fudge factor

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pages: 258 words: 73,109

The (Honest) Truth About Dishonesty: How We Lie to Everyone, Especially Ourselves by Dan Ariely

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accounting loophole / creative accounting, Albert Einstein, Bernie Madoff, Broken windows theory, cashless society, clean water, cognitive dissonance, Credit Default Swap, Donald Trump, fudge factor, new economy, Richard Feynman, Richard Feynman, Schrödinger's Cat, shareholder value, Steve Jobs, Walter Mischel

If your accountant were to ask you to sign an honor code a moment before filing your taxes or if your insurance agent made you swear that you were telling the whole truth about that water-damaged furniture, chances are that tax evasion and insurance fraud would be less common.* What are we to make of all this? First, we need to recognize that dishonesty is largely driven by a person’s fudge factor and not by the SMORC. The fudge factor suggests that if we want to take a bite out of crime, we need to find a way to change the way in which we are able to rationalize our actions. When our ability to rationalize our selfish desires increases, so does our fudge factor, making us more comfortable with our own misbehavior and cheating. The other side is true as well; when our ability to rationalize our actions is reduced, our fudge factor shrinks, making us less comfortable with misbehaving and cheating. When you consider the range of undesirable behaviors in the world from this stand-point—from banking practices to backdating stock options, from defaulting on loans and mortgages to cheating on taxes—there’s a lot more to honesty and dishonesty than rational calculations.

How can we secure the benefits of cheating and at the same time still view ourselves as honest, wonderful people? This is where our amazing cognitive flexibility comes into play. Thanks to this human skill, as long as we cheat by only a little bit, we can benefit from cheating and still view ourselves as marvelous human beings. This balancing act is the process of rationalization, and it is the basis of what we’ll call the “fudge factor theory.” To give you a better understanding of the fudge factor theory, think of the last time you calculated your tax return. How did you make peace with the ambiguous and unclear decisions you had to make? Would it be legitimate to write off a portion of your car repair as a business expense? If so, what amount would you feel comfortable with? And what if you had a second car? I’m not talking about justifying our decisions to the Internal Revenue Service (IRS); I’m talking about the way we are able to justify our exaggerated level of tax deductions to ourselves.

Although most people haven’t consciously figured out (much less announced) their acceptable rate of lying like this young man, this overall approach seems to be quite accurate; each of us has a limit to how much we can cheat before it becomes absolutely “sinful.” Trying to figure out the inner workings of the fudge factor—the delicate balance between the contradictory desires to maintain a positive self-image and to benefit from cheating—is what we are going to turn our attention to next. CHAPTER 2 Fun with the Fudge Factor Here’s a little joke for you: Eight-year-old Jimmy comes home from school with a note from his teacher that says, “Jimmy stole a pencil from the student sitting next to him.” Jimmy’s father is furious. He goes to great lengths to lecture Jimmy and let him know how upset and disappointed he is, and he grounds the boy for two weeks.

 

pages: 898 words: 266,274

The Irrational Bundle by Dan Ariely

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accounting loophole / creative accounting, air freight, Albert Einstein, banking crisis, Bernie Madoff, Black Swan, Broken windows theory, Burning Man, business process, cashless society, Cass Sunstein, clean water, cognitive dissonance, computer vision, corporate governance, credit crunch, Credit Default Swap, Daniel Kahneman / Amos Tversky, delayed gratification, Donald Trump, endowment effect, Exxon Valdez, first-price auction, Frederick Winslow Taylor, fudge factor, George Akerlof, Gordon Gekko, greed is good, happiness index / gross national happiness, Jean Tirole, job satisfaction, knowledge economy, knowledge worker, lake wobegon effect, late fees, loss aversion, Murray Gell-Mann, new economy, Peter Singer: altruism, placebo effect, price anchoring, Richard Feynman, Richard Feynman, Richard Thaler, Saturday Night Live, Schrödinger's Cat, second-price auction, shareholder value, Silicon Valley, Skype, software as a service, Steve Jobs, The Wealth of Nations by Adam Smith, The Wisdom of Crowds, ultimatum game, Upton Sinclair, Walter Mischel, young professional

If your accountant were to ask you to sign an honor code a moment before filing your taxes or if your insurance agent made you swear that you were telling the whole truth about that water-damaged furniture, chances are that tax evasion and insurance fraud would be less common.* What are we to make of all this? First, we need to recognize that dishonesty is largely driven by a person’s fudge factor and not by the SMORC. The fudge factor suggests that if we want to take a bite out of crime, we need to find a way to change the way in which we are able to rationalize our actions. When our ability to rationalize our selfish desires increases, so does our fudge factor, making us more comfortable with our own misbehavior and cheating. The other side is true as well; when our ability to rationalize our actions is reduced, our fudge factor shrinks, making us less comfortable with misbehaving and cheating. When you consider the range of undesirable behaviors in the world from this standpoint—from banking practices to backdating stock options, from defaulting on loans and mortgages to cheating on taxes—there’s a lot more to honesty and dishonesty than rational calculations.

How can we secure the benefits of cheating and at the same time still view ourselves as honest, wonderful people? This is where our amazing cognitive flexibility comes into play. Thanks to this human skill, as long as we cheat by only a little bit, we can benefit from cheating and still view ourselves as marvelous human beings. This balancing act is the process of rationalization, and it is the basis of what we’ll call the “fudge factor theory.” To give you a better understanding of the fudge factor theory, think of the last time you calculated your tax return. How did you make peace with the ambiguous and unclear decisions you had to make? Would it be legitimate to write off a portion of your car repair as a business expense? If so, what amount would you feel comfortable with? And what if you had a second car? I’m not talking about justifying our decisions to the Internal Revenue Service (IRS); I’m talking about the way we are able to justify our exaggerated level of tax deductions to ourselves.

Although most people haven’t consciously figured out (much less announced) their acceptable rate of lying like this young man, this overall approach seems to be quite accurate; each of us has a limit to how much we can cheat before it becomes absolutely “sinful.” Trying to figure out the inner workings of the fudge factor—the delicate balance between the contradictory desires to maintain a positive self-image and to benefit from cheating—is what we are going to turn our attention to next. CHAPTER 2 Fun with the Fudge Factor Here’s a little joke for you: Eight-year-old Jimmy comes home from school with a note from his teacher that says, “Jimmy stole a pencil from the student sitting next to him.” Jimmy’s father is furious. He goes to great lengths to lecture Jimmy and let him know how upset and disappointed he is, and he grounds the boy for two weeks.

