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Elie Ayache is a unique philosopher of probability and finance. For decades, he has worked at the ground floor of the world's derivatives markets, providing traders with the technology they need to create prices that financial theorists imagine emerging from some mysterious probabilistic process. mostrar más And for decades he has sought the words that might help us all understand how the market creates both its realities and its illusions. In The Blank Swan, published in 2010, Ayache deconstructed the conception of the market as a stochastic process, explaining how its prices emerge not from probability but from contingency itself. Spectacular breakdowns can occur, he leads us to understand, not because the market gets the prices wrong (underestimating, say, the probability of a black swan) but because there are no prices save those the market creates. In this new and persuasive book, he returns to the fray with an analysis that aims higher and goes deeper. There is indeed a stochastic structure in the market, he now tells us, but this structure is not an underlying reality that drives the market. It itself is a creation of the market. mostrar menos

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LOM-Lausanne | otra reseña | Mar 19, 2020 |
Pre-review review:

The attentive and intelligent reader who is now reading this pre-review review and who had every intention of buying The Blank Swan at any price between the full publisher's price ($34.50 - $39.95 (U.S.)) down to Amazon.com's price of about $ 26.37 (shipping excluded), now stands to make a substantial savings if he or she follows my advice which comes without further delay:

Save your money. Do not buy this book--not at $34, not at $3.00.

This book is either another example of a hoax of the sort which [[Alan Sokal]] so brilliantly produced with his article published in the review Social Text, Spring/Summer 1996 issue, (see : "Transgressing the Boundaries: Towards a Transformative Hermeneutics of Quantum Gravity," at http://en.wikipedia.org/wiki/Sokal_Affair ) or, if intended seriously, as I fear it is, it constitutes at best a very sad commentary on the still-debased state of academic scholarship, for The Blank Swan, apart, perhaps, from a thimble's full of genuine plain common sense deeply and needlessly buried within hundreds of pages of pseudo-insightful prose, is in the main simply ordinary scholarly gibberish, junk, nonsense and puffery maquerading as something profound and interesting. Reading its Introduction while on the sweltering return bus-ride from the bookshop, I was reminded of the well-known joke about the publisher's Reader's rejection slip comments sent to a hopeful would-be-published-writer which ran,

"Dear Sir, Thank you for your manuscript which we have read with care. It is both original and interesting. Unfortunately, the parts that are interesting are not original and the parts that are original are not interesting."

The book could conceivably have an interest for those whose serious study is of cases of high academic nonsense taken very seriously by the parts of both the lay and professional world because the writing is grossly inflated, supremely prententious and largely indecipherable; that is, as an example of the sort of sheer baloney which Sokal parodied with "Transgressing the Boundaries: Towards a Transformative Hermeneutics of Quantum Gravity" it has a certain interest but there is nothing beyond that in a book which is indecipherable not because it is actually profoundly penetrating but rather because it is nonsense.

The really startling thing in this case is that a publisher as respected as John Wiley & Sons would, could, actually publish this work of intellectual cotton-candy. Even movie popcorn provides more in nourishment than does this book. I don't for a moment believe that the publisher's editor(s), if any, who examined this book actually understood it at all; and, just as the editors of Social Text did with the manuscript Alan Sokal sent them, they published it not because they understood it but because, in finding it beyond them, they assumed that it must be profoundly significant and important and, of course, they were much too embarrassed to either admit that they could not make heads or tails of it or, on the other hand, that they could recognize it as sheer puffed-up nonsense and that they had to turn it down since they are not publishers of nonsense.

The tell-tale indicators that this is a book mainly of intellectual junk-thought are everywhere to be found. The most obvious is that Mr. Ayache puts such emphasis on using what is clearly manufactured jargon which is needlessly complicated--or complicated from the need to confuse, confound and befuddle the reader.

As early as page xvi of the introduction (which begins on page xv), when, still on the bus and stuck in congested traffic which moved in very brief spurts punctuated by long stretches of standing still, I read,



"It is not with prevision (either of Black or White) or prediction that we should deal with the Black Swan or define it, but with something else, which, in the course of my book, turns out to be writing and whose quantative avatar is the market. Writing is something we produce without previous knowledge or prevision or prediction. Writing is quicker than thought and vision. It is a material process, when vision and prevision are only conceptual. Writing transpierces the page it is marked on. It is real. It is a process that eventually transports us to the future, making us attain and fulfil our promises (think of the derivative payoff as a promise that the seller of the derivative has written to the buyer), yet at no point is it based on prediction or forecast."

