I’ve been doing a lot of thinking and a little bit of work on Ole Peters’ concept of “Time averaging”. This was flagged up in Mark Buchanan’s excellent blog (http://physicsoffinance.blogspot.co.uk/2012/11/ergodicity-biggest-mistake-in-economics.html). The non technical papers (e.g. http://www.towerswatson.com/united-kingdom/research/8271) and TEDx video (http://www.youtube.com/watch?feature=player_embedded&v=LGqOH3sYmQA) are excellent introductions for laymen such as me.

I agree with Peters and Buchanan that this is fundamentally important. It has serious implications for distribution of wealth and equity, but most importantly in terms of risk tolerance. I have had a hunch for a while (after looking at what was the expected 95% confidence limit in a portfolio over say 30 years) that something was wrong in the conventional, risk-neutral, view of the world. Peters’ work hits it fair and square. It is clear that the arithmetic average (ensemble average) is not a relevant statistic for decision making. Far more interesting are either median or percentile outcomes which tell you far more about where you will likely end up, as opposed to the occasional lucky fool.

The St. Petersburg paradox Peters uses to examine this is an extreme example, but not the only one. Nevertheless, I decided to run a simple spreadsheet looking at the distribution of results you get if you play the following game:

Start with \$1.

Toss a coin.

Heads you gain 50%

Tails you lose 40%

Repeat 100 times.

If you ask Excel to run this for 8,000 players, the log distribution, as you could expect, is roughly “bell shaped” (see below). But the big surprise is what the average is (or ensemble average to be precise). In the figure below, the amazing result is that the average is 1.76, even though the peak of the distribution is around minus 2.

This may not seem that dramatic in log space, but the implication is that the “normal” or “common” result is that after 100 coin tosses, most people will end up with between \$0.1 and \$1, whereas a few extreme winners mean that the average outcome is \$5,800 (!)

Extend this analogy to the GDP of a country and you can see why median earnings are far more important to society than GDP, which can be skewed dramatically by disproportionate returns to the global elite (Top 1% anyone???).

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Just the most beautiful photos. I just had to link to them.

The Royal Observatory has culled through over 800 entries from astronomers and astro-photographers around the world to release its compilation of the best astronomy photos of the year. The contest is run by Royal Observatory Greenwich and Sky at Night Magazine.

Should you have plans to be in London, an exhibition featuring the work is on display at the Royal Observatory Greenwich Planetarium throughout October 2012 in “The Universe Exposed: photographing the cosmos.”

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## Limits to growth – 2002 predictions and evidence since

I am reading the 2002 update to Limits to Growth (http://www.amazon.com/Limits-Growth-The-30-Year-Update/dp/193149858X), a book originally published in 1972. The book describes models run to simulate how the planet, ecosystem and economy will react to the collision between exponential growth and finite physical resources. As you can imagine, it was not popular at the time, and you could make a cogent argument that the popular debate has hardly advanced since.

Which is depressing, because many of their original predictions have proved startlingly accurate (see for example http://www.csiro.au/files/files/plje.pdf). But then why have vested interests ever let facts, evidence and testable predictions get in the way of defence of a (profitable) status quo? Tobacco industry anyone?

The fundamental property that the dynamical systems model (theirs is called “World3”) highlights is that any system with growth, finite resources and delays in reactions, is prone to Overshoot. This is like driving at a set of traffic lights that turns red: if you’re travelling slow enough and your reaction time and brakes are good enough, you will stop in time; if you’re travelling too fast, your reaction time is slow or your brakes inadequate, the inevitable result is Overshoot. This applies to industrial output, food production, pollution levels etc.

In the 2002 update, the authors give a list of symptoms that would indicate that the global system was heading for an Overshoot (and, for the avoidance of doubt, that is not a clever place to be). What struck me was the mountain of evidence against many of these that has arisen since 2002. I thought I would give the list in full, together with examples of evidence that has arisen since the work was published. This last point is important, because rear view mirror science is no good: a prediction must be made before you know the evidence and the evidence gathered afterwards.

The excerpt from the book begins with a couple of introductory paragraphs, followed by the indicators, with the evidence in italics for each point.

“Any population–economy–environment system that has feedback delays and slow physical responses; that has thresholds and erosive mechanisms; and that grows rapidly is literally unmanageable. No matter how fabulous its technologies, no matter how efficient its economy, no matter how wise its leaders, it can’t steer itself away from hazards. If it constantly tries to accelerate, it will overshoot. By definition, overshoot is a condition in which the delayed signals from the environment are not yet strong enough to force an end to growth.

How, then, can society tell if it is in overshoot? Falling resource stocks and rising pollution levels are the first clues. Here are some other symptoms:

• Capital, resources, and labor diverted to activities compensating for the loss of services that were formerly provided without cost by nature (for example, sewage treatment, air purification, water purification, flood control, pest control, restoration of soil nutrients, pollination, or the preservation of species). Record investment needed in the water industry globally (http://www.investmentu.com/2010/April/water-industry-infrastructure.html) ; Record amount spent on flood defence infrastructure and flood insurance (http://www.fas.org/sgp/crs/misc/R40650.pdf)

• Capital, resources, and labor diverted from final goods production to exploitation of scarcer, more distant, deeper, or more dilute resources. Tar sands anyone?

• Technologies invented to make use of lower-quality, smaller, more dispersed, less valuable resources, because the higher-value ones are gone. Fracking? Many primary mine tailings are now being mined for their residual resources (e.g. Cobalt)

• Failing natural pollution cleanup mechanisms; rising levels of pollution. CO2… see e.g. http://www.esrl.noaa.gov/gmd/ccgg/trends/

• Capital depreciation exceeding investment, and maintenance deferred, so there is deterioration in capital stocks, especially long-lived infrastructure.

• Growing demands for capital, resources, and labor used by the military or industry to gain access to, secure, and defend resources that are increasingly concentrated in fewer, more remote, or increasingly hostile regions. Iraq? China in Africa?

• Investment in human resources (education, health care, shelter) postponed in order to meet immediate consumption, investment, or security needs, or to pay debts. Euro crisis? US deficit?

• Debts a rising percentage of annual real output. No need to point out evidence of this one…

• Eroding goals for health and environment.

• Increasing conflicts, especially conflicts over sources or sinks. Water conflicts in Africa; fortunately this hasn’t erupted yet, but did bread prices pay a part in the Arab spring?

• Shifting consumption patterns as the population can no longer pay the price of what it really wants and, instead, purchases what it can afford. Downtrading in retail post financial crisis?

• Declining respect for the instruments of collective government as they are used increasingly by the elites to preserve or increase their share of a declining resource base. Occupy Wall Street? Arab Spring?

• Growing chaos in natural systems, with “natural” disasters more frequent and more severe because of less resilience in the environmental system. Hurricane Katrina, Arctic Ice Extent collapse, Heat records all over the world, Asian floods. Do I need to go on.

For me the message of all this is that we all need to collectively wake up and smell the coffee. We could screw this planet up in the next decade if we don’t change course very quickly. I work every day with companies who try in some small way to address these challenges, and am well aware that these tiny actions make little to no difference on a global scale. But if many people pull in the same direction, we can turn the boat round and set sail on a sustainable course.

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## Rio disappointment

Yet another climate conference has come and gone with essentially no material progress towards tackling one of the most important challenges humanity has ever faced.

Is that hyperbole?  I don’t think so.

The rate at which humans are altering the earth’s ecosystem is unprecedented.  I don’t mean “the fastest for 100 years” here, I mean geologically unprecedented.  Sure, the odd meteorite or ice age has hit, but we’ve never consumed the earth’s resources in an exponentially growing manner before.

Climate change is only one of the manifestations of this.  Biodiversity loss is another, and the consequences of that could be just as dire.

But sticking to the main point, it staggers me that endless column inches and TV studio hours are devoted to whether Greece will leave the Euro, but very little to the fact that we are probably only a couple of generations away from permanently altering the way our species has to live.  Humans obviously have an extreme short term focus, but I’m amazed that we can logically and rationally understand, document and explain this, but not emotionally react to it in a way that leads to action.  You can blame the vested interests of the fossil fuel based industries (and they deserve plenty of criticism) but their voice is small compared to the popular will, so I think we need to look closer to home.