 

pages: 593 words: 118,995

Relevant Search: With Examples Using Elasticsearch and Solr by Doug Turnbull, John Berryman

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crowdsourcing, domain-specific language, finite state, fudge factor, full text search, information retrieval, natural language processing, premature optimization, recommendation engine, sentiment analysis

The summation in the preceding dot product can be found in the behavior of the Boolean query that sums up matching clauses. You can see this in sum of from the previous explain: 3.19292, sum of: 3.19292, weight(title:alien in 223) [PerFieldSimilarity] 3.6.3. Practical caveats to the vector space model Although the vector space model provides a general framework for discussing Lucene’s scoring, it’s far from a complete picture. Numerous fudge factors have been shown to improve scoring in practice. Perhaps most fundamentally, the ways matches are combined by compound queries into a larger score isn’t always a summation. You’ve seen through the | symbol that the “max” of two fields is often taken. There’s also often a coord factor that directly punishes compound matches missing some of their components (coord multiplies the resulting dot product by <the number of matches> / <the total query terms>).

You’ll explore many of these strategies in future chapters. Another important note about this dot product is that it’s often normalized by dividing the magnitude of each vector: For dot products, normalization converts the score to a 0–1. This rebalances the equation to account for features that tend to have high weights, and those that tend to have smaller weights.[3] For search, given all the fudge factors in Lucene scoring and the peculiarities of field statistics, you should never attempt to compare scores between queries without a great deal of deep customization to make them comparable. 3 Astute readers will recognize this as the cosine similarity. As stated previously, the sparse vector representation of text is known as the bag of words model. It’s considered a “bag” because it reflects a decomposition of text that ignores the context of these terms.

Taken together, Lucene’s classic similarity measures a term’s weight in a piece of text as follows: TF weighted × IDF weighted × fieldNorm Revisiting the fieldWeight calculation, you see this formula in play: 0.4414702, fieldWeight in 31, product of: 1.4142135, tf(freq=2.0), with freq of: 2.0, termFreq=2.0 3.9957323, idf(docFreq=1, maxDocs=40) 0.078125, fieldNorm(doc=31) Lucene’s next default similarity: BM25 Over the years, an alternate approach to computing a TF × IDF score has become prevalent in the information retrieval community: Okapi BM25. Because of its proven high performance on article-length text, Lucene’s BM25 similarity will be rolling out as the default similarity for Solr/Elasticsearch, even as you read this book. What is BM25? Instead of “fudge factors” as discussed previously, BM25 bases its TF × IDF “fudges” on more-robust information retrieval findings. This includes forcing the impact of TF to reach a saturation point. Instead of the impact of length (fieldNorms) always increasing, its impact is computed relative to the average document length (above-average docs weighted down, below-average boosted). IDF is computed similarly to classic TF × IDF similarity.

 

pages: 244 words: 68,223

Isaac Newton by James Gleick

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Albert Einstein, Astronomia nova, complexity theory, dark matter, Edmond Halley, Fellow of the Royal Society, fudge factor, Isaac Newton, On the Revolutions of the Heavenly Spheres, Richard Feynman, Richard Feynman, Thomas Kuhn: the structure of scientific revolutions

.… It is necessary to cut loose from such difficulties.” Newton, by contrast, set himself, and science, the obligation to exclude nothing and calculate everything. As Westfall says, “So completely has modern physical science modeled itself on the Principia that we can scarcely realize how unprecedented such calculations were.” It was impossible, given the available data, and sometimes he cheated. Westfall, “Newton and the Fudge Factor,” Science 179 (February 23, 1973): 751. Also Nicholas Kollerstrom, “Newton’s Lunar Mass Error,” Journal of the British Astronomical Association 95 (1995): 151. For another example of what Whiteside calls “the delicate art of numerical cookery,” see Math VI: 508–36. 23. Principia 807. 24. Principia 806. 25. Principia 814. 26. Principia 829. 27. Add MS 3965, “De motu corporum,” in Hall and Hall, Unpublished Scientific Papers, p. 281. 28.

Cambridge, Mass.: Harvard University Press, 2001. Weld, Charles Richard. A History of the Royal Society, with Memoirs of the Presidents. London: 1848. Westfall, Richard S. Force in Newton’s Physics: The Science of Dynamics in the Seventeenth Century. London: Macdonald, 1971. ———. Never at Rest: A Biography of Isaac Newton. Cambridge: Cambridge University Press, 1980. ———. “Newton and the Fudge Factor,” Science 179: 751. ———. Science and Religion in Seventeenth-Century England. New Haven: Yale University Press, 1958. ———. “Short-Writing and the State of Newton’s Conscience, 1662.” Notes and Records of the Royal Society 18 (1963): 10. Whiston, William. Memoirs of the Life and Writings of Mr. William Whiston. Second edition. London: Whiston & White, 1753. White, Lynn, Jr. Medieval Technology and Social Change.

 

pages: 420 words: 124,202

The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention by William Rosen

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Albert Einstein, All science is either physics or stamp collecting, barriers to entry, collective bargaining, computer age, Copley Medal, David Ricardo: comparative advantage, decarbonisation, delayed gratification, Fellow of the Royal Society, Flynn Effect, fudge factor, full employment, invisible hand, Isaac Newton, Islamic Golden Age, iterative process, Jacquard loom, James Hargreaves, James Watt: steam engine, John Harrison: Longitude, Joseph Schumpeter, Joseph-Marie Jacquard, knowledge economy, moral hazard, Network effects, Peace of Westphalia, Peter Singer: altruism, QWERTY keyboard, Ralph Waldo Emerson, rent-seeking, Ronald Coase, Simon Kuznets, spinning jenny, the scientific method, The Wealth of Nations by Adam Smith, Thomas Malthus, transaction costs, transcontinental railway, éminence grise

It isn’t, of course, that Britain didn’t have its own Réaumurs—the Royal Society was full of skilled scientists uninterested in any involvement in commerce—but rather that it also had thousands of men like Darby: an inventor and engineer who cared little about scientific glory but a whole lot about pots and pans. IF THE CAST IRON used for pots and pans was the most mundane version of the element, the most sublime was steel. As with all iron alloys, carbon is steel’s critical component. In its simplest terms, wrought iron has essentially no minimum amount of carbon, just as there is no maximum carbon content for cast iron. As a result, the recipe for either has a substantial fudge factor. Not so with steel. Achieving steel’s unique combination of strengths demands a very narrow range of carbon: between 0.25 percent and a bit less than 2 percent. For centuries* this has meant figuring out how to initiate the process whereby carbon insinuates itself into iron’s crystalline structure, and how to stop it once it achieves the proper percentage. The techniques used have ranged from the monsoon-driven wind furnaces of south Asia to the quenching and requenching of white-hot iron in water, all of which made steelmaking a boutique business for centuries: good for swords and other edged objects, but not easy to scale up for the production of either a few large pieces or many smaller ones.

