Understanding the Earth at Caltech

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Understanding the Earth at Caltech
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Understanding the Earth at Caltech
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Credit: Courtesy J. Andrade/Caltech

The ground beneath our feet may seem unexceptional, but it has a profound impact on the mechanics of landslides, earthquakes, and even Mars rovers. That is why civil and mechanical engineer Jose Andrade studies soils as well as other granular materials. Andrade creates computational models that capture the behavior of these materials—simulating a landslide or the interaction of a rover wheel and Martian soil, for instance. Though modeling a few grains of sand may be simple, predicting their action as a bulk material is very complex. "This dichotomy…leads to some really cool work," says Andrade. "The challenge is to capture the essence of the physics without the complexity of applying it to each grain in order to devise models that work at the landslide level."

Credit: Kelly Lance ©2013 MBARI

Geobiologist Victoria Orphan looks deep into the ocean to learn how microbes influence carbon, nitrogen, and sulfur cycling. For more than 20 years, her lab has been studying methane-breathing marine microorganisms that inhabit rocky mounds on the ocean floor. "Methane is a much more powerful greenhouse gas than carbon dioxide, so tracing its flow through the environment is really a priority for climate models and for understanding the carbon cycle," says Orphan. Her team recently discovered a significantly wider habitat for these microbes than was previously known. The microbes, she thinks, could be preventing large volumes of the potent greenhouse gas from entering the oceans and reaching the atmosphere.

Credit: NASA/JPL-Caltech

Researchers know that aerosols—tiny particles in the atmosphere—scatter and absorb incoming sunlight, affecting the formation and properties of clouds. But it is not well understood how these effects might influence climate change. Enter chemical engineer John Seinfeld. His team conducted a global survey of the impact of changing aerosol levels on low-level marine clouds—clouds with the largest impact on the amount of incoming sunlight Earth reflects back into space—and found that varying aerosol levels altered both the quantity of atmospheric clouds and the clouds' internal properties. These results offer climatologists "unique guidance on how warm cloud processes should be incorporated in climate models with changing aerosol levels," Seinfeld says.

Credit: Yan Hu/Aroian Lab/UC San Diego

Tiny parasitic worms infect nearly half a billion people worldwide, causing gastrointestinal issues, cognitive impairment, and other health problems. Biologist Paul Sternberg is on the case. His lab recently analyzed the entire 313-million-nucleotide genome of the hookworm Ancylostoma ceylanicum to determine which genes turn on when the worm infects its host. A new family of proteins unique to parasitic worms and related to the early infection process was identified; the discovery could lