The Dog and the Frisbee

Mr. Haldane is speaking to the fact that although our economic problems may seem complex on the surface, the underlying solutions should employ more of the K.I.S.S. principle.

The example he uses is The Dog and the Frisbee. He makes the case that regulatory and oversight complexity may have caused signals to be missed that could have prevented the crisis from occurring. 

Something to think about and it does have applications to other areas of interest across the spectrum of your life activities.

This article demonstrates the always priceless wisdom passed down from Mom's and Dad's across the land:

"Sometimes you can be too smart for your own good".

The Dog and the Frisbee - Andy Haldane

http://www.kansascityfed.org/publicat/sympos/2012/ah.pdf

 ** Haldane actually says "For studies have shown that the frisbee-catching dog follows the simplest of rules of thumb: run at a speed so that the angle of gaze to the frisbee remains roughly constant," and I cannot stop myself imagining the dog reasoning that out with a few simple diagrams and an HP-12C.

from Forbes:http://www.forbes.com/sites/ralphbenko/2012/10/22/catching-a-frisbee-is-difficult-the-bank-of-england-tells-it-like-it-is/

The world's greatest living public intellectual, Yogi Berra, once, it is said, said;  "In theory there is no difference between theory and practice.   But in practice there is."  (Also attributed to Jan L. A. van de Snepscheut.) If Andy Haldane represents the new class of leading public servants — empirical, based in practical outcomes rather than on rather dubious theories — the world economy well may prove to be poised on the verge of a new golden age.

http://dealbreaker.com/2012/08/ben-bernanke-got-to-hear-about-adorable-though-hypothetical-dogs-at-jackson-hole/

Ben Bernanke Got To Hear About Adorable, Though Hypothetical, Dogs At Jackson Hole

December 9, 2012

Ben Bernanke gave another Augustinian give-us-QE_n-but-not-yet* speech at Jackson Hole today and you could go read it but honestly why would you, you know what it says, which is "everything is bad, but not as bad as it could be, and we want to make it a bit better, but only once it's gotten a bit worse." Moving right along.

To Andrew Haldane's speech, which is a treat! It is here and its title is "The dog and the frisbee," so obviously he had Dealbreaker on his side right there. Haldane, the Bank of England's financial-stability guy, basically argues that while the financial system is complex, it should be regulated simply – "As you do not fight fire with fire, you do not fight complexity with complexity" – just as a dog uses only elementary trigonometry and differential calculus to solve the complex and multivariate problem of catching a frisbee.**

Haldane's main example of overcomplexity in regulation is risk-based capital regulation, in which the Basel accords have moved from simple leverage tests – common equity divided by total assets – to complicated tests where the numerator is made up of different tiers of capital and the denominator uses risk-weights that are largely driven by the bank's own models of riskiness. One thing you could do is compare the performance of those measures in the recent crisis, so he did. 

* That reference in this context feels like it is not original to me but I don't know who got it first. The Economist has used it with austerity. The original is of course.

** Haldane actually says "For studies have shown that the frisbee-catching dog follows the simplest of rules of thumb: run at a speed so that the angle of gaze to the frisbee remains roughly constant," and I cannot stop myself imagining the dog reasoning that out with a few simple diagrams and an HP-12C.

*** This is a good thing to ponder:

To give some sense of scale, consider model-based estimates of portfolio Value at Risk (VaR), a commonly-used technique for measuring risk and regulatory capital in the trading book. A large firm would typically have several thousand risk factors in its VaR model. Estimating the covariance matrix for all of the risk factors means estimating several million individual risk parameters. Multiple pricing models are then typically used to map from these risk factors to the valuation of individual instruments, each with several estimated pricing parameters.

Taking all of this together, the parameter space of a large bank's banking and trading books could easily run to several millions. These parameters are typically estimated from limited past samples. For example, a typical credit risk model might comprise 20-30 years of sample data – barely a crisis cycle. A market risk model might comprise less than five years of data – far less than a crisis cycle.

**** I mean, not really, but everyone had to have adequate Basel capital, and wanted to minimize capital subject to that requirement. Note that that chart has a narrower range than the total leverage chart. So you shouldn't really expect differences in adequate Basel capital levels to distinguish failed and non-failed banks.

You Can't Think and Hit at the Same Time - Who you gonna believe?

A study was published in Pub Med (whatever that is) with that specific title which mimics Yogi Berra's famous quote and it got me thinking a bit about coaching theories and approaches.

You basically have to pick one of two choices -- the Yogi Berra, baseball traditionalist, empirical evidence approach ( they have been promoting this 'theory' since 1947 or thereabouts ) or the Bill Nye, The Science Guy, scientific evidence and proof approach.

