Random-Matrix Theory, Goldman Sachs, God’s Work

Jun 21, 2011
J. Webster
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Finally, Wall Street and someone who works at Goldman Sachs actually do’God’s Work’ for real. Goldman Sachs, perhaps the most hated and envied company in the world, has done something worthy of praise, although quite indirectly.

The random-matrix theory, a mathematical method used to find hidden correlations within masses of data, meaning companies on Wall Street, was used to find an Achilles heel in HIV:

Sure enough, random-matrix theory filtered out the “noise” of random correlations and overwhelming events to reveal such genuine correlations. One of the authors of that finding, physicist Parameswaran Gopikrishnan, working with Boston University physics professor H. Eugene Stanley, is now a managing director at Goldman Sachs Group Inc.

“Of course,” Dr. Stanley said, “we know those sectors are correlated anyway.” But his team found the sectors purely by using random-matrix theory “without looking at the innards of the companies,” he explained. That proved the power of the theory, which Dr. Stanley believes could act as an early-warning system for stock-market analysts. If one company in a sector “wanders away and stops being correlated, that would tell you something is going on” in that firm.

Arup Chakraborty, a chemistry and chemical engineering professor at MIT, knew of random-matrix theory from the stock market work and from a scientific colleague who had used it to analyze enzymes, though not in HIV. Dr. Chakraborty thought it could help find sectors of HIV that rarely undergo multiple mutations—and it did.

Now, when Lloyd Blankfein says his company is doing God’s Work he actually has a case for it. This is all thanks to physicist Parameswaran Gopikrishnan, who is a managing partner at Goldman Sachs. You’d think Goldman Sachs, or the public relations folks for ‘Wall Street’ would be touting their role in this breakthrough a bit more….especially when the uselessness of most of Wall Street’s theories and creations, think credit default swaps on sub prime mortgage tranches, is front and center after the financial collapse. I’m guessing Mr. Gopikrishnan will always have a job at Goldman Sachs now – at least so they can make claim to part of the credit for the breakthrough.

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