(all emphasis both above and in later citations is in the original text)



my heart sank in disappointment because it was already clear what I was dealing with in this book. Then, a little later, I took some courage from a little bit of clear and reasonable thought and writing where Ayache writes, or so I thought,

"The reason why probability or prediction doesn't apply to the market is that the market is too complex or too human or too chaotic."

But unfortunately that was a misreading on my part. The actual text read, instead,

"The reason why probability or prediction doesn't apply to the market isn't that the market is too complex or too human or too chaotic. The reason is simply that the market should be the alternative to prediction in matters relating to the future. It remains to say, of course, how we can relate to the future outside prediction. Trying to answer this question is the stuff my own swan is made of."

I'd have thought that it also "remains to say" why anyone should accept the assertion that "the market should be the alternative to prediction in matters relating to the future," instead of conveniently leaving that assertion as valid without clear explanation.

But this brings me to the other major tell-tale indications that what we are dealing with here is pseudo-intellectual junk and nonsense: there are references throuhgout The Blank Swan to what is known as French Theory (see http://en.wikipedia.org/wiki/French_Theory ) and to certain of those who are considered its leading lights such as Gilles Deleuze whose indexed references run as follows:

(pages) 16, 19, 22, 26, 28, 39, 47-50, 55, 56, 62, 79, 94, 95, 113, 118, 154-157, 191, 205-207, 211-233, 236, 238, 243-248, 254, 257, 258, 266, 271-276, 280-281, 283, 286-287, 292-293, 296-303, 305-307, 313-317, 322-340, 346, 349, 351-353, 366-367, 379, 385-413, 415-444, and 461-462.

Also cited in this text are Kant, Heidegger, Henri Bergson, Paul de Man, Jorge Luis Borges, Felix Guattari and Frederich Nietzsche.

At this point, rather desperate for some sign of solid ground and grounded thought, I turned ahead at random to read something and what I came upon was this, at page 184:



"Recall that mathematical science has imposed the absolute as the possibility, now irreversibly open to thought, to think diachronically. In this, writes Meillassoux, Kant's problem ('How is mathematical science possible?') receives a speculative, rather than a critical, answer. Science is no longer possible derivatively on the the possibility of representation (that is to say, on the correlational circle) but absolutely, in the sense that anything that is mathematically thinkable ought to be absolutely possible. This, Meillassoux calls the 'ontic absolutization of mathematics.' It replaces Kant's move, of conditionalizing the possibility of science on the fact of our representation (an undeniable fact, which Kant describes and doesn't deduce), with a license to possibility issued directly and absolutely by the ex-centered standing of mathematics itself."



I assure you, reader, that I am not making this up. Indeed, I could not in my wildest dreams make that up. Nor could I dream of or ask for a better example of the silly gibberish which is "French Theory" and taken very seriously by highly educated academicians. The above is my idea of sublimely bad writing, of very dreary and by-now-discredited goofy nonsense. Either the above citation means something, in which case it could and should have been expressed in immeasurably clearer and simpler terms, or, as I am inclined to believe, it means nothing at all; it's gobbledy gook jargon. And I defy the Wiley editors to restate in plain terms just what the above citation, published apparently in all seriousness by them, actually means.

Again, I do not contend that this book is utterly without merit. It may indeed contain here or there a morsel of valid thinking, explained within an atomic-bomb's blast-range of being comprehensible to a reader who is not yet fully indoctrinated into the other-worldly haze of French Theory, but those morsels will not, I contend, redeem the rest of this very elaborate demonstration of how very, very lost are the worlds of serious thought and serious publishing today.

The wholly bizarre Twilight Zone world of financial number-crunching which became so wildly and needlessly complicated by its own wunderkind's mental perigrinations, and which at last collapsed in exhaustion from the effort to untangle the dense self-confusions which overworked genius had wrought, gave us the world-wide mess we all now live and suffer in.

