A Foundation of Measurement

Do you think Math is the science of measurement?
I am not sure about it, but I know a mathematician who is a radical philosopher of measurement and next week I am going to meet him. Thomas Saaty is an Iranian-American professor of mathematics who goes to the core of it. The comparision is both predecessor and generalization of measurement. The pairwise comparison theory of Prof. Saaty is a reconciliation of mathematics and psychology. With the precise understanding of pairwise comparison you can make an abundance of rational decisions. From picking the right software to
Palestine-Israeli peace process. Ok,... at least we try!
See you at http://www.isahp.org/italy2010

The Kondratjev Epedemy

Somehow this thing called  "Kondratjeff Wave" is stubborn. I encounter it frequently when the occassionaly business related speaker crosses my path. The idea of Nicolai Kondratjev was that the regular business cycles of boom and bust are overlayed by sixthy year super cycles. The problem with business cycles is that they can not be predicted, we know that there is a boom and then eventualy a bust. We don't know how long a boom stays and when and how long the bust takes. Thats a fact, otherwise the market actors would antecipate each phase change and therefore modify the phases. You see, its unpredictability is native to the markets. Therefore "cycle" might be a term taken with a grain of salt: its periodicity is not constant nor predictable. Now Kontradieff made his proposal of Supercycle 1929 and he figured out three cycles in history. The observation of an invariance of three cycles really means nothing statistically speaking. Take the US GDP per capita since 1961, and tell me where the cycles are?

The six Kondratieff Cycles
we should have witnessed in the past century

Kondratieff Cycles - hard to spot: remember, they are sixty year periods. It just doesn't fit

Ok, If this is convincing, why the Kondratieff spreads like a virus?

1. A regular cycle of boom and bust is a persuasive idea.
2. We are acquainted with the notion of "epoch" and Kondratieff is a visual representation of the "epoch". Therefore by analogy we understand the concept, it is sound. But conclusions drawn from analogy are not waterproof logical operations. They are merely hints.  
3. The host of the meme has the opportunity to show technical skills (it looks kind of scientific) and demonstrate deeper insight into long term mechanics of human condition. What an opportunity for the host.
4. The witnesses of the meme have the succumb to 1 and 2 and humans are such pattern addicts, they can not resist the temptation to see a regularity.

We need to implant a new meme that represents the truth:

Kontradieff is bogus, they want to fool you with business esoterics.

I have hope for this brand new meme, humans are ashamed of being tricked. 

How to decide when more than one criteria is important: ELECTRE

The French School of decision making has a short answer: Apply an ELECTRE algorithm.
Howto:

1. Decide what to compare, e.g. products, actions
2. Define criteria and their scales, importance and veto tresholds (I'd rather die, than choosing a hotel without Internet connection)
3. Measure them
4. Construct outranking relations, in the style of  a better b if. These are called Recommandations.
5. Devise an exploitation procedure that uses the Recommandations to e.g. rank the products.

Sounds promising, after a day of research I must give up because the material found on internet is hard to grasp. But the americans, much more elegalitarian when offering ideas, are doing good job with Analytical Hierarchical Process. Subject under investigation and my next post.

Expert Bias and Making a Screencast 'better'

I've updated the screencast tutorial for EPR. Even if I augmented the quality of the recording, I have the bad feeling that I've complicated the explaination. Dan and Chip Heaths "Made to Stick" argues that experts fail to teach, because they focus too much on 'important' details. So eventually I have to do it again.

How to Solve It! A book review

"Schule des Denkens"  means school of thought. The title of the original manuscript reveals the motivation for this book: to teach better. George Polya wrote it as a guide on how to lecture mathematics. But only the publicized edition, after Polya's migration to the United States, tells in plain English why its relevant for a broader audience: How to Solve It. I am not a teacher, the didactic musings of a lecturer would produce nothing more than a spark of curiosity in me. But "How to Solve It" describes a general procedure for problem solving. This freaks me out! Polya hides this endeavor in favor of the didactic justification, and only later in this book he will reveal that it is about a Modern Heuristic, to "understand the process of solving problems, especially the mental operations typically useful in this process" [p. 129]. The book is divided into four parts, I will discuss them briefly:

Part I: In the Classroom

This 32 pages are all you need to grasp his algorithm of problem solving. Good ideas are simple and the procedure proposed is not counterintuitive. You could easily come a similiar conclusion by your own:

What is the first step of problem solving? 

(1) Understanding the problem. 

What is the next step? 

(2) Devise a plan. 

Then?

(3) Execute the plan. 

And finally

(4) Look back

Mightily impressed? Then you are a lobotomized PowerPoint disciple! But follow Polya in a Socratic dialog with the classroom and look into the train of thoughts of an educated problem solver. There are many subtilities to discover.

By reading this chapter, more than once I had moments of Heureka!, when Polya guides you to ask the so called right questions and instructs you how to take a different point of view of the problem.

Part II: How to Solve it - a Dialog

The second part compresses the problem solving procedure, the ars inveniendi, in a summary of two pages. I did not gain from this, but it might be helpful as a short rehearsal when time passes by.

Part III: Dictionary of Heuristic

This is a 200 pages collection of heuristics to use as a pattern language for problem solving. The autor advices to take your time read this piece by piece when you are struggling with problems. Which I do.

Part IV: Problems, Hints, Solutions

These 8 pages are filled with exercises and smart hints how to approach the individual problems.

Conclusions

Polya opens your mind for solutions. I will tackle future hard problems only with Polya's algorithm and benefit from the careful order he imposes to the confused mind.

Albeit written for teaching mathematics, I suspect that Polyas work is useful not only for quantitativ problem solving, but for qualitative problems too. Here, I have no proof and only the application of it will tell. 

The book is easy to read, and you might master the first fundamental part "In the Classroom" in 3-5 hours. It is also a really cheap book, 13-something Euros, and if you are a problem solver you will need and enjoy it.

Butter in Bangladesh as a S&P 500 predictor

http://nerdsonwallstreet.typepad.com/my_weblog/files/dataminejune_2000.pdf

Fully Automated Prediction with Random Forests

Put the input vector down each of the trees in the forest. Each tree gives a classification, and we say the tree "votes" for that class. The forest chooses the classification having the most votes (over all the trees in the forest).

Basically Random Forests automatically generate many decision trees with mostly weak predictive goodness, and gain high predictive power by averaging them out. The algo can be sketched like this:

1. randomly sample variables and predictors, repeat:
1. identifying a predictor
2. repeat down the tree
1. seeking the most correlated variable
2. make a binary decision out of it
2. combine all predictions and average them out, voila!

Result: high predictive goodness sans parameters!

http://stat-www.berkeley.edu/users/breiman/RandomForests/