Sunday, November 22, 2009

Wednesday, November 11, 2009

See Saw waveform

Gyan time folks.

Remember Manickavachagam Pillai?

Let's say I need to plot the life of a salaried person and a business person( for some reason, i hate the word entrepreneur, the only combination in which i ever use it, is, the mediocre entrepreneur) against time.

A salaried person's life is a line passing through origin with m<1.>

A person who is attempting a business( why should a sane man ever do this is still out of my understanding) can be represented by a sew saw waveform, passing through origin. There also might be points on the graphs which lie below the x axis. Technically you can not hold negative money, but I guess the financial term is , you are in debt.

You start life by getting out of job, where you have to sacrifice certain privileges, a fixed income security at the end of each month( line is discontinuous at this point and goes down(hill)). You liquidate your assets, be it a car or a home etc. Life generally becomes difficult.

Say you do well in the business after some time so graph again goes up. You again want the small pleasures of life, a car, a house etc. Overall this decision reflects business cycles. In boom time you expand and in recession you contract. This is also how a stock price varies, my friend said so.

The challenge lies in managing this uncertainty through out your life. At every juncture in your life, you do not know how will your line move( a la rekhaon ka khel hai muqaddar, rekhaoes se mat kha rahe ho). If you are a science student or a finance fanatic, you will broadcast to the whole world that my life is a Brownian motion.

At every juncture it has only two outcomes either up or down, unlike a drunkard's motion.

Next, let's say your fake mathematical alter ego asks you to capture the line in a mathematical form. At least give me equations of two contours within which the story/line of your life will lie.

You do regression, and all excel modeling and finally you propose this equation:

y = mx , where

m>1 , with a probability of 1%
m is less than 1 with a certainty of 99%( had to type in English as the mathematical equation was giving an html error, and it's been 8 years since I last did some debugging)

Sunday, November 01, 2009