The Same Thing All Over Again
Today God and I had one of those long rambling talks that seems to go all over the place with no particular rhyme or reason. We touched on computer programming, the economy, and poker among other things and then God managed to wrap it all up so it all belonged together after all. I’m going to try and distill just enough of the essence here to bring it back to God’s final point.
In programming there’s a technique called recursion that is very powerful but very easy to get wrong. When you write programs you’re quite often writing a bunch of functions that use other functions to do parts of what they need to get done. In recursion one function uses itself as a component of itself. For a really bad example, say you wanted to know the Fibonacci Sequence, which is a sequence of numbers beginning with zero and one, where each succeeding number is the sum of the two previous numbers. You could write a function that takes the two numbers that you give it adds, them together, and prints out the result. It then takes that result and the second of the two numbers it was given and calls itself with those two numbers. This works. To a point. Because of the way computers work each successive call uses up a little memory and that memory stays in use until the function ends, but since the function doesn’t end until all the functions that it has called have ended, the memory in this very simple example stays in use forever and eventually the computer runs out of memory and crashes. I’m ignoring a lot of things we do in computer programming here, but they’re generally things that we learned to do by making naive mistakes like what I’ve just described.
In poker there’s the notion that when you’re good at the game you’re not just playing your cards, you’re playing the other guy’s cards. It’s not just what do I have but what do you have. And then it’s not just what do you have but what do I think that you think that I have. And then it’s how can I make you think that what I have is not what I have but what I want you to think that I have. And this can go back and forth like this for a long time with each player trying to fool the other player but trying to fool the other player while the other player knows that you’re trying to fool them. It’s a lot like the recursion example above, as it turns out, and pushing it too far can keep you from ever making a decision.
So then we got around to the economy. There was the whole question of what will the sagging economy do to the poker scene, but that pretty quickly moved on to how did the economy get to be so sagging in the first place. One of the main things was the unfettered use of derivatives. We’ve all heard how the bursting of the housing bubble has led to a collapse on Wall Street and those of us who have been paying a lot of attention have heard that derivatives were probably the main mechanism by which that happened. I’m no specialist on this so my understanding isn’t perfect but I can give, I think, a pretty good lay explanation. The idea behind derivatives in the housing market is that a bunch of banks and mortgage companies all loan money to people to buy houses. Then, in order to have more money to make more loans, they sell the loans they’ve already made to someone “upstream.” That upstream buyer then puts all the loans they buy together and sells pieces of the collected group of them to people. This is much the same way that people buy pieces of a company by buying shares of that company’s stock. Well, Wall Street wanted to keep playing this game of buying up the pieces of the collected loans through new funds that in turn were sold in pieces, in a very recursive fashion. The idea of this is that it spreads out the risk, because if a single loan goes bad, well, you only own a piece of a piece of a piece of that loan. The big problem with that was that some lenders figured that if the risk was already gone from them by the time the loan went bad, they didn’t have to work so hard to make sure the loans they gave out were good loans. To a certain extent what the derivatives did was spread the risk too thin. Of course there was also an element of a pyramid scheme where everybody was thinking more about the spreading out of the risk on the loans than they were that they were also spreading out the profit on those loans.
So the thing that God told me that tied all of this together that I’ve already partially included for the sake of brevity is that all of these things are tied together by their use of recursion. The use of recursion can be good or it can be bad. The difference, the key to using recursion well, is knowing when to stop. In computers, you need to stop before you use too much memory. In poker you need to stop before you’ve taken so much time that nobody wants to play with you any more. For the economy, you need to stop while you can still see where you started.
So take this as a lesson for life. Whatever you’re doing, make sure that you know when to stop.
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