The Price of Everything
What Harvard Gets Us
In his 1933 essay “The Hedgehog and the Fox,” Isaiah Berlin famously claims that some writers and thinkers—the hedgehogs—saw the world in terms of a single, all-encompassing idea, while others—the foxes—drew upon an arsenal of disparate ideas, often unrelated and even antithetical, in order to make sense of the reality in which they live.
Berlin’s distinction was, in essence, one of model choice. Hedgehogs rely on a unitary model of reality, while foxes deftly use a variety of models to build their understanding of the world.
The Happiness Sale
A. J. Maxwell’s was an archetypal New York steakhouse on the corner of 48th and 6th in the heart of midtown Manhattan. There, a few weeks after my middle school graduation, my family splurged on a celebration of our first road trip to America. I distinctly remember the forty-dollar entrées that dotted the menu (the opulence of it all!), and sinking my teeth into a steak that the Old Spaghetti Factories I was used to could only dream of serving.
Today, A. J. Maxwell’s is closed after years of poor reviews, with references to overpriced food and jerky-like steaks dating back to far before my visit. Though I can’t say for certain, I suspect the steak I had eight years ago was not, in any particular way, noteworthy in the grand scheme of beef. But somehow that steak remains in my mind, more vividly than any steak I’ve had since, as close to perfection as a slab of meat can be.
Rights and Obligations
An option is a financial security that gives its owner the right, but not the obligation, to buy or sell an underlying asset—anything from a share of a company to a bushel of corn—at a fixed price on some future date, known as the expiration date. Options are among the simplest examples of financial derivatives: securities that derive their value from the value of other assets.
Despite the simplicity of options, pinning down their value is in fact immensely difficult. After all, determining how much a right to do something should be worth seems like a problem of philosophy, not finance. But in 1973, Fischer Black and Myron Scholes were able to put a price on an option under certain mathematical assumptions; in doing so, they revolutionized the financial industry in theory and in practice, and won a Nobel Prize along the way.
Discount, For Good or For Tech
Though little is disclosed officially, there is some anecdotal evidence that top graduates entering the tech industry can be paid up to $100k lump-sum for committing to join a firm after graduation. As our graduating classmates make their full-time employment decisions, these so-called signing bonuses are no doubt hard to resist. But we, from future Bay Area inhabitants to those entering the public service, should take care to think about the present value of our decisions.
The concept of present value is a cornerstone of financial theory and involves looking at future income backwards. The usual way we think about time and money is that if we had a dollar today, we could put it in a savings account with 1% interest and have $1.01 a year from now. But the flip side of this is that a dollar a year from now is worth 99 cents today, since we could invest those 99 cents at 1% interest to have a dollar then. We call the worth of next year’s dollar today—99 cents in this case—its present value, and the conversion rate between future money and money now, 1% here, the discount rate.
Love in the Time of Dice Games
Uncertainty dominates our lives. From what the Catch of the Day will be (we may never truly know) to generally accepted interpretations of the mathematics describing the fundamental nature of matter, the world is rife with possibility. In some sense, it’s amazing that we aren’t paralyzed in our decision-making by the unknowability of the future—though you might have felt as much as you stared down your iPhone’s gray ellipses bubble, desperately hoping for a "yes" to some follow-up Netflix and Chill with your Valentine.
Indeed, love and uncertainty inevitably go hand in hand. And while we are comfortable using mathematics to quantify risk everywhere from the stock market to weather forecasts, it strikes most as an affront to even suggest that economics and statistics could say anything about the institution of love.