Humble Pi: A Comedy of Maths Errors by Matt Parker

Author:Matt Parker
Language: eng
Format: azw3, epub, mobi
Tags: Mathematics, Non-Fiction, Science
ISBN: 9780141989136
Publisher: Penguin Books Ltd
Published: 2019-03-07T00:00:00+00:00

EIGHT

Put Your Money Where Your Mistakes Are

What counts as a mistake in finance? Of course, there are the obvious ones, where people simply get the numbers wrong. On 8 December 2005 the Japanese investment firm Mizuho Securities sent an order to the Tokyo Stock Exchange to sell a single share in the company J-COM Co. Ltd for ¥610,000 (around £3,000 at the time). Well, they thought they were selling one share for ¥610,000 but the person typing in the order accidentally swapped the numbers and put in an order to sell 610,000 shares for ¥1 each.

They frantically tried to cancel it, but the Tokyo Stock Exchange was proving resistant. Other firms were snapping up the discount shares and, by the time trading was suspended the following day, Mizuho Securities were looking at a minimum of ¥27 billion in losses (well over £100 million at the time). It was described as a ‘fat fingers’ error. I would have gone with something more like ‘distracted fingers’ or ‘should learn to double-check all important data entry but is probably now fired anyway fingers’.

The wake of the error was wide-reaching: confidence dropped in the Tokyo Stock Exchange as a whole, and the Nikkei Index fell 1.95 per cent in one day. Some, but not all, of the firms which bought the discount stock offered to give them back. A later ruling by the Tokyo District Court put some of the blame on the Tokyo Stock Exchange because their system did not allow Mizuho to cancel the erroneous order. This only serves to confirm my theory that everything is better with an undo button.

This is the numerical equivalent of a typo. Such errors are as old as civilization. I’d happily argue that the rise of civilization came about because of humankind’s mastery of mathematics: unless you can do a whole lot of maths, the logistics of humans living together on the scale of a city are impossible. And for as long as humans have been doing mathematics, there have been numerical errors. The academic text Archaic Bookkeeping came out of a project at the Free University of Berlin. It is an analysis of the earliest script writing ever discovered: the proto-cuneiform texts made up of symbols scratched on clay tablets. This was not yet a fully formed language but a rather elaborate bookkeeping system. Complete with mistakes.

These clay tablets are from the Sumerian city of Uruk (in modern-day Southern Iraq) and were made between 3400 and 3000BCE, so over five thousand years ago. It seems the Sumerians developed writing not to communicate prose but rather to track stock levels. This is a very early example of maths allowing the human brain to do more than it was built for. In a small group of humans you can keep track of who owns what in your head and have basic trade. But when you have a city, with all the taxation and shared property that it requires, you need a way of keeping external records. And written records allow for trust between two people who may not personally know each other.

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