Which brings me to Rio.

After a disappointment like this, and bearing in mind what I just said, I feel a responsibility to “do something about it”.  I work in the environmental sector, trying to finance companies and facilities which will improve the way we look after our planet, and in particular our waste.  So I feel I contribute to “doing something”.  But there is a nagging feeling that it’s just not enough.  Unless we can really scale those activities (and if we can’t it won’t be for the lack of trying), the impact on a global scale is only ever going to be limited.

I suppose this blog is in part an attempt to assuage my guilt for not doing more.  I joined twitter (@james_samworth) to try to spread information and opinions and contribute to the global conversation on the environmental (and science, finance, politics and anything else I find interesting), but the 140 character limit makes it hard to convey any more than a bullet point (I also accept it’s part of the service’s charm).

So this is a longer version of 100 tweets.

Anyone who feels the same way, please share, comment and distribute.

Anyone who disagrees, please comment too, and be prepared to justify your arguments with facts, data, evidence and logic.  If I fall foul of that standard, I’m happy to have it pointed out!

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## Inspirations

This is a list of books or sources that I’ve enjoyed and that have helped shape my view of the world.  It’s my intention to write a summary or review of each of them, explaining why I find them so interesting and how they hang together.  Suggestions for additions are very welcome!

Jane Jacobs: The Death and Life of Great American Cities (http://www.amazon.co.uk/Death-Great-American-Cities-Vintage/dp/067974195X/ref=sr_1_1?ie=UTF8&qid=1339244051&sr=8-1).  A passionate attack on city planning orthodoxy, and argument for diversity, vitality, mixtures of uses, complexity, emergence and cities as ecosystems.

David MacKay: Sustainable Energy Without the Hot Air (http://www.withouthotair.com/).  A reference bible for renewable energy.  The book every physicist wishes they had the capacity to conceive and were eloquent enough to write.

Tom Murphy: Do The Math blog: (http://physics.ucsd.edu/do-the-math/).  A first principles look at the implications and impossibility of continued economic growth at historic (industrial era) rates.

Albert-Laszlo Barabasi: Linked (http://www.amazon.co.uk/Linked-Everything-Connected-Business-Everyday/dp/0452284392/ref=sr_1_3?ie=UTF8&qid=1339244206&sr=8-3) and Bursts (http://www.amazon.co.uk/Bursts-Hidden-Patterns-Everything-Crusades/dp/0452297184/ref=sr_1_1?s=books&ie=UTF8&qid=1339244253&sr=1-1).  One on the most cited scientists of the last decade, and pioneer in network science, human dynamics and other fields.  Powerful explanation of the implications of the structure of networks (particularly scale-free ones) and their applications in social, economic, medical and a huge variety of other fields.

John Cook: Skeptical Science blog (http://www.skepticalscience.com/).  A magnum opus refuting line by line the attacks of climate change deniers and refuseniks.

Per Bak: How nature works (http://www.amazon.co.uk/how-nature-works-self-organized-criticality/dp/038798738X/ref=sr_1_1?s=books&ie=UTF8&qid=1339244431&sr=1-1).  One of those books where you find yourself saying “Of course” about every ten pages.  Starting from sand piles it explores the behaviour of non-equilibrium systems, explaining the statistics of many things from earthquakes to the distribution of company sizes.

Mark Buchanan: The social atom (http://www.amazon.co.uk/The-Social-Atom-neighbor-usually/dp/0462099148/ref=sr_1_1?s=books&ie=UTF8&qid=1339244465&sr=1-1).  A popular distillation of the efforts of physicists to apply their thinking and models to social sciences.  Fundamental implications for finance, social influence and contagion and many other areas.

Daniel Kahneman: Thinking Fast and Slow (http://www.amazon.co.uk/Thinking-Fast-Slow-Daniel-Kahneman/dp/0141033576/ref=sr_1_1?s=books&ie=UTF8&qid=1339244515&sr=1-1).  A tour de force summary by a Nobel prize winning psychologist of his life’s work.  There is almost too much to take in, but it’s worth it for the explanation of prospect theory alone.  Builds two models of thinking: System 1 (fast, intuitive) and System 2 (slow, logical) and explains how we alternate between them with startling consequences.

