17 Equations That Changed The World

[vt]

http://www.businessinsider.com/17-eq...#ixzz2yGip9Zct

[santafe2]

Re: 17 Equations That Changed The World

http://www.businessinsider.com/17-eq...#ixzz2yGip9Zct

Really, Black-Scholes got mentioned in the same list as Relativity? How about astrology and astronomy in the same list...they sound alike.

[Penguin]

Re: 17 Equations That Changed The World

Ha, see a few old friends in that list.

I was wondering if they would list the Navier-Stokes equations. Back when I was a young sprout preparing for the qualifier in grad school I could derive them in under 5 minutes.... sheesh, never do that now! I'm a bit confused though, there are theorietical solutions to them. Not sure what they mean. But as you can readily tell from using a good CFD program, you have to supply the turbulence model in addition to them. That's not their bag. Maybe that's what they mean?

But that is an impressive list. Lots of very smart folks have made very good careers working on applications of those equations. A man could spend a lifetime of lifetimes studying them and still not know it all.

Will

[vinoveri]

Re: 17 Equations That Changed The World

Ha, that's funny SF, my thoughts as well.
Interesting, and following the list chronologically we see a progression from analytical mathematics to physics explaining and allowing prediction of the physical world, to economics and valuing futures/options, clearly we are progressing in the right direction and have our priorities straight! The recent addition of economics to the categories of Nobel prize awards is also quite telling.

[Slimprofits]

Re: 17 Equations That Changed The World

Really, Black-Scholes got mentioned in the same list as Relativity? How about astrology and astronomy in the same list...they sound alike.

+6 million However, note that the headline doesn't specify change for the worse or better. edit: I confused Black-Scholes with VaR (value-at-risk).

[photoncounter]

Re: 17 Equations That Changed The World

Really, Black-Scholes got mentioned in the same list as Relativity? How about astrology and astronomy in the same list...they sound alike.

To be fair, it did change the course of history !

[santafe2]

Re: 17 Equations That Changed The World

To be fair, it did change the course of history !

True, the title doesn't characterize the value, just that each changed the world.

I'll tell a short story that might help people understand Black-Scholes. I'm looking at a few business ideas this year and if I find a suitable one I'd like to try an employee owned structure for the company. It can help solve a few issues in a small, fast growing company where the largest and fastest growing expense is labor.

1. It keeps salaries low because everyone is an owner and is paid based on company profitability.
2. It generates long term interest in the company by employees and helps stabilize the staff.
3. It can offer employees the ability to move a large portion of their income into long term capital gains so tax rates are much lower.

I bring all of this up because the best understood method for pricing the present value of an employee's profit interests at a point in time, inside this structure is Black-Scholes. It is a useful tool. Without it, pricing at vesting can be much more subjective. Black-Scholes was designed to solve the problem of pricing options in a very simple world in the early 1970s and it was abused in the 2000s to price derivatives no one understood. Even though it's fun to have fun with this tool, the real tools are the folks that used it without ever understanding or questioning it's limitations. Black-Scholes did not cause the AFC. The happy idiots that grabbed a pitchfork to bail water and punctured the bilge are to blame.