Left Flank

Now that the Wall Street crisis has sat on the front pages for awhile, it's about time for scientific theories, not just political strategies, about how Wall Street humiliated itself. Science writers John Horgan and George Johnson bring chaos theory to the discussion.

One writer mentioned - and criticized - prominently in this diavlog is Nassim Taleb. Taleb argues about avoiding «The Fourth Quadrant», where statistics becomes a illegitimate route to certainty.

So the good news is that we can identify where the danger zone is located, which I call «the fourth quadrant», and show it on a map with more or less clear boundaries. A map is a useful thing because you know where you are safe and where your knowledge is questionable. So I drew for the Edge readers a tableau showing the boundaries where statistics works well and where it is questionable or unreliable. Now once you identify where the danger zone is, where your knowledge is no longer valid, you can easily make some policy rules: how to conduct yourself in that fourth quadrant; what to avoid.

So the principal value of the map is that it allows for policy making. Indeed, I am moving on: my new project is about methods on how to domesticate the unknown, exploit randomness, figure out how to live in a world we don't understand very well. While most human thought (particularly since the enlightenment) has focused us on how to turn knowledge into decisions, my new mission is to build methods to turn lack of information, lack of understanding, and lack of «knowledge» into decisions—how, as we will see, not to be a «turkey».

I warn readers, that the essay concerns statistics, not politics, or even economics as presented in lay terms. I'll admit I've had to listen to the diavlog twice and read graphs repeatedly, since I'm not a math buff. But, I sense that these arguments are valuable for policy and lay understanding as opposed to the orthodox models based on gambling now current. Or, instead of putting your money on «black», you can keep it on «red».

And, for «people» people, Saul Hansell has a related attack in the same voice, but with more human agency. Hansell criticizes «...Wall Street executives had lots of incentives to make sure their risk systems didn't see much risk.»

Whether you blame the universe or people for the current predicament, it's time to deepen the search for solutions.

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