Introduction
Monday,
Jan 16, 2004
A.
Humanity vs. Numbers
On February 8, 2000, NOVA aired a piece
on the Black-Sholes Formula and how it won it’s creators the Nobel Prize and millions of dollars, and
how it eventually failed.
Click here to read the whole transcript. The story is testimony to the limitations of
scientific approaches to human behavior. One of the Federal Reserve officers
who got involved in the aftermath concluded:
“Math
doesn’t drive financial markets, people drive financial markets, and people are
not predictable. We do not yet have a universal theory of human behavior or
human motivation. Given that that’s so, we’re not likely to have robust models
of financial market behavior that will always work, and I think the hubris of
the mathematician is to ignore that fact.”
B.
Art vs. Science
G. Vico, 1707 (also
quoted in "Task Force 5 report")
“The case of P. Perot is in point. He built a ship the proportions of which had
been carefully calculated beforehand according to the rules of analytical
geometry, expecting it to be the swiftest vessel in existence. But as soon as
the ship slid from the docks into the water, it sank to the bottom of the sea
and remained there as motionless as a rock.”
C.
Subtlety and Strategy
To
know wisdom and instruction;
to perceive the words of understanding;
To
receive the instruction of wisdom,
justice, and judgment, and equity
To
give subtlety to the simple,
to the young man knowledge and discretion
(A
wise man will hear, and will increase learning;
and a man of understanding shall attain unto wise counsels:)
To
understand a proverb, and the interpretation;
the words of the wise, and their dark sayings.
The
fear of the LORD is the beginning of knowledge:
but fools despise wisdom and instruction.
1.
Information
2.
Passive
3.
Legal
1.
Influence instead of information
2.
Active instead of passive
3.
Persuasive instead of legal
F.
A Discussion of Communication Models
1.
Shannon-Weaver Model
2.
What’s missing?
a.
Multiple
Channels
b. Process
c.
Context
d. Reciprocality