Gill Eapen's Blog, page 88

Net Present Happiness

In finance, a series of present and future cash flows associated with an action or project are discounted back to the present to calculate a Net Present Value (NPV).  Although this is done by many, often the "discount rate" used does not undergo scrutiny to assure that it is consistent with the underlying economic theory, Capital Asset Pricing Model. At the heart of discounting are two intuitive concepts – money later is less valuable than money today (time value of money) and risky money is ...

Information exchange

An individual's memory – result of information garnered from disconnected experiments – generally is of negative value to her as the disutility from negative information far exceed the utility from positive information. This is because of many factors, including the bias in retained information during extreme events and the concavity of the utility function. Thus, it is always optimal for the individual to forget and/or to have low memory capacity. However, society gains from the individual's...

"Peking" Oil

It has been a tough early summer for the oil enthusiasts and forecasters of the coming oil boom. Investment bankers and forecasters alike have been waiting for the moment the last drop of oil is drained out of mother earth. Just like many generations before them, they also expect oil to be a "limited resource," that is bound to run out. And just as their predecessors had forecasted, using linear ,exponential and logarithmic extrapolation, they also see an oil price close to infinite, or at...

Kant and the Computer

An article in a recent issue of Science references "Critique of Pure Reason" by Immanuel Kant, in which he proposes that the brain in its original form already contains the necessary building blocks of understanding and utilizing space and time. This makes sense and it is analogous to the computer's BIOS – where the basic instructions are permanently stored. Without a BIOS, the computer simply cannot boot up and without booting up it cannot perform any tasks. Similarly, without these basic...

Titan's dirty secret

Recent revelations that Titan, Saturn's largest moon may be harboring methane based life calls into question the many "life seeking missions" of the past and the ones planned for the future. Although life in a non-oxygen and non-water environment have been speculated by many for decades, the two "essential ingredients of life" are still considered by many to be oxygen and water. Even the Titan story does not allow one to break the hold on carbon, as the only life giving chemical. Although...

Salt water brain freeze

The famed salt water economist, is at it again. He has been consistent in his criticisms against anybody who does not live on the East Coast as well as the Obama administration's sheer inability to spend more money faster. As he stares into the inevitable depression for the lack of fiscal stimuli, he laments at the incompetence in front of him. How could somebody, who seeks to understand economics, object to more stimulus, he asks. With unemployment at 10% and the country in the grips of depr...

The importance of soccer

As the world cup begins in South Africa, it becomes more clear why international sport is an important part of bringing the world together. Soccer, by far, is the most international and it clearly holds a special place in the minds of billions of fans worldwide. Countries, who are caught in colloquial games either because of history or because of the economics involved, may have to reconsider their positions and reallocate more capital and energy to the types of sport that are truly...

The deterministic trap

In almost every aspect of life, we see the deleterious effects of determinism. Humans, generally, dislike uncertainty and because of this, most gravitate toward predictions and expectations that show low uncertainty, or worse deterministic. It may have an evolutionary basis – reducing uncertainty has been synonymous with reducing risk in most of the human history. So, clear and precise forecasts always have a premium to those based on uncertainty.

This has not been missed on those making a ...

The end of thinking

The recent emergence of the social media culture has resulted in an alarming increase in instinctual responses. An instinctual response is one that does not require much activity in the brain. In the case of humans, endowed with an exceptionally large (but unused) organ called the brain, instinct means fast decisions without much processing. Although the use of the brain has been in a decline for the past century, recent inventions – software that allows communications in pre-specified...

The Physics of life

Recent revelations that a synthetic cell can be concocted and made to reproduce pose significant questions for humanity. Although it demonstrates that Chemistry can mechanistically create sustainable life, the question of why such a process exists is left unanswered. This question can only be tackled by Physics – the science that explains the universe itself. Envisioning life without the context of the universe has led humanity into blind and constricted alleys many times before. Although...