Except during times of dramatic depopulation, such as the Black Death of the fourteenth century, or extremely large additions to the stock of arable land, as with Europe’s discovery of the New World, growth in land per worker has been negligible for centuries, so small that its effect on growth can be eliminated in the simplest calculations. The second component, growth in capital3 per worker—that is, all the buildings, machinery, tools, and so on—explains only about 24 percent of total growth. However, since the growth in the amount of land and capital per worker together doesn’t equal the overall growth rate, a fudge factor must be used, called the residual: what’s left over. This also means that the residual, despite the ass-backward way it is calculated, amounts to at least three-quarters of the total increase in economic growth since 1800. That’s a big chunk of activity defined by subtracting everything else, a little like a ten-drawer file cabinet with seven drawers marked “Miscellaneous.” Solow first assumed4 that the residual represented increasing efficiency over time, and he incorporated an arbitrary constant to represent the rate of the growth in useful knowledge.

 

pages: 226 words: 59,080

Economics Rules: The Rights and Wrongs of the Dismal Science by Dani Rodrik

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airline deregulation, Albert Einstein, bank run, barriers to entry, Bretton Woods, butterfly effect, capital controls, Carmen Reinhart, central bank independence, collective bargaining, Daniel Kahneman / Amos Tversky, David Ricardo: comparative advantage, distributed generation, Edward Glaeser, Eugene Fama: efficient market hypothesis, Fellow of the Royal Society, financial deregulation, financial innovation, floating exchange rates, fudge factor, full employment, George Akerlof, Gini coefficient, Growth in a Time of Debt, income inequality, inflation targeting, informal economy, invisible hand, Jean Tirole, Joseph Schumpeter, Kenneth Rogoff, labor-force participation, liquidity trap, loss aversion, low skilled workers, market design, market fundamentalism, minimum wage unemployment, oil shock, open economy, price stability, prisoner's dilemma, profit maximization, quantitative easing, randomized controlled trial, rent control, rent-seeking, Richard Thaler, risk/return, Robert Shiller, Robert Shiller, school vouchers, South Sea Bubble, spectrum auction, The Market for Lemons, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, Thomas Malthus, trade liberalization, trade route, ultimatum game, University of East Anglia, unorthodox policies, Washington Consensus, white flight

But ask them whether the model is more relevant to Bolivia or to Thailand, or whether it resembles more the market for cable TV or the market for oranges, and they will have a hard time producing an articulate answer. The standards of the profession require that the modeler make only some general claims about how what he or she is doing is relevant to the real world. It is left to the reader or the user of the model to infer the specific circumstances in which the model can help us better understand reality.§ This fudge factor increases the chances of malpractice. Models lifted out of their original context can be used in settings for which they are inappropriate. At the empirical end of economics, such as labor and development economics, where almost all economists work directly with data and real-world evidence, paradoxically the problems may be even more severe. This is because the underlying model is often left unspecified from the outset.

 

pages: 231 words: 71,248

Shipping Greatness by Chris Vander Mey

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don't be evil, en.wikipedia.org, fudge factor, Google Chrome, Google Hangouts, Gordon Gekko, Jeff Bezos, Kickstarter, Lean Startup, minimum viable product, performance metric, recommendation engine, Skype, slashdot, sorting algorithm, Steve Jobs, Superbowl ad, web application

., for each three days of development, you need one day of your test team to test). The testing constant is a function of the size of your test team. In the spreadsheet shown in Figure 4-1, I’ve added some calculations to ensure that tasks don’t end on the weekends. Because this model uses “ideal” developer days for estimates, it is critical to build a buffer into your dates, but not the engineering task estimates. A buffer is a “fudge factor” that accommodates unforeseen problems and general productivity losses. Some teams estimate that approximately three out of five days are productive. Anything could be happening in those two days, but it’s likely some combination of meetings, broken builds, marriage problems, and false starts. It’s pretty hard to eliminate those distractions, and as a result I find that 60% productivity is a good estimate.

 

pages: 265 words: 74,807

Our Robots, Ourselves: Robotics and the Myths of Autonomy by David A. Mindell

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Air France Flight 447, autonomous vehicles, Captain Sullenberger Hudson, Chris Urmson, en.wikipedia.org, Erik Brynjolfsson, fudge factor, index card, Mars Rover, ride hailing / ride sharing, Ronald Reagan, self-driving car, Silicon Valley, telepresence, telerobotics, trade route

By one engineer estimating the difference between stopped and moving and dialing it in to the algorithm. I asked my colleague Jon How, one of the principals on the project, how many such thresholds there are in a system like that. His reply: “Many, many, many.” In fact the “configuration file” for the MIT vehicle contained nearly a thousand lines of text, setting hundreds of variables: sensor positions and calibrations, fudge factors to align the sensors with one another, how to deal with sun dazzle, etc. Machine learning techniques can help reduce this reliance on parameters, but they still rely on human programmers for their basic structure. How points out that core algorithms generally rely heavily on accurate models of uncertainty in the world. As he observes, “The problem of autonomy is fundamentally the problem of living in an uncertain world.”

 

pages: 269 words: 104,430

Carjacked: The Culture of the Automobile and Its Effect on Our Lives by Catherine Lutz, Anne Lutz Fernandez

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barriers to entry, car-free, carbon footprint, collateralized debt obligation, failed state, feminist movement, fudge factor, Gordon Gekko, housing crisis, illegal immigration, income inequality, inventory management, market design, market fundamentalism, mortgage tax deduction, Naomi Klein, Nate Silver, New Urbanism, oil shock, peak oil, Ralph Nader, Ralph Waldo Emerson, ride hailing / ride sharing, Thorstein Veblen, traffic fines, Unsafe at Any Speed, urban planning, white flight, women in the workforce, working poor, Zipcar

With greater model diversity and the niche marketing of those models to a complex set of demographics that began most vigorously in the 1970s, the automobile became more than a marker of class.21 And in an environment where credit is sold so aggressively, the car today is less a reliable sign of hard work done and money earned than of hard work yet to be done and money yet to be earned. (Now the more appropriate comment to a new car buyer might be “Congratulations on your debt!”) Despite these fudging factors, class remains legible in one’s car, a fact that provides some of the sweetest pleasures to those who drive more expensive and late-model cars. Even the way some talk about how they drive sounds a lot like how they think about getting ahead. Said one man: “I have a life philosophy. If you do what the herd does, you get what the herd gets.” So when he sees packs of cars moving together, he said, he zooms up to them, gets through and barrels away as fast as possible.

