Revenge of the math geeks

Geeks may not inherite the earth, but they're certainly getting plenty of ego stroking at the moment:

A generation ago, quants turned finance upside down. Now they're mapping out ad campaigns and building new businesses from mountains of personal data.

That is the central thesis of Business Week's new cover story: Why Math Will Rock Your World. We are seeing nothing less than the "mathematical modeling of humanity", claim the authors. To me that sounds a little too much like Hari Seldon, so I'd treat the claims below with a degree of scepticism:

The world is moving into a new age of numbers. Partnerships between mathematicians and computer scientists are bulling into whole new domains of business and imposing the efficiencies of math. This has happened before. In past decades, the marriage of higher math and computer modeling transformed science and engineering. Quants turned finance upside down a generation ago. And data miners plucked useful nuggets from vast consumer and business databases. But just look at where the mathematicians are now. They're helping to map out advertising campaigns, they're changing the nature of research in newsrooms and in biology labs, and they're enabling marketers to forge new one-on-one relationships with customers. As this occurs, more of the economy falls into the realm of numbers. Says James R. Schatz, chief of the mathematics research group at the National Security Agency: "There has never been a better time to be a mathematician."

From fledglings like Inform to tech powerhouses such as IBM, companies are hitching mathematics to business in ways that would have seemed fanciful even a few years ago. In the past decade, a sizable chunk of humanity has moved its work, play, chat, and shopping online. We feed networks gobs of digital data that once would have languished on scraps of paper - or vanished as forgotten conversations. These slices of our lives now sit in databases, many of them in the public domain. From a business point of view, they're just begging to be analyzed. But even with the most powerful computers and abundant, cheap storage, companies can't sort out their swelling oceans of data, much less build businesses on them, without enlisting skilled mathematicians and computer scientists.

The rise of mathematics is heating up the job market for luminary quants, especially at the Internet powerhouses where new math grads land with six-figure salaries and rich stock deals. Tom Leighton, an entrepreneur and applied math professor at Massachusetts Institute of Technology, says: "All of my students have standing offers at Yahoo! and Google." Top mathematicians are becoming a new global elite. It's a force of barely 5,000, by some guesstimates, but every bit as powerful as the armies of Harvard University MBAs who shook up corner suites a generation ago.

Math entrepreneurs, meanwhile, are raking in bonanzas. Fifteen months ago, Neal Goldman of Inform sold his previous math-based startup, a financial analysis company called CapitalIQ, for $225 million to Standard & Poor's (like BusinessWeek, a division of The McGraw-Hill Companies). And last May two brothers, Amit and Balraj Singh, sold Perabit Networks - a company that developed algorithms for genetic research - to Juniper Networks for $337 million.

In a world teeming with data, we ourselves become the math nerds' most prized specimens. Researchers at Aetna Health Care, Amazon.com, and many other companies are piecing together mathematical models of customers and employees. Some models predict what music we'll buy, others figure out which worker is best equipped for a particular job.

For now, these models are crude, the digital equivalent of stick figures. But over the coming decade, each of us will give birth to far more fleshed out simulations of ourselves. We'll be modeled as workers, shoppers, voters, and patients. Some of the simulations will have our names and credit cards attached, perhaps a few genetic details. In others, our identities will be shielded. Many of these models will be eerily accurate and others laughably off mark. But companies and governments will use them all the same to predict how to sell us things, steer us clear of diseases, and ramp up our productivity. And yes, they'll try to use them to keep us from hijacking airplanes or detonating bombs.

This mathematical modeling of humanity promises to be one of the great undertakings of the 21st century. It will grow in scope to include much of the physical world as mathematicians get their hands on new flows of data, from atmospheric sensors to the feeds from millions of security cameras. It's a parallel world that's taking shape, a laboratory for innovation and discovery composed of numbers, vectors, and algorithms. "We turn the world of content into math, and we turn you into math," says Howard Kaushansky, CEO of Boulder (Colo.)-based Umbria Inc., a company that uses math to analyze marketing trends online.

Twenty years ago, the hot job for mathematicians was to become actuaries - steady work, and good wages (albeit a tad dull). Then it was financial quant work - structuring deals, pricing options and building complex models. I had thought the latest hot math jobs were in genetics, but maybe I was wrong?

Still, to really make big money the best career path is to do a PhD in physics or mathematics, work as a quant for an investment bank for a few years, then set up a hedge fund with several of your colleagues. Hard to beat money wise, if you know what you're doing.

Disclaimer: No, I am not a maths geeks. I don't have the personality (or the numeracy).

Comments

[Barry Ritholtz]

Math you say? Hmmm, I'm gonna have to look into that.

In all seriousness, thanks to digital technology, we have been replacing squishy, unmeasurable eleements (i.e. advertising) with quantifiable easily readable analyses.

[TechnoBalance]

Well, matamaticians are good in sensing and thinking (ST)

[Reality Check]

I am a math geek. I even went to grad school in the subject. It's the worst decision I ever made, one which has literally destroyed my life.

I've been looking for work since I completed the coursework for my PhD. That coursework was completed back during the Reagan era, when the concept of financial aid was very politically incorrect. I worked my way through school, putting in long hours even before studies, and still held to a solid Dean's List average at a top twenty school here in the US, while others were suffering psychological breaks around me. Neither a lazy man nor a weak one could do that, but now I find myself condescended to on a daily basis by punks who found the one true path to success in the New Economy - get drunk or high in the right fraternity, because nobody making a hiring decision gives a rat's backside about what you did in school, at least not in a good way.

What grad school did for me was that it put me on the path for being rejected for almost every job advertised on the basis of "overqualification". I started looking for my entry level job when I was 28; I am now 45. In 17 years, I have not been able to find even a single employer who has been willing to allow me the opportunity to work. Let's put that number in perspective. I've had people tell me to stop complaining, that they were out of work longer than that during the Great Depression, and aside from the usual chronological impossibilities (how old would one have to be now, to have been of employable age during the 1930s), there is the simple fact that they can't be telling the truth, because the Great Depression didn't come close to lasting that long.

I could tell you about the joys that followed, of picking the maggots out of the food I had to fight others for, to win the privilege of being the first to did through the freshly deposited garbage, as I had to because the luxurious $2/day (roughly 1 British pound) granted unto the poor in Chicago during the 90s just never seemed to go far enough. Or of standing with the others who had been locked out of the system with equal capriciousness on a cold January morning, a deep, -10 Farenheit cold with a forty mile per hour wind, waiting in a line wrapping itself around a largish city block several times, filled with those waiting to apply for a single hamburger flipping position. Stumbling in through the door, because frostbite has begun to numb one's feet, only to have the girl taking the applications tear yours into shreds, and throw them into your face along with a few choice epithets that if one is a wise applicant, one will let pass. One wouldn't want other employers to think that one wasn't minding one's place.

17 years of looking through every avenue open to me later, being guilty of nothing more than having worked hard and asking for nothing more than a chance to finally begin my life, I can have no realistic expectation that this will ever be possible, which is why I will leave off my real name. At 28, my life was already over, and in 17 years of looking I have yet to meet anybody who has offered me anything more than a handful of platitudes or a lousy attitude, and the thought of another 17 years of the same is more than I can take. The reward for my work is to wake up in the morning uncertain that I am glad to have been able to do so.

Ask around, and try doing a little field work instead of just repeating the polemic you hear. Shattered lives are not hard to find in this field, and neither are those who will tell you what I'm telling you now - that there is no path back to having a life, once you drop into this abyss. Please do the right thing, talk with the people who have gone this way, and never encourge anybody to go into this field again.

[r4 revolution per ds]

I find it amazing that that quants are taking part of the blame for the credit crisis and growth of the securitized debt markets. what about shareholders who screamed for more profits and rating agencies that slapped AAA ratings on all these instruments in order to sell more? Its like saying game designers are responsible for high school shootings. The fact is that quant finance still has little influence on corporate decision making. its up to management to prudently allocate capital. everyone knows that you should not cancel the insurance on your house even if there has not been a natural disaster in the last 5 years.

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