Ben Goldacre: http://www.badscience.net/ Blog exposing poor use or abuse of science and research, with a particular focus on medicine and the popular press.  Campaigner for source data and basic honesty.

Richard Feynman: Cargo Cult Science (http://www.lhup.edu/~DSIMANEK/cargocul.htm) and Lectures on Physics (http://www.amazon.co.uk/Feynman-Lectures-Physics-boxed-set/dp/0465023827/ref=sr_1_2?s=books&ie=UTF8&qid=1339244610&sr=1-2).  The Cargo Cult Science lecture is the benchmark for scientific honesty and cuts so many at hype to the quick.  The Lectures are the best exposition I’ve ever seen of the basic laws of Physics, written by one of the most brilliant physicists of all time and a master communicator.

Hopp and Spearman: Factory Physics (http://www.amazon.co.uk/Factory-Physics-Wallace-Hopp/dp/007123246X/ref=sr_1_1?s=books&ie=UTF8&qid=1339244633&sr=1-1).  The laws of physics applied to factories and operations.  For a fundamental understanding of so much more than kanban and six sigma, this is a great place to start.  Queueing theory is well worth spending the time to understand – it has implications for everyone’s productivity!

Benjamin Franklin: Autobiography (http://www.amazon.co.uk/The-Autobiography-Benjamin-Franklin-ebook/dp/B000JMLMXI/ref=sr_1_1?s=books&ie=UTF8&qid=1339244671&sr=1-1).  An honest account of the life of a great man.  His discipline, morality, good nature and graft shine through.

Malcolm Gladwell: Outliers (http://www.amazon.co.uk/Outliers-Story-Success-Malcolm-Gladwell/dp/0141036257/ref=sr_1_1?s=books&ie=UTF8&qid=1339244714&sr=1-1) and Blink (http://www.amazon.co.uk/Blink-The-Power-Thinking-Without/dp/0141014598/ref=sr_1_1?s=books&ie=UTF8&qid=1339244741&sr=1-1).  The story of success and populariser of the “10,000 hour rule”, emphasising the importance of hard work over “talent” and the level of expertise it is possible to achieve whereby decisions can be made almost instantaneously, without concious thought.

Nassim Taleb: The Black Swan (http://www.amazon.co.uk/The-Black-Swan-Impact-Improbable/dp/0141034599/ref=sr_1_1?s=books&ie=UTF8&qid=1339244777&sr=1-1).  A profound critique of the culture of wilful myopia which led to the financial crisis.  A failure to appreciate that unknown risks could cause an interconnected system to collapse and the incentives that drive individuals to “pick up pennies in front of the steam roller”.

George Prochnik: In Pursuit of Silence (http://www.amazon.co.uk/In-Pursuit-Silence-Listening-Meaning/dp/0767931211/ref=sr_1_1?s=books&ie=UTF8&qid=1339244804&sr=1-1).  Shows the need for us all to get away from time to time, in order to do some proper thinking, and the difficulty of doing that in the modern world.

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## What and why?

The aim of this blog is to explore thoughts and promote discussion of what I think is the most important issue we face as a society: the effect we are having on our environment and its habitability by future generations.  My training was as a Physicist, and later in my career I studied an MBA.  As a result, my take on it stems from those two roots, and has branched out in to related fields.

Fundamentally, I see the issue as a thermodynamic problem, which is exacerbated by feedback and network effects in our ecosystem.  This means there is a non-trivial probability of a catastrophic collapse, and therefore a precautionary approach should be taken.

I’m sure many people share my basic belief that people are bright enough to work this out for themselves, given access to full information, and the market will generally do the rest.  However there are powerful forces which pervert this and entrench a way of living which has worked very well in the past (for rich / developed countries), but cannot work in the future for 9 billion people.

So we need to make sure that the sunlight of reason and data is widely disseminated, and that this ultimately builds pressure on decision makers to act differently.  The aim of this blog is to contribute in some small way to the monumental efforts already made by wiser people than me, for we all stand on the shoulders of giants.

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