I suppose you could pick and choose from both approaches as you wish, but that seems like it would leave you hopelessly confused

So do we go with Yogi....

from quoteinvestigator.com
You Can’t Think and Hit at the Same Time |:

How can you think and hit at the same time?” Yogi Berra once said, which like many of the quotes attributed to the former Yankees catcher, even the malapropisms, contains an essential truth. You can’t think and hit because there’s not time for both.

The evidence is not completely clear because Yogi himself has made confusing pronouncements about this saying. The earliest citation located by QI is an Associated Press newswire story dated August 1, 1947 [MCYB]:

'via Blog this'



...or The Bill Bye the Science Guy crowd -- who will not act until something is scientifically proven, peer  reviewed and accepted by the pocket-protector crowd.

from PubMed:
You Can't Think and Hit at the Same Time: Neu... [Front Neurosci. 2012] - PubMed - NCBI:

Abstract

Hitting a baseball is often described as the most difficult thing to do in sports. A key aptitude of a good hitter is the ability to determine which pitch is coming. This rapid decision requires the batter to make a judgment in a fraction of a second based largely on the trajectory and spin of the ball. When does this decision occur relative to the ball's trajectory and is it possible to identify neural correlates that represent how the decision evolves over a split second?

'via Blog this'

It seems to me that if you relied too much on science (not that there's anything wrong with that) you would have wasted 65 years waiting for an answer. To break the tie, we went to the two smartest guys we could find.

Both are also a scientists by nature so neither one would appear to have a built in pro-baseball guy bias.

from wikiwuote:
http://en.wikiquote.org/wiki/Richard_Feynman

A great deal more is known than has been proved. 

I believe that a scientist looking at nonscientific problems is just as dumb as the next guy — and when he talks about a nonscientific matter, he will sound as naive as anyone untrained in the matter. 

Thanks Messrs. Einstein and Feyman. CASE CLOSED. Yogi wins. 

Daniel Wolpert on Why you have a Brain - To hit a fastball, of course!!

Yogi Berra is credited with saying "You can't think and hit at the same time". As usual, Yogi was correct, apparently you cannot 'consciously' think and hit at the same time. However, you can think 'subconsciously' and hit. Who'd have thunk it?

Metrics for the subconscious organization
http://blogs.sas.com/content/valuealley/2012/01/17/metrics-for-the-subconscious-organization/

Think about what it’s like to learn to ride a bicycle, or play the piano, or hit a fast ball, or to coach a group of middle schoolers to do the same. If asked to explain how you stay balanced on a bicycle, you probably couldn’t do it. If you tried to think about each finger finding the right piano key, you could never play a series of chords let alone an entire song. A fast ball reaches home plate in four-tenths of a second, two-tenths faster than your conscious brain can register it. Yet somehow, you still manage to ride a bike, play the piano, and hit that fast ball, often with considerable skill. What’s going on here?

A new book out by David Eagleman entitled, “Incognito – The Secret Lives of the Brain”, investigates these types of abilities and explains how much, how very, very much of what we do and what we think is managed by subconscious processes completely outside of our conscious control and often beyond our conscious awareness (i.e. temperature control, digestion). It was Freud who first described this “iceberg” of mental processes, with 90% of it below the conscious surface, now further advanced by modern science, which has discovered that your subconscious makes its own decisions several tenths of a second before the conscious mind is aware of that decision. The “you’ of your subjective conscious experience is a minor player when it comes to most of what it is your body does, primarily brought into action only when there is a tie vote or a conflict among your subconscious processes. How do we know this is true, that the brain really works that way? Because you can hit a fast ball. Some part of your brain made the decision to pull the trigger and swing away before your conscious self was made aware of that decision.

Great stuff from Sports are 80 Percent Mental. This is where science meets real-life, on the baseball field.

"So, our brain is constantly doing Bayesian calculations to compute the probability that the pitch that our eyes tell us is a fastball is actually a fastball based on our prior knowledge.  Every hitter knows when this calculation goes wrong when our prior knowledge tells our brain so convincingly that the next pitch will be a fastball, it overrules the real-time sensory input that this is actually a nasty curve ball.  The result is either a frozen set of muscles that get no instructions from a confused brain or a swing that is way too early. "

Sports are 80 Percent Mental...