 

pages: 294 words: 85,811

The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care by T. R. Reid

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Berlin Wall, British Empire, double helix, employer provided health coverage, fudge factor, medical malpractice, profit maximization, profit motive, single-payer health, South China Sea, the payments system

In terms of “Fairness of financial contribution,” the United States was rated fifty-fourth. Colombia, with health care funded by a steeply progressive tax code, topped the chart on this scale, followed closely by western European countries and Japan. Finally, the WHO experts took all these factors, tabulated each country’s score on each measure, and arrived at its rating of “overall performance.” But this score was adjusted by one more fudge factor: a comparison of each country’s actual performance on national health care to the overall performance it should have been able to achieve, considering its level of education and the amount of money it spends on health care.With this ultimate wrinkle factored in, the report finally came up with its ranking of “overall performance” in all 191 member nations. When the figures were all computed, the French health care system was rated first in the world—and the United States, thirty-seventh.

 

pages: 383 words: 108,266

Predictably Irrational, Revised and Expanded Edition: The Hidden Forces That Shape Our Decisions by Dan Ariely

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air freight, Al Roth, Bernie Madoff, Burning Man, butterfly effect, Cass Sunstein, collateralized debt obligation, computer vision, corporate governance, credit crunch, Daniel Kahneman / Amos Tversky, David Brooks, delayed gratification, endowment effect, financial innovation, fudge factor, Gordon Gekko, greed is good, housing crisis, invisible hand, lake wobegon effect, late fees, loss aversion, market bubble, Murray Gell-Mann, payday loans, placebo effect, price anchoring, Richard Thaler, second-price auction, Silicon Valley, Skype, The Wealth of Nations by Adam Smith, Upton Sinclair

On one hand, we want to look in the mirror and feel good about ourselves (ergo, “I can’t even look at myself in the mirror” is an indicator of one’s own guilt). On the other hand, we’re selfish, and we want to benefit from cheating. On the surface, these two motivations seem contradictory, but our flexible psychology allows us to act on both of them when we cheat “just by a bit”—benefiting financially from cheating while at the same time managing not to feel bad about ourselves. I think of this as an individual “fudge factor,” or a fuzzy conscience. One way to look at the experiments described in Chapters 11 and 12 is to think about them as an examination of what happens when people wrestle with conflicting interests. When we placed participants in situations in which they were torn between wanting to behave honorably and wanting to benefit financially, they usually succumbed to temptation but only by a little bit.

 

pages: 345 words: 86,394

Frequently Asked Questions in Quantitative Finance by Paul Wilmott

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Albert Einstein, asset allocation, Black-Scholes formula, Brownian motion, butterfly effect, capital asset pricing model, collateralized debt obligation, Credit Default Swap, credit default swaps / collateralized debt obligations, delta neutral, discrete time, diversified portfolio, Emanuel Derman, Eugene Fama: efficient market hypothesis, fixed income, fudge factor, implied volatility, incomplete markets, interest rate derivative, interest rate swap, iterative process, London Interbank Offered Rate, Long Term Capital Management, Louis Bachelier, mandelbrot fractal, margin call, market bubble, martingale, Norbert Wiener, quantitative trading / quantitative finance, random walk, regulatory arbitrage, risk/return, Sharpe ratio, statistical arbitrage, statistical model, stochastic process, stochastic volatility, transaction costs, urban planning, value at risk, volatility arbitrage, volatility smile, Wiener process, yield curve, zero-coupon bond

First, if we do start to move outside the Black-Scholes world then chances are it will be the diffusion coefficient that we must change from its usual to accommodate new models. Second, if we want to fudge our option prices, to massage them into line with traded prices for example, we can only do so by fiddling with this diffusion coefficient, i.e. what we now know to be the volatility. This derivation tells us that our only valid fudge factor is the volatility. Black-Scholes for Accountants The final derivation of the Black-Scholes equation requires very little complicated mathematics, and doesn’t even need assumptions about Gaussian returns, all we need is for the variance of returns to be finite. The Black-Scholes analysis requires continuous hedging, which is possible in theory but impossible, and even undesirable, in practice.

 

pages: 1,197 words: 304,245

The Invention of Science: A New History of the Scientific Revolution by David Wootton

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agricultural Revolution, Albert Einstein, British Empire, clockwork universe, Commentariolus, conceptual framework, Dava Sobel, double entry bookkeeping, double helix, en.wikipedia.org, Ernest Rutherford, Fellow of the Royal Society, fudge factor, germ theory of disease, Google X / Alphabet X, Hans Lippershey, interchangeable parts, invention of gunpowder, invention of the steam engine, invention of the telescope, Isaac Newton, Jacques de Vaucanson, James Watt: steam engine, John Harrison: Longitude, knowledge economy, lone genius, Mercator projection, On the Revolutions of the Heavenly Spheres, placebo effect, QWERTY keyboard, Republic of Letters, spice trade, spinning jenny, the scientific method, Thomas Kuhn: the structure of scientific revolutions

In From Natural Philosophy to the Sciences: Writing the History of Nineteenth-century Science. Ed. D Cahan. Chicago: University of Chicago Press, 2003: 221–53. Wesley, Walter G. ‘The Accuracy of Tycho Brahe’s Instruments’. Journal for the History of Astronomy 9 (1978): 42–53. Westfall, Richard S. ‘The Development of Newton’s Theory of Color’. Isis (1962): 339–58. ———. Never at Rest: A Biography of Isaac Newton. Cambridge: Cambridge University Press, 1980. ———. ‘Newton and the Fudge Factor’. Science 179 (1973): 751–8. ———. ‘Science and Technology during the Scientific Revolution: An Empirical Approach’. In Renaissance and Revolution. Humanists, Scholars, Craftsmen and Natural Philosophers in Early Modern Europe. Ed. JV Field and FA James. Cambridge: Cambridge University Press, 1997: 63–72. ———. ‘The Scientific Revolution Reasserted’. In Rethinking the Scientific Revolution. Ed.

Bacon, The Advancement of Learning (1605), 31; and Brown, ‘The Evolution of the Term “Mixed Mathematics”’ (1991). 47. Galileo’s second letter on sunspots (1612), in Galilei & Scheiner, On Sunspots (2008), 107–70. 48. ‘Préface sur le traité du vuide’, in Pascal, Oeuvres complètes (1964), Vol. 2, 772–85. 49. Dear, Discipline and Experience (1995), 15, 180; for an example published by Riccioli in 1651, 78. 50. Palmerino, ‘Experiments, Mathematics, Physical Causes’ (2010); and Westfall, ‘Newton and the Fudge Factor’ (1973). 51. The legal issues and their history were recently summarized in the House of Lords judgement on Regina v. Pendleton, 13 Dec. 2001. 52. Locke, An Essay (1690), 333. 53. Hobbes, Humane Nature (1650), 38–9; quoted in Hacking, The Emergence of Probability (2006), 48 54. Wotton, Reflections upon Ancient and Modern Learning (1694), 301. 55. Seneca, Seneca’s Morals Abstracted (1679), Part 3, 99–100. 56.

