Review Of 'Weapons Of Math Destruction' By Cathy O'Neil

Sep. 29, 2016 1:22 PM ET4 Comments
Hazel Henderson profile picture
Hazel Henderson
239 Followers

Summary

  • Henderson reviews Cathy O'Neil's critique of Big Data and algorithms.
  • Analyzes application of algorithms and Big Data to social media.
  • Looks at Weapons of Math Destruction chapter by chapter.

Weapons of Math Destruction by Cathy O'Neil, Crown Random House, NY, 2016

Harvard mathematician Cathy O'Neil authored Weapons of Math Destruction after a stint on Wall Street as a quant at D. E. Shaw, the hedge fund associated with former Treasury Secretary Larry Summers.

After observing the cultural priorities and the short-term values of most financial decisions, O'Neil became disillusioned, searching for higher goals for the mathematical modelling she loved. By 2009, she realized that even the lessons of the financial collapse brought no new direction and instilled no new values in the world of finance.

O'Neil left D. E. Shaw to join Risk Metrics Group, hoping to work on fixing the kind of financial engineering she called "weapons of math destruction" (WMD). She worked on risk models, predicting the likelihood with which tranches of securities or commodities would blow up next week, next year or five years hence. She liaised between Risk Metrics and the most discerning connoisseurs of risk: the quantitative hedge funds, who considered themselves the smartest of the smart. O'Neil soon found that analysts warning about risk were viewed as party poopers or a threat to the bottom line. The refusal to acknowledge risk ran deep, and a risk report might tumble a trader's Sharpe ratio.

So, O'Neil recast her expertise as a data scientist and moved to Intent Media, a Big Data startup, to design an algorithm to distinguish buyers from mere window shoppers. O'Neil found parallels between finance and Big Data. Both gobble up talent from elite universities -- MIT, Princeton or Stanford -- with students expecting riches and success. Money vindicated all doubts, even in these industries that seemed a combination of gaming the system and dumb luck. O'Neil quit again, joined Occupy Wall Street and wrote this well-documented book.

In each revealing

This article was written by

Hazel Henderson profile picture
239 Followers
Hazel Henderson D.Sc.Hon., FRSA, is the founder of Ethical Markets Media, Certified B Corporation and producer of its TV series. She is a world-renowned futurist, evolutionary economist, a worldwide syndicated columnist, consultant on sustainable development, and author of The Axiom and Nautilus award-winning book Ethical Markets: Growing the Green Economy (2006) and eight other books. Her editorials appear in Wall Street International Magazine and many other media partners, including Other News, and her book reviews appear on SeekingAlpha.com. Her articles have appeared in over 250 journals, including (in the USA) Harvard Business Review, New York Times, Christian Science Monitor; and Challenge, Mainichi (Japan), El Diario (Venezuela), World Economic Herald (China), LeMonde Diplomatique (France) and Australian Financial Review. Since becoming a full-time media executive in 2004, Hazel has stepped down from many of her board memberships, including Calvert Social Investment Fund (1982-2005), the Social Investment Forum and the Social Venture Network. She has been Regent's Lecturer at the University of California-Santa Barbara, Horace Albright Chair in Conservation at the University of California-Berkeley, and advised the U.S. Office of Technology Assessment, the National Academy of Engineering, and the National Science Foundation from 1974 to 1980. She remains on the International Council of the Instituto Ethos de Empresas e Responsabilidade Social, Sao Paulo, Brasil; serves on the Program Council of FORUM 2000, Prague, Czechoslovakia, founded by the late President Vaclav Havel; is a World Business Academy Fellow; an active member of the National Press Club (Washington DC), and a member of the Association for Evolutionary Economics. She is an Honorary Member of the Club of Rome. She shared the 1996 Global Citizen Award with Nobelist A. Perez Esquivel of Argentina. In 2007, she was elected a Fellow to Britain’s Royal Society of Arts, founded in 1754. She leads the Transforming Finance initiative, created the Green Transition Scoreboard®, co-developed with Calvert the GDP alternative renamed the Ethical Markets Quality of Life Indicators, co-organized the Beyond GDP conference for the European Commission, and funded three Beyond GDP surveys, finding strong support worldwide for ESG metrics in national accounting. In 2010, 2012, 2013, and 2014, she was honored as a "Top 100 Thought Leader in Trustworthy Business Behavior" by Trust Across America. In 2012, she was honored with the Reuters Award for Outstanding Contribution to Development of ESG & Investing at TBLI Europe. In 2013, she was inducted into the International Society of Sustainability Professionals Hall of Fame.  Her 2014 monograph, Mapping the Global Transition to the Solar Age, published by ICAEW and Tomorrow’s Company, UK, is available for free download from www.ethicalmarkets.com.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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