The Blank Swan is an example of how we got into the mess, not how we can get ourselves out of it.

I'm probably going to keep this book as a lesson in gross nonsense taken seriously and published by a respected publishing house; and I'm going to try and figure out why I can't and shouldn't also be a world-renowned financial guru---and write a dense and incomprehensible book of gibberish which proves it to all the world.

Addendum :


There is still a question to consider about the writing and publication of this book and for me it's by far a more interesting one than the particular merits or demerits of the work itself: how could it happen that a person as intelligent as the author could have written such a book?--and, how could it be that a serious publisher could publish it? I have a better hunch as to the former part than as to the latter part.

From the author's biographical notes on the book’s cover flap, the reader learns that Elie Ayache, born in Lebanon, was trained in engineering at the very prestigious École Polytechnique of Paris. Later he worked as an options trader first at the Marché à Terme International de France (MATIF), the French International Futures Market from 1990 to 1995 which has since merged with the Marché des Options Négociables de Paris (MONEP), the Negotiable Options Market of Paris, and he then went on to work at the London International Financial Futures and Options Exchange (LIFFE), itself eventually bought out and taken over in 2002 by Euronext, which sprang from the fusion of trading exchanges of Paris, Amsterdam and Brussels in 2000.

His university education and the fact that his training was in the field of engineering should, by the conventional view, attest to his being a person of remarkable intelligence. The same is or was at least for quite some time true of his going into work as an analyst or trader at a futures & options exchange, though that received opinion is now a good deal more suspect as a valid indicator of someone's particularly high intelligence--or, at any rate, high practical intelligence, the sort that financial traders need and the sort which is closely akin to what is generally described as instinctual.

In addition to his Polytechnique education, whether before, during or after it, he has also apparently read quite a lot in the work of some of the leading figures of French Theory, which burst upon the intellectual scene in the 1970s and among whom figure Michel Foucault, Jacques Derrida, Gilles Deleuze, Jean Baudrillard, Jacques Lacan, Félix Guattari, Jean-François Lyotard, Louis Althusser, Julia Kristeva, Hélène Cixous, and Luce Irigaray.

As I see it, people who become ardent enthusiasts of this school of thought have something particular in common about their intellectual make up. They have a kind of finely wrought sensitivity to abstract theories which concern artistic qualities; they have, in fact, much of what constitutes a fine artist’s mentality and sensibility. I suspect that they perceive the world much as many artists do. This makes their insights seem to those who don’t share such an artistic perception very strange and difficult to understand. And that has a lot to do with the fact that the insights they express are special to them rather than quite broad and general in their intellectual accessibility. In other words, what they offer is analogous to what a poet offers in his poetry or a painter in his canvases, or a composer in musical compositions.

There was also something “in the air”, the zeitgeist, which informed the peculiar intellectual climate from which French Theory thinkers’ ideas sprang in the 1970s and a good deal of it lingers on today. I would offer as a comparison the somewhat similar social and artistic sensibilities which produced the Romantic Movement and for somewhat similar reasons and causes which are founded in deeply formed and rooted emotions--and which were themselves spawned by intense social turmoil and a collapse of the general power of authority over many people. . For a simplified summary of what that was and what it meant in the heyday of the Romantic Movement, I think Wikipedia’s page is a fair description:



…a complex artistic, literary, and intellectual movement that originated in the second half of the 18th century in Western Europe, and gained strength in reaction to the Industrial Revolution. In part, it was a revolt against aristocratic social and political norms of the Age of Enlightenment and a reaction against the scientific rationalization of nature, and was embodied most strongly in the visual arts, music, and literature, but had a major impact on historiography, education and natural history.

