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A math nerd’s perspective of the world – Here’s a couple book recommendations

4 years of education in 1 sentence
I’ve been told that you can boil down your entire undergraduate degree into one statement. For me, I majored in Applied Math (with a focus in Economics) and if I had to pick one statement, it’d be:

Any attempt to mathematically model the world is flawed.

I suppose this is a timely subject given the recent market implosion led by quant hedge funds. But I suppose the above statement lacks in nuance since having flaws doesn’t mean it’s still not ultimately useful. So instead, you might revise the statement to be:

Any attempt to mathematically model the world is flawed (yet still incredibly useful).
The skill is in determining where the models work, and where they break.

Math books disguised as other stuff
To that end, I wanted to highlight a couple of my favorite books on my shelf that talk about this subject:

Moneyball is the most approachable and popular book on this topic, I think. After all, the entire book is on something fun and not boring: Baseball. The entire approach of using mathematical modeling to find undervalued assets (baseball players, in this case) is a great introduction to this type of thinking.

Calculated Bets is a great book that not a ton of people have read – it’s about one guy’s obsession with creating a model to beat everyone else on jai-alai gambling. It’s a really great book because he explains the entire rules of the sport, and then starts to disassemble all the pieces, and shows you all the data. It’s technical enough to be interesting to anyone who has a quantitative background.

Thinking Strategically is a bit more academic in nature and gives a high-level overview of Game Theory without too much in terms of real-world application. It’s also technical enough to be useful for folks with quantitative backgrounds. The most interesting part is how the book deconstructs complex multi-party interactions into algebraic equations and approaches tackling the problem.

Better is completely driven by anecdotes and real-world applications, making it a close cousin to Moneyball. Instead of theories, instead, it focuses on 5 real-world case studies around the world of healthcare and medicine. One of the main arguments of the book is something I deeply believe – that change doesn’t come in huge quick shifts, but rather by careful repetitive measurement of metrics that you care about, and fighting for small percentage improvements every day is what makes the difference.

Fooled By Randomness is a great book, much better than its sequel Black Swan. In it, the author does some very philosophical reflection on logic and when you can determine causality or not. After all, the most common mistake that people make (particularly the MEDIA!) is confusing correlation with causality. Most of the book is about finance, which is particularly interesting in light of the recent quant fund blowups. Another good book on the limits of mathematical modeling is When Genius Failed, a good discussion about the failure of the giant hedge fund Long-Term Capital Management.

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