Commerce -> Math -> Science ->Trade -> Boom

We live in interesting times 

The financial crisis is just beginning according to some finance insiders, economists and journalists. One of the reasons for this crisis is the high amount of leveraged trading done by banks and other institutions. 

Leveraging means using tools to amplify your action. In a physical lever, we need to apply small force at one point to achieve a multiple of that force at some other location by pivoting on a fulcrum point.

Leverage in Physics

So to have the effect of X times a force F, you just have to apply a force F at another suitably chosen point. This is a powerful idea but has been around for millenia most notably used by Archimides in many of his inventions. Infact, he is said to have remarked that give me a fulcrum strong enough and I will move the world.

But the downsides of this is that if you make a small change in F, there will be X times the change on the other side. So a small error propogates multiplicatively in leveraged scenario. 

Though this is a crude analogy, but even in finance people started doing something similar. They did leveraged trades so as to need to only invest a small amount but hoping to get a bigger return. They failed to see the downside which is that their risk also balooned and also the fact that if everyone took such extremely leveraged position, the whole system becomes extremely fragile due to a small shock even though the chances of that shock occuring might have reduced.

Many of these financial instruments were results of using complex mathematical tools and methods which were traditionally developed to help in solving scientific and engineering problem. But primitive mathematics like number system and algebra were developed to facilitate trade and commercial activities. 

It is funny that first math developed from commerce, then it is used and developed spectacularly well in the field of science and engineering, but then the advanced math when applied back to the field of commerce seems to have backfired. 

Last post on the WC'07

BBC news examines the financial implication of early exit of Indian cricket team from the WC '07 here.

The punch line at the end was a cruel joke!

Sony's Kunal Dasgupta now says the format of the tournament is flawed.

"In a 48-day tournament, if teams like India and Pakistan are out for playing bad cricket in two matches, there is something really wrong. We were against this format and even told the International Cricket Council to reconsider it," he said.

Hear Hear! I say, for the next World Cup India must get the automatic bye to the finals. Only then will cricket in its present economic avatar be sustainable.

Lessons from the WC debacle

Mukul Kesavan has written about how the exit of India and Pakistan might actually be good for Cricket. He argues that the rise of these two south asian cricketing giants is responsible for the rise of one day cricket (which he associates with match fixing and other corrupt practices).
While I do agree that this exit might be good for cricket but not for the reason. One Day cricket is no south asian invention, infact the brits have even shorter version Twenty20. These are innovations designed to make the game popular. And match fixing and corruption are no south asian preserve.
But the malaise lies in the unstable nature of international cricket. There are around a dozen international teams playing the world cup but (I guess) the audience comprise more than 70% south asians. I dont think there is much passion for the game in Britan or even Australia (who are doing so well).
If cricket in India has to be saved, then more effort must be made to popularize the domestic cricket like Ranji Trophy. It is a joke that the players representing state teams have so little perks while the players just a level above them are treated like gods.
I do hope that the cricket administrator realize that they should not kill the hen that lays the golden eggs.

Another I told u so!

Now this is an I told you so, I really dont have any fun saying. India lost against SL and, unless the formidable Bangladeshis screw up big time, it looks like the picture posted here was prescient.

Well, I guess it is time to reflect for all concerned including Sunny Gavaskar! It would take a lot of guts for the Cricket board not to have some head rolling. For who come up with that concept anyways. Unless Chappell or Dravid resign by themselves, they should be kept on and the team should be rebuilt.

I also wonder how much the murder of Bob Woolmer played on the minds of the cricketers. It does seem prima facie that Woolmer was killed because someone was really pissed off with Pakistan teams exit out of the World Cup. Such an unnatural action suggests lot of juicy conspiracy theories. The Indian team might also be playing with this thought at the back of their minds.