The movement validated strong emotion as an authentic source of aesthetic experience, placing new emphasis on such emotions as trepidation, horror and terror and awe—especially that which is experienced in confronting the sublimity of untamed nature and its picturesque qualities, both new aesthetic categories. It elevated folk art and ancient custom to something noble, made of spontaneity a desirable character (as in the musical impromptu), and argued for a "natural" epistemology of human activities as conditioned by nature in the form of language and customary usage.
Romanticism reached beyond the rational and Classicist ideal models to elevate a revived medievalism and elements of art and narrative perceived to be authentically medieval, in an attempt to escape the confines of population growth, urban sprawl, and industrialism, and it also attempted to embrace the exotic, unfamiliar, and distant in modes more authentic than Rococo chinoiserie, harnessing the power of the imagination to envision and to escape.
The modern sense of a romantic character may be expressed in Byronic ideals of a gifted, perhaps misunderstood loner, creatively following the dictates of his inspiration rather than the mores of contemporary society.
http://en.wikipedia.org/wiki/Romanticism


Because such an orientation to the world is at least partly ingrained in the psyche of all of us, it isn’t and it can’t ever be entirely absent on some level, however latent, from expression in society—and particularly those of artistic members of society even though, as it seems to me, it is not necessarily an orientation which is dominant in all artists at all times. I think that it becomes more keenly felt and more urgently expressed whenever society finds itself in periods of unusual social, technical and economic turmoil and instability. And, now, as in the past, we are again in a period of particular social, economic and political instability and this turmoil itself springs, I think, from a widespread sense of emotional and intellectual dismay, confusion, lack of clarity in any identifiable and order-giving theories which provide an essential ideological underpinning to social, political and economic institutions and their operation in the most practical affairs of daily life. In other words, then as now, long-standing social, political and economic theories and institutions and the people associated with them have very largely lost their authority, their capacity to command widespread respect either from the average public or from a faithful élite part of society.

Take all of the above elements and combine them in a person who, coming from one of his society’s most prestigious training grounds, can easily be imagined to feel a very heavy responsibility and desire to “make a mark,” to produce something socially and intellectually striking and worthy of the many leading intellects of the past in which he has steeped himself through study, something which will prove both lasting and important in, for and among the larger society of influential thinkers.

Such, I suspect, is the sort of person we find in Elie Ayache and such, I suspect, is the general intellectual predicament in which such a person finds himself today. He, like many people, after all, very much wants and needs to say something of large and lasting importance. It may be that he feels that it is nothing less than natural and logical to expect as much of himself as a person who has his intelligence and his education.

Unfortunately, the felt need to live up to such high expectations does not always find itself combined with the nature-given talents and genius required to actually produce that level of work, a level which is, after all, very, very exceptional. Only a few people are ‘blessed’ (or cursed) with both the talents and the happenstance circumstances to employ them so that they figure among the very few who mark their times.

If you take such a powerful need into account and you combine that with the terrible emotional and intellectual confusion and disorder which characterizes our times, you begin to gain an idea of how a finely wrought artistic sensibility under self-imposed pressure to doing something significant can find its expression warped into a very outlandish and shaky outcome. Had Mr. Ayache's talent been given to canvas and oil paints or to compositions on the piano or to the writing of poetry, his work might be far less reproachable than what it is in its present form--that of an engineer-by-training and options-market-trader-by-trade's genius as author of The Blank Swan. But as it happens, it is to none of those former outlets that he resorted for his peculiar intellectual insights and genius. And that is too bad because, in prose writing about financial market phenomena, however potentially strange and fascinating may be the intersections of certain conceptions derived from art and literary theory with the mental processes of any random customer’s decision to execute a trade order to buy or sell in the stock, bond or options markets, the fact is that interesting and mark-making work of this kind has to appeal on a practical and accessible level far beyond what the best in painting or poetic or musical compositions can ever be reasonably hoped to do.

------ ------------

related reading :

The Black Swan: The Impact of the Highly Improbable : http://www.librarything.com/work/1525031

and the market crashes of 1987 and 2007:

Panic The Story of Modern Financial Insanity : http://www.librarything.com/work/6357026
Liar's Poker

See also, from Portfolio Magazine's "Portfolio.com" :

The End

by Michael Lewis
Nov 11 2008

"The era that defined Wall Street is finally, officially over. Michael Lewis, who chronicled its excess in Liar’s Poker, returns to his old haunt to figure out what went wrong."

Read more:
http://www.portfolio.com/news-markets/national-news/portfolio/2008/11/11/The-End...

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proximity1 | otra reseña | Jun 30, 2010 |

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