 

pages: 696 words: 143,736

The Age of Spiritual Machines: When Computers Exceed Human Intelligence by Ray Kurzweil

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Ada Lovelace, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, Albert Einstein, Any sufficiently advanced technology is indistinguishable from magic, Buckminster Fuller, call centre, cellular automata, combinatorial explosion, complexity theory, computer age, computer vision, cosmological constant, cosmological principle, Danny Hillis, double helix, Douglas Hofstadter, first square of the chessboard / second half of the chessboard, fudge factor, George Gilder, Gödel, Escher, Bach, I think there is a world market for maybe five computers, information retrieval, invention of movable type, Isaac Newton, iterative process, Jacquard loom, Jacquard loom, John von Neumann, Lao Tzu, Law of Accelerating Returns, mandelbrot fractal, Marshall McLuhan, Menlo Park, natural language processing, Norbert Wiener, optical character recognition, pattern recognition, phenotype, Ralph Waldo Emerson, Ray Kurzweil, Richard Feynman, Richard Feynman, Schrödinger's Cat, Search for Extraterrestrial Intelligence, self-driving car, Silicon Valley, speech recognition, Steven Pinker, Stewart Brand, stochastic process, technological singularity, Ted Kaczynski, telepresence, the medium is the message, traveling salesman, Turing machine, Turing test, Whole Earth Review, Y2K

THE END OF THE UNIVERSE What does the Law of Time and Chaos say about the end of the Universe? One theory is that the Universe will continue its expansion forever. Alternatively, if there’s enough stuff, then the force of the Universe’s own gravity will stop the expansion, resulting in a final “big crunch.” Unless, of course, there’s an antigravity force. Or if the “cosmological constant,” Einstein’s “fudge factor,” is big enough. I’ve had to rewrite this paragraph three times over the past several months because the physicists can’t make up their minds. The latest speculation apparently favors indefinite expansion. Personally, I prefer the idea of the Universe closing in again on itself as more aesthetically pleasing. That would mean that the Universe would reverse its expansion and reach a singularity again.

 

pages: 412 words: 122,952

Day We Found the Universe by Marcia Bartusiak

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Albert Einstein, Albert Michelson, Arthur Eddington, California gold rush, Cepheid variable, Copley Medal, cosmic microwave background, cosmological constant, Edmond Halley, Edward Charles Pickering, Fellow of the Royal Society, fudge factor, Harlow Shapley and Heber Curtis, Harvard Computers: women astronomers, horn antenna, invention of the telescope, Isaac Newton, Louis Pasteur, Magellanic Cloud, Occam's razor, Pluto: dwarf planet, Solar eclipse in 1919, William of Occam

Even Newton knew that matter distributed throughout a finite space would eventually coalesce into larger and larger lumps. Stellar objects would be gravitationally drawn to one another, closer and closer over time. Ultimately, the universe would collapse under the inescapable pull of gravity. So, to avoid this cosmic calamity and match his theory with then-accepted astronomical observations, Einstein altered his famous equation, adding the term λ (the Greek letter lambda), a fudge factor that came to be called the “cosmological constant.” This new ingredient was an added energy that permeated empty space and exerted an outward “pressure” on it. This repulsive field—a kind of antigravity, actually—exactly balanced the inward gravitational attraction of all the matter in his closed universe, keeping it from moving. As a result, the universe remained immobile, “as required by the fact of the small velocities of the stars,” wrote Einstein in his classic 1917 paper.

 

pages: 478 words: 131,657

Tesla: Man Out of Time by Margaret Cheney

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AltaVista, dematerialisation, fudge factor, invention of radio, luminiferous ether, Menlo Park

The new physics boiled with debates over waves versus particles and about Einstein’s special theory of relativity, which Tesla—with strong cosmic theories of his own—rejected outright. When Einstein’s general theory of relativity was published in 1916, even its creator had been unable to accept fully the dynamic universe that it implied. So disturbed was Einstein by this that he built into his calculations a “fudge factor” that preserved the possibility that the universe might after all prove to be stable and unchanging. To Tesla this was just added proof that the relativists didn’t know what they were talking about. He himself was working on a theory of the universe to be disclosed in good time, and he had long ago propounded (but not published) his own dynamic theory of gravity. He believed and had often stated, that atomic power would be 1. a dud, or 2. impossibly dangerous to control.

 

pages: 532 words: 133,143

To Explain the World: The Discovery of Modern Science by Steven Weinberg

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Albert Einstein, Alfred Russel Wallace, Astronomia nova, Brownian motion, Commentariolus, cosmological constant, dark matter, Dava Sobel, double helix, Edmond Halley, Eratosthenes, Ernest Rutherford, fudge factor, invention of movable type, Isaac Newton, James Watt: steam engine, music of the spheres, On the Revolutions of the Heavenly Spheres, probability theory / Blaise Pascal / Pierre de Fermat, retrograde motion, Thomas Kuhn: the structure of scientific revolutions

Crease, World in the Balance—The Historic Quest for an Absolute System of Measurement (W. W. Norton, New York, 2011). 13. See J. Z. Buchwald and M. Feingold, Newton and the Origin of Civilization (Princeton University Press, Princeton, N.J., 2014). 14. See S. Chandrasekhar, Newton’s Principia for the Common Reader (Clarendon, Oxford, 1995), pp. 472–76; Westfall, Never at Rest, pp. 736–39. 15. R. S. Westfall, “Newton and the Fudge Factor,” Science 179, 751 (1973). 16. See G. E. Smith, “How Newton’s Principia Changed Physics,” in Interpreting Newton: Critical Essays, ed. A. Janiak and E. Schliesser (Cambridge University Press, Cambridge, 2012), pp. 360–95. 17. Voltaire, Philosophical Letters, trans. E. Dilworth (Bobbs-Merrill Educational Publishing, Indianapolis, Ind., 1961), p. 61. 18. The opposition to Newtonianism is described in articles by A.

