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Comment by jibiki | Hacker News Reader

It took decades after Chernobyl for nuclear engineering to lose the stigma of failure.

Sarcasm aside, I think that you are half right. Some of the financial engineering stuff was genuinely wrong, and financial engineers will have to figure out what.

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The problem is that finance is not really an engineering problem. Issues arise because the techniques used to distribute risk change the market value of the underlying assets. This was a major cause of the MBS issue. Financial engineering allowed risk from MBS's to be more easily distributed. This increased the demand for these securities, which increased their value. The price of the assets increased, even though the underlying value of the assets was exactly the same. Much of the value created by financial engineering is an illusion.

I wish I could give the parent more points.

"Financial Engineering" is discredited and should more discredited.

I'm sure some physics geeks really enjoyed fitting heat equations to financial processes. This exercise ran a foul of the problem that the processes were subject to the normal distribution, were not uncorrelated and had "long tails", etc, etc.. But all these errors were just results of selecting those models which provided actionable data - the markets found those geeks who willing to endorse a dive into reckless asset inflation. This kind of thing has been around since John Law.

The emperor was just as naked five years ago as today. What has changed is what people are willing to see.

Read Nassim Nicholas Taleb. If you're a real geek for this stuff, read Benoit Mandlebrot's financial stuff. HN had a link to Mandlebrot's prediction of the present mess - written in 1998 (when it had almost happened, as opposed to now, when it has happen).

Any technology can be inappropriately applied. Neither crushed thumbs nor deranged psychopaths discredit hammers, do they?

Well, fortunately "financial engineering" hasn't discredited engineering. It is merely an inappropriate and discredited application of the engineering methodology.

A good analogy is Linux. The Linux camp can't understand why people don't switch. Haven't they done everything they were supposed to do, easy installers, graphical desktops, etc? Well no, like those bankers, they're just going through the motions without understanding that at the end of the day, it all boils down to human factors. You can't solve that with equations. You have to grasp it intuitively.

Let's keep one thing in mind: financial engineering is not like civil engineering. It is not about helping society. It is about making money.

With that in mind, the practitioners of financial engineering aren't really doing so bad (the individuals, not their companies).

financial engineering is not like civil engineering. It is not about helping society. It is about making money

You don't think Halliburton, one of the biggest employers of civil engineers, is about making money? Interesting.

I've always been fascinated by how that works. Hindenberg pretty much killed the Zeppelin industry, yet airliners crash all the time and no-one's afraid to fly. The Titanic didn't herald the end of sea travel either. What's the difference?

Live video of the event?

Watching the Hindenburg burn is just frightening. I think airplane crashes are far less scary because they are so fast. Financial disasters don't really seem to prevent the next bubble, but video of Chernobyl burning and an abandoned city have real impact.

The difference is that there is enough demand for airplanes/ships to overcome these events. That kind of demand doesn't seem to exist for Zeppelins, probably because they are so slow.

It doesn't now, but back then Zeppelins were pretty quick compared to ships!

True. I think the event just brought about the inevitable death to an industry that wouldn't have been able to keep up as the cost effectiveness, carrying capacity and maximum distance of airplanes grew so rapidly.

For shifting medium cargo medium distances over inhospitable terrain, I wouldn't be surprised if Zeppelins were more cost-effective than helicopters. Also it might be quite a nice holiday, spending a week or two Zeppelining along some scenic coastline, like a small cruise ship 100ft up. I don't think we've seen the last of that technology.

Oh, certainly not. If you google around, you'll find more than a few floating cruise ship ventures that have made it to various stages. =)

I'd imagine that it is at least a few factors. For one, there is a dramatically longer history of sailing and boating such that the occasional accident, even one on a massive scale, doesn't shake confidence so readily.

With respect to airplanes, I think it is again a proven volume/historical problem. Zeppelins (and blimps) have very low maximum speeds and limited capacity. As for airplane accidents, I don't think they are very frequent so much as it is just that they are generally so heavily broadcast (for good reason).

the hindenberg was a huge flying balloon filled with highly flammable gas

And an airliner is a metal tube full of highly flammable liquid. What's your point?

do you think people see airplanes as metal tubes full of highly flammable liquid?

not to mention that balloon vs metal is already very unbalanced

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