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Daniel Wolpert On Why You Have A Brain Posted: 31 Mar 2012 06:35 PM PDT Daniel Wolpert is absolutely certain about one thing.  "We have a brain for one reason and one reason only, and that's to produce adaptable and complex movements," stated Wolpert, Director of the Computational and Biological Learning Lab at the University of Cambridge.  "Movement is the only way you have of affecting the world around you."  After that assertive opening to his 2011 TED Talk, he reported that, despite this important purpose, we have a long way to go in understanding of how exactly the brain controls our movements. Daniel Wolpert The evidence for this is in how well we've learned to mimic our movements using computers and robots.  For example, take the game of chess.  Since the late 1990s, computer software has been playing competitive matches and beating human master players by using programmed tactics and sheer computing power to analyze possible moves.  However, Wolpert points out that a five-year-old child can outperform the best robot in actually moving chess pieces around the board. From a sports context, think of a baseball batter at the plate trying to hit a fastball.  It seems intuitive to watch the ball, time the start of the swing, position the bat at the right height to intercept the ball and send it deep.  So, why is hitting a baseball one of the most difficult tasks in sports?  Why can't we perform more consistently? The problem is noise.  Not noise as in the sense of sound but rather the variability of incoming sensory feedback, in other words, what your eyes and ears are telling you.  In baseball, the location and speed of the pitch are never exactly the same, so the brain needs a method to adapt to this uncertainty.  To do this, we need to make inferences or beliefs about the world. The secret to this calculation, says Wolpert, is Bayesian decision theory, a gift of 18th century English mathematician and minister, Thomas Bayes.  In this framework, a belief is measured between 0, no confidence in the belief at all, and 1, complete trust in the belief.  Two sources of information are compared to find the probability of one result given another.  In the science of movement, these two sources are data, in the form of sensory input, and knowledge, in the form of prior memories learned from your experiences. Thomas Bayes So, our brain is constantly doing Bayesian calculations to compute the probability that the pitch that our eyes tell us is a fastball is actually a fastball based on our prior knowledge.  Every hitter knows when this calculation goes wrong when our prior knowledge tells our brain so convincingly that the next pitch will be a fastball, it overrules the real-time sensory input that this is actually a nasty curve ball.  The result is either a frozen set of muscles that get no instructions from a confused brain or a swing that is way too early. Our actions and movements become a never-ending cycle of predictions.  Based on the visual stimuli of the approaching baseball, we send a command to our muscles to swing at the pitch at a certain time.  We receive instant feedback from our eyes, ears and hands about our success or failure in hitting the ball, then log that experience in our memory. Wolpert calls this process our "neural simulator" which constantly and subconsciously makes predictions of how our movements will influence our surroundings. "The fundamental idea is you want to plan your movements so as to minimize the negative consequence of the noise," he explained. We can get a sense of what its like to break this action-feedback loop.  Imagine a pitcher aiming at the catcher's mitt, releasing the ball but then never being able to see where the pitch ended up.  The brain would not be able to store that action as a success or failure and the Bayesian algorithm for future predictions would be incomplete. Try this experiment with a friend.  Pick up a heavy object, like a large book, and hold it underneath with your left hand.  If you now use your right hand to lift the book off of your left hand, you'll notice that your left hand stays steady.  However, if your friend lifts the book off of your hand, your brain will not be able to predict exactly when that will happen.  Your left hand will rise up just a little after the book is gone, until your brain realizes it no longer needs to compensate for the book's weight.  When your own movement removed the book, your brain was able to cancel out that action and predict with certainty when to adjust your left hand's support. "As we go around, we learn about statistics of the world and lay that down," said Wolpert.  "But we also learn about how noisy our own sensory apparatus is and then combine those in a real Bayesian way." Our movements, especially in sports, are very complex and the brain to body communication pathways are still being discovered.  We'll rely on self-proclaimed "movement chauvinists" like Daniel Wolpert to continue to map those routes.  In the meantime, you can still brag about the pure genius of your five-year-old hitting a baseball.

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Try This!!!
From exploratorium.edu
http://www.exploratorium.edu/baseball/reactiontime.html

Click on the "play ball" button, then move your cursor over the part of the screen that shows the baseball field. As soon as you see "swing batter," click on your screen as fast as you can.

Fastball Reaction Time imitates a 90-mph fastball thrown by a major league pitcher. While this exhibit doesn't test if you could actually hit a fastball, it does test whether you could react in time to hit one. When you see the "swing batter" screen, a signal in your eye sends a message to a part of your brain that controls your muscles. Your brain must then send a signal to your muscles, telling them to click. Although it takes some time for the signal to travel along each nerve, the major delay in your reaction time occurs at the junction points in between the different nerves involved, and between the nerves and the muscles in your fingers.