Sep

14

Studying Nothing, from Jim Sogi

September 14, 2006 |

I am studying nothing. But that does not mean I am not studying anything! In fact I am reading Nothing That Is, A Natural History of Zero by Robert Kaplan about the development of the mathematical symbol zero, one of the most important advances in math.

There are more ideas or concepts than there are words to express them. The Hawaiian language for example has concepts that do not exist in English. There are concepts that have not yet been articulated clearly. The development of science and math is the development of new ideas and concepts that had not been thought of before, such as calculus, limits, asymptotes, statistics, the law of large numbers and laws of convergence and probability. Great discoveries in science by Copernicus, Galileo, Einstein, Laplace and Galton among others, allowed man to make computations and models that had practical applications. In politics also, ideas of freedom and democracy and equality have resulted in huge changes.

Fibonacci's book mainly concerned trade and divisions of profits among partners and the calculations of interest. These appeared in the same book as his popularized sequence. He was one of the first European adopters of Indian figures or Arabic numbers and explained in detail how to do the computations. It was required reading for business school back in the middle ages.

Why did the Greeks and Romans never have the number zero? Where did the symbol first arise? The Sumerian's cuneiform numbers first used the idea of a place holder, but it was the Indians who first properly conceptualized, used and symbolized the zero. The metaphysical tradition made the Hindus peculiarly well suited to invent the concept, and thus they had a symbol to signify both nothing and large numbers in different contexts.

How did this come to be that the same symbol has two very different uses? Consider that the oldest verbs such as to be, are classified as one verb, but the conjugation I am, he is, they are, are so different that they are actually different concepts lumped together by a modern English teacher rather than a philosopher. The existence of self, and the awareness of others is epistemologically a completely distinct function. So too is the use of the zero as a place keeper and as the symbol for nothing. Conceptually it is difficult to have a word for nothing.

In markets we are all looking for the next big thing that will help us decipher the markets. It might be a quantitative model or even an new breakthrough in mathematics that sheds a new understanding of the market functions. Numbers are changing now. Rather than use names like googolplex, or 10 million we use notation such as 1e-08 from computer notation. Recent developments in probability and computational math are constantly pushing the thresholds of our abilities to perceive and understand the data in the markets. Mathematical models allow accurate quantification of the relationships, the changes occurring second to second, faster than the mind can comprehend. These models give the mind added powers of huge memory, speeding complex calculations on huge incoming data streams, just the counters on sand boards doing Arabic computations with a zero, enabling faster and more complex computation had an advantage in commerce and business over those using their fingers or beads or the eye to count, those with the fastest, best, most powerful tools in the markets will have the advantage over the slow moving, over the old technology, over the backward looking, over the mechanical, the non adaptive, or the dogmatic. No man, no matter how smart, can absorb all that is presented or can compete with the power, speed and unflagging attention of the computers.

Taking for granted as fixed current financial, mathematical, political systems stultifies the mind. The ideas that language, math, the political system, the social system, the financial systems are status quo and locked in place or that they have always been like that or always will be, leads to dangerous complacency. Looking back at the amazing discoveries in science and math and the benefits flowing gives hope that things as we have them now can be changed and give way to newer and better discoveries that will push the boundaries of human thought and comprehension and bring profit and enjoyment to those who do it. It also helps to know the weaknesses and limitations of our current systems so as to better understand risk. Risk is in part based on the financial structure as it has pieced itself together. Past failures give clues. But the continued ever upward spiral is most apparent. There is no plan, and no one can control or regulate the development and growth of the financial system. Profits are to be made at the ragged edges, by pushing the envelope, and perhaps doing some counting on the back of the envelope on the way.


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