it. The reality, however, is that the astonishing wealth and comfort we have achieved in modern civilization are a direct result of the forward march of technology—and the relentless drive toward ever more efficient ways to economize on human labor has arguably been the single most important factor powering that progress. It’s easy to claim that you are against the idea of too much automation, while still not being anti-technology in the general sense. In practice, however, the two trends are inextricably tied together, and anything short of a massive—and certainly ill-advised—intrusion of government into the private sector seems destined to fail at any attempt to halt the inevitable, market-driven rise of autonomous technology in the workplace.

Martin Ford takes a rather bleak approach to the idea that increased education can help deal with the displacement of jobs. First of all, automation and the vast displacement of manual and easily repititive jobs is inevitable. It is those whom believe that education (training poeple to be coders) that will find themselves going against Ford’s opinion.

I pretty much agree that there is a fundamental limit to the number of high skill jobs that we can create, though education can defintely help open up more opportunities and jobs. I don’t necessarily think that job openings for skilled labour to be fixed though, and I think higher education can help alleviate some of the impact.

There is an often-told story about Henry Ford II and Walter Reuther, the legendary head of the United Auto Workers union, jointly touring a recently automated car manufacturing plant. The Ford Motor Company CEO taunts Reuther by asking, “Walter, how are you going to get these robots to pay union dues?” Reuther comes right back at Ford, asking, “Henry, how are you going to get them to buy your cars?” While that conversation probably never actually took place, the anecdote nonetheless captures a key concern about the ultimate impact of widespread automation: workers are also consumers, and they rely on their wages to purchase the products and services produced by the economy.

A rather short anecdote, that is obviously not true, but one that I found to encapsulate extremly well the essence of the dangers of widepsread automation and jobs loss.

A strong economy relies on sustainable consumption within the consumers, and most developed economies have benefited from having a strong middle class that had enough incomes to spend in the past few decades. If technology does indeed continue to drive further inequality, our economic performance will definitely begin to suffer.

That is when the “doom and gloom” scenarios come in, and solutions such as cash transfers from the rich to the poor via taxation and welfare will probably need to happen.

If the higher-education industry ultimately succumbs to the digital onslaught, the transformation will very likely be a dual-edged sword. A college credential may well become less expensive and more accessible to many students, but at the same time, technology could devastate an industry that is itself a major nexus of employment for highly educated workers. And as we’ve already seen, in an entire range of other industries, advancing automation software will continue to impact many of the higher-skill jobs these new graduates are likely to seek. Even as essay-grading algorithms and robotic tutors help teach students to write, algorithms like those developed by Narrative Science might have already automated much of the routine, entry-level writing in many areas. There may also prove to be a natural synergy between the rise of MOOCs and the practice of offshoring knowledge-based jobs. If massive online courses eventually lead to college degrees, it seems inevitable that a great many of the people—and a high percentage of the top-performing candidates—awarded these new credentials will be located in the developing world. As employers become accustomed to hiring workers educated via this new paradigm, they may also be inclined to take an increasingly global approach to recruiting.

I find the point that this passage makes to be even more relevant during the environment we find ourselves in today, where there is increasingly more jobs and education being held online.

The internet and education can be great levellers in terms of opportunities, but it could lead to negative consequences if too much change happens too fast. We’ve already seen the rise in anti-migrants sentiments in developed countries all over the world. Much of this is driven by economic insecurities of the average person.

Would these problems get exacerbated when increasing amount of higher value educational opportunies and hence, jobs, becomes remote opportunities in the developing world?