 

pages: 426 words: 115,150

Your Money or Your Life: 9 Steps to Transforming Your Relationship With Money and Achieving Financial Independence: Revised and Updated for the 21st Century by Vicki Robin, Joe Dominguez, Monique Tilford

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asset allocation, Buckminster Fuller, buy low sell high, credit crunch, disintermediation, diversification, diversified portfolio, fiat currency, financial independence, fudge factor, full employment, Gordon Gekko, high net worth, index card, index fund, job satisfaction, Menlo Park, Parkinson's law, passive income, passive investing, profit motive, Ralph Waldo Emerson, Richard Bolles, risk tolerance, Ronald Reagan, Silicon Valley, software patent, strikebreaker, Thorstein Veblen, Vanguard fund, zero-coupon bond

We might search our souls and discuss with our mate the advisability of spending $40 for a new four-color left-handed veeblefitzer, yet over the course of a month an even larger amount has unconsciously gone out of our universe in small “insignificant” purchases (the “nickel and diming yourself to death” syndrome). “But must I keep track of every cent?” you may ask. Yes, every cent! Why every cent, rather than just rounding off to the nearest dollar, or using approximate figures? Because this helps to establish important lifelong habits. After all, how big is a “Finagler’s Constant”? What’s the definition of a “Fudge Factor”? How close is “close enough”? Granted, in practice many FIers settle into rounding to the dollar, but that’s as far as they slip. Human nature being what it is, if you start cheating, even “just a little bit,” that little bit tends to get bigger and soon you’ll find yourself thinking, “Well, I don’t have to write everything down, just the major expenses”; and then, “Well, I’ve done this for a month now, so I think I’ll start rounding it off to the nearest thousand.”

 

pages: 492 words: 149,259

Big Bang by Simon Singh

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Albert Einstein, Albert Michelson, All science is either physics or stamp collecting, Andrew Wiles, anthropic principle, Arthur Eddington, Astronomia nova, Brownian motion, carbon-based life, Cepheid variable, Chance favours the prepared mind, Commentariolus, Copley Medal, cosmic abundance, cosmic microwave background, cosmological constant, cosmological principle, dark matter, Dava Sobel, Defenestration of Prague, discovery of penicillin, Dmitri Mendeleev, Edmond Halley, Edward Charles Pickering, Eratosthenes, Ernest Rutherford, Erwin Freundlich, Fellow of the Royal Society, fudge factor, Hans Lippershey, Harlow Shapley and Heber Curtis, Harvard Computers: women astronomers, Henri Poincaré, horn antenna, if you see hoof prints, think horses—not zebras, Index librorum prohibitorum, invention of the telescope, Isaac Newton, John von Neumann, Karl Jansky, Louis Daguerre, Louis Pasteur, luminiferous ether, Magellanic Cloud, Murray Gell-Mann, music of the spheres, Olbers’ paradox, On the Revolutions of the Heavenly Spheres, Paul Erdős, retrograde motion, Richard Feynman, Richard Feynman, scientific mainstream, Simon Singh, Solar eclipse in 1919, Stephen Hawking, the scientific method, Thomas Kuhn: the structure of scientific revolutions, unbiased observer, V2 rocket, Wilhelm Olbers, William of Occam

On the single occasion on which he had bowed to peer pressure, he was proved to be wrong. Later he would call the cosmological constant the greatest blunder of his entire life. As he wrote in a letter to Lemaître: ‘Since I have introduced this term I had always a bad conscience…I am unable to believe that such an ugly thing should be realised in nature.’ Although Einstein was keen to abandon his cosmic fudge factor, cosmologists who still believed in an eternal, static universe were convinced that the cosmological constant was an essential and valid part of general relativity. Even some Big Bang cosmologists had become quite fond of it and were reluctant to lose it. By retaining the cosmological constant and varying its value, they could tweak their theoretical models of the Big Bang and modify the universe’s expansion.

 

pages: 692 words: 127,032

Fool Me Twice: Fighting the Assault on Science in America by Shawn Lawrence Otto

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affirmative action, Albert Einstein, anthropic principle, Berlin Wall, Brownian motion, carbon footprint, Cepheid variable, clean water, Climategate, Climatic Research Unit, cognitive dissonance, Columbine, cosmological constant, crowdsourcing, cuban missile crisis, Dean Kamen, desegregation, double helix, energy security, Exxon Valdez, fudge factor, ghettoisation, Harlow Shapley and Heber Curtis, Harvard Computers: women astronomers, informal economy, invisible hand, Isaac Newton, Louis Pasteur, mutually assured destruction, Richard Feynman, Richard Feynman, Ronald Reagan, Saturday Night Live, shareholder value, sharing economy, smart grid, Solar eclipse in 1919, stem cell, the scientific method, The Wealth of Nations by Adam Smith, Thomas Kuhn: the structure of scientific revolutions, transaction costs, University of East Anglia, War on Poverty, white flight, Winter of Discontent, working poor

In fact, Einstein himself had originally calculated that the universe was expanding, but he was a theoretician, not an astronomer. When he turned to astronomers for verification of his theory, he found that almost all of them held the notion that the universe existed in a steady state and there was no motion on a grand scale. So in deference to their observational experience, Einstein adjusted his general theory calculations with a mathematical “fudge factor”—the cosmological constant—that made the universe seem to be steady. Lemaître had independently been working off the same mathematical principles that Einstein had originally laid out, and in 1927 he wrote a dissenting paper in which he argued that the universe must be expanding, and that if it was, the redshifted light from stars was the result of this expansion. This redshift had been observed by a number of astronomers, but until then there had been no consensus on what the cause could be.

 

pages: 1,351 words: 385,579

The Better Angels of Our Nature: Why Violence Has Declined by Steven Pinker

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1960s counterculture, affirmative action, Alan Turing: On Computable Numbers, with an Application to the Entscheidungsproblem, Albert Einstein, availability heuristic, Berlin Wall, Bonfire of the Vanities, British Empire, Broken windows theory, California gold rush, Cass Sunstein, citation needed, clean water, cognitive dissonance, colonial rule, Columbine, computer age, conceptual framework, correlation coefficient, correlation does not imply causation, crack epidemic, cuban missile crisis, Daniel Kahneman / Amos Tversky, David Brooks, delayed gratification, demographic transition, desegregation, Doomsday Clock, Douglas Hofstadter, Edward Glaeser, en.wikipedia.org, European colonialism, experimental subject, facts on the ground, failed state, first-past-the-post, Flynn Effect, food miles, Francis Fukuyama: the end of history, fudge factor, full employment, ghettoisation, Gini coefficient, global village, Henri Poincaré, impulse control, income inequality, informal economy, invention of the printing press, Isaac Newton, lake wobegon effect, libertarian paternalism, loss aversion, Marshall McLuhan, McMansion, means of production, mental accounting, meta analysis, meta-analysis, Mikhail Gorbachev, mutually assured destruction, open economy, Peace of Westphalia, Peter Singer: altruism, QWERTY keyboard, race to the bottom, Ralph Waldo Emerson, random walk, Republic of Letters, Richard Thaler, Ronald Reagan, Rosa Parks, Saturday Night Live, security theater, Skype, Slavoj Žižek, South China Sea, statistical model, stem cell, Steven Levy, Steven Pinker, The Bell Curve by Richard Herrnstein and Charles Murray, The Wealth of Nations by Adam Smith, theory of mind, transatlantic slave trade, transatlantic slave trade, Turing machine, ultimatum game, uranium enrichment, V2 rocket, Walter Mischel, WikiLeaks, women in the workforce

A team of statisticians led by Michael Spagat and Neil Johnson found these estimates incredible and discovered that a disproportionate number of the surveyed families lived on major streets and intersections—just the places where bombings and shootings are most likely.69 An improved study conducted by the World Health Organization came up with a figure that was a quarter of the Lancet number, and even that required inflating an original estimate by a fudge factor of 35 percent to compensate for lying, moves, and memory lapses. Their unadjusted figure, around 110,000, is far closer to the battle-death body counts.70 Another team of epidemiologists extrapolated from retrospective surveys of war deaths in thirteen countries to challenge the entire conclusion that battle deaths have declined since the middle of the 20th century.71 Spagat, Mack, and their collaborators have examined them and shown that the estimates are all over the map and are useless for tracking war deaths over time.72 What about the report of 5.4 million deaths (90 percent of them from disease and hunger) in the civil war in the Democratic Republic of the Congo?

Both from the PRIO Battle Deaths Dataset, 1946–2008, Version 3.0, http://www.prio.no/CSCW/Datasets/Armed-Conflict/Battle-Deaths/, Lacina & Gleditsch, 2005. 66. Myth of reversal in civilian war deaths: Human Security Centre, 2005, p. 75; Goldstein, 2011; Roberts, 2010; White, in press. 67. Civilian deaths in the Civil War: Faust, 2008. 68. Lancet study: Burnham et al., 2006. 69. Bias in epidemiological studies: Human Security Report Project, 2009; Johnson et al., 2008; Spagat, Mack, Cooper, & Kreutz, 2009. 70. Fudge factor: Bohannon, 2008. 71. Retrospective surveys of war deaths: Obermeyer, Murray, & Gakidou, 2008. 72. The trouble with surveys: Spagat et al., 2009. 73. Claim of 5.4 million deaths in DRC: Coghlan et al., 2008. 74. Problems with DRC estimate: Human Security Report Project, 2009. 75. Famine and disease decline during war: Human Security Report Project, 2009. 76. Lives saved by vaccination: Human Security Report Project, 2009, p. 3. 77.

 

pages: 603 words: 182,781

Aerotropolis by John D. Kasarda, Greg Lindsay

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3D printing, air freight, airline deregulation, airport security, Akira Okazaki, Asian financial crisis, back-to-the-land, barriers to entry, Berlin Wall, big-box store, blood diamonds, borderless world, British Empire, call centre, carbon footprint, Clayton Christensen, cleantech, cognitive dissonance, conceptual framework, credit crunch, David Brooks, David Ricardo: comparative advantage, Deng Xiaoping, deskilling, edge city, Edward Glaeser, failed state, food miles, Ford paid five dollars a day, Frank Gehry, fudge factor, full employment, future of work, Geoffrey West, Santa Fe Institute, George Gilder, global supply chain, global village, gravity well, Haber-Bosch Process, Hernando de Soto, hive mind, if you build it, they will come, illegal immigration, inflight wifi, interchangeable parts, intermodal, invention of the telephone, inventory management, invisible hand, Jane Jacobs, Jeff Bezos, Kangaroo Route, knowledge worker, kremlinology, labour mobility, Marshall McLuhan, Masdar, McMansion, megacity, Menlo Park, microcredit, Network effects, New Economic Geography, new economy, New Urbanism, oil shale / tar sands, oil shock, peak oil, Peter Thiel, pets.com, pink-collar, pre–internet, RFID, Richard Florida, Ronald Coase, Ronald Reagan, savings glut, Seaside, Florida, Shenzhen was a fishing village, Silicon Valley, Silicon Valley startup, Skype, smart cities, smart grid, South China Sea, South Sea Bubble, sovereign wealth fund, special economic zone, spice trade, spinning jenny, stem cell, Steve Jobs, supply-chain management, sustainable-tourism, telepresence, the built environment, The Chicago School, The Death and Life of Great American Cities, The Nature of the Firm, thinkpad, Thomas L Friedman, Thomas Malthus, Tony Hsieh, trade route, transcontinental railway, transit-oriented development, traveling salesman, trickle-down economics, upwardly mobile, urban planning, urban renewal, urban sprawl, walkable city, white flight, Yogi Berra

DFW annually handles some sixty million passengers, equal to one in five Americans. Heathrow sees more traffic than Britain has citizens. The world’s busiest hub, Atlanta’s Hartsfield-Jackson, has a daytime population larger than Orlando’s and an annual one that would rank it as the twelfth most populous nation on earth. (It’s also the state of Georgia’s largest employer.) All of these figures have a sky-high fudge factor, failing to account for fliers counted twice or more. The media research firm Arbitron made a better measurement a few years ago. It estimated ninety-two million Americans—nearly one in three—had flown at least once in the past twelve months. A clear and bright line separates those of us who fly and those of us who don’t. The former are almost twice as likely to make more than $100,000 a year, and more than half have incomes of $50,000 and up, compared to barely a third of the latter.

 

pages: 829 words: 186,976

The Signal and the Noise: Why So Many Predictions Fail-But Some Don't by Nate Silver

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airport security, availability heuristic, Benoit Mandelbrot, Berlin Wall, Bernie Madoff, big-box store, Black Swan, Broken windows theory, Carmen Reinhart, Claude Shannon: information theory, Climategate, Climatic Research Unit, cognitive dissonance, collapse of Lehman Brothers, collateralized debt obligation, complexity theory, computer age, correlation does not imply causation, Credit Default Swap, credit default swaps / collateralized debt obligations, cuban missile crisis, Daniel Kahneman / Amos Tversky, diversification, Donald Trump, Edmond Halley, Edward Lorenz: Chaos theory, en.wikipedia.org, equity premium, Eugene Fama: efficient market hypothesis, everywhere but in the productivity statistics, fear of failure, Fellow of the Royal Society, Freestyle chess, fudge factor, George Akerlof, haute cuisine, Henri Poincaré, high batting average, housing crisis, income per capita, index fund, Internet Archive, invention of the printing press, invisible hand, Isaac Newton, James Watt: steam engine, John Nash: game theory, John von Neumann, Kenneth Rogoff, knowledge economy, locking in a profit, Loma Prieta earthquake, market bubble, Mikhail Gorbachev, Moneyball by Michael Lewis explains big data, Monroe Doctrine, mortgage debt, Nate Silver, new economy, Norbert Wiener, PageRank, pattern recognition, pets.com, prediction markets, Productivity paradox, random walk, Richard Thaler, Robert Shiller, Robert Shiller, Rodney Brooks, Ronald Reagan, Saturday Night Live, savings glut, security theater, short selling, Skype, statistical model, Steven Pinker, The Great Moderation, The Market for Lemons, the scientific method, The Signal and the Noise by Nate Silver, The Wisdom of Crowds, Thomas Kuhn: the structure of scientific revolutions, too big to fail, transaction costs, transfer pricing, University of East Anglia, Watson beat the top human players on Jeopardy!, wikimedia commons

* Meditation helps people achieve this, in part, by encouraging focus on posture and breathing—things that are within our control but which we normally take for granted. * Some of it also represents market making: certain investment firms, like a well-stocked 7-Eleven, hold a lot of inventory and can be counted on to be open for business when no one else is, hoping to make a few pennies at a time for their trouble. * One could imagine that a small fudge factor might be allowed if our probability estimates were close but not exactly the same, since there is some inconvenience associated with betting. * I met Santorum for my New York Times story on the Iowa vote count dispute after the initial tally had shown Romney ahead. Santorum remembered my bet and jokingly asserted that the bet was my motivation for tracking him down. It may have provided some additional incentive

 

pages: 665 words: 207,115

Across Realtime by Vernor Vinge

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fudge factor, gravity well, Isaac Newton, job automation, Magellanic Cloud, means of production, technological singularity, Vernor Vinge

It was more like seventy-five minutes than an hour. Since the Age of Man, the Earth's rotation had slowed. Now, at fifty megayears, the day was a little over twenty-five hours long. Rather than change the definition of -he second or the hour, the Korolevs had decreed (just another of their decrees) that the standard day should consist of twenty-four hours plus whatever time it took to complete one rotation. Yel‚n called the extra time the Fudge Factor. Everyone else ailed it the Witching Hour. Wil walked through the Witching Hour, looking for some sign of Marta Korolev. He was still on the Robinson estate, that.vas obvious: as advanced travelers, the Robinsons had plenty of robots. Rescue-day ash had been meticulously cleaned from he stone seats, the fountains, the trees, even the ground. The.cent of almost-jacarandas floated in the cool night breeze.

 

pages: 819 words: 181,185

Derivatives Markets by David Goldenberg

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Black-Scholes formula, Brownian motion, capital asset pricing model, commodity trading advisor, compound rate of return, conceptual framework, Credit Default Swap, discounted cash flows, discrete time, diversification, diversified portfolio, en.wikipedia.org, financial innovation, fudge factor, implied volatility, incomplete markets, interest rate derivative, interest rate swap, law of one price, locking in a profit, London Interbank Offered Rate, Louis Bachelier, margin call, market microstructure, martingale, Norbert Wiener, price mechanism, random walk, reserve currency, risk/return, riskless arbitrage, Sharpe ratio, short selling, stochastic process, stochastic volatility, time value of money, transaction costs, volatility smile, Wiener process, Y2K, yield curve, zero-coupon bond

However, these changes would have to be equal in order for a one-for-one hedge to be able to replicate the option, no matter what the bond position. In order to hedge the option in the Binomial model, we have to have a hedge ratio different from 1, except for Case 1. Further, it generally has to be less than 1.0 in order to hedge the option. When we replicated the option for European Put-Call Parity, we also had a European put option that we used as the ‘fudge’ factor. Here, we only have the stock and the bond. So we have to do better than we did in proving European Put-Call Parity. How can we do better, given that we lost the put option? The answer is that we have been given something we didn’t have for proving European Put-Call Parity. We now get to choose the hedge ratio and make it different from 1.0. (We also get to change the hedge ratio in the Binomial model for N>1 as the underlying stock price changes, and thereby dynamically hedge the option.)

 

pages: 706 words: 206,202

Den of Thieves by James B. Stewart

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discounted cash flows, diversified portfolio, fudge factor, George Gilder, index arbitrage, Internet Archive, margin call, Ponzi scheme, rolodex, Ronald Reagan, shareholder value, South Sea Bubble, The Predators' Ball, walking around money, zero-coupon bond

But it was no secret that Boesky, given the enormous size of his positions and his insatiable quest for greater leverage, was constantly in danger of violating the regulatory net capital requirements. Boesky and many arbitrageurs had always viewed the net capital requirements with thinly veiled contempt. His colleagues Conway and especially Mooradian, who had nearly lost his career after being disci- plined for net capital violations, took the law much more seriously and tried to keep Boesky in compliance. They even went so far as to build in what they termed a "fudge factor" that overstated Boesky's actual leverage in order to try to keep him in bounds. In 1985, however, with the pace of merger deals quickening, and the resulting increase in arbitrage opportunities, it was getting harder and harder to keep Boesky in compliance. Finally, that summer, Conway wrote Boesky an angry memo: "You have continued to show very small regard for our net capital position or the debt covenants under our loan agreements. . . .

 

pages: 1,445 words: 469,426

The Prize: The Epic Quest for Oil, Money & Power by Daniel Yergin

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anti-communist, Ayatollah Khomeini, bank run, Berlin Wall, British Empire, colonial exploitation, Columbine, cuban missile crisis, energy security, European colonialism, Exxon Valdez, financial independence, fudge factor, informal economy, joint-stock company, land reform, megacity, Mikhail Gorbachev, Monroe Doctrine, new economy, North Sea oil, oil rush, oil shale / tar sands, oil shock, postnationalism / post nation state, price stability, RAND corporation, rent-seeking, Ronald Reagan, shareholder value, Thomas Malthus, Yom Kippur War

Yet before any agreements could be made, several fundamental issues had to be thrashed out, including the basic question of valuation. For instance, depending on the accounting formula that was chosen, 25 percent of the Kuwait Oil Company could be worth anywhere from sixty million to one billion dollars. Finally, in that case, the two sides came together by inventing a new accounting concept, "updated book value," which included inflation and large fudge factors. And in October 1972 a "participation agreement" was finally reached between the Gulf states and the companies. It provided for an immediate 25 percent participation share, rising to 51 percent by 1983. But, despite all the OPEC endorsements, the application of the agreement was less popular in the rest of OPEC than Yamani hoped. Algeria, Libya, and Iran all stood outside it. Kuwait's oil minister approved it, but the Kuwaiti parliament rejected it, and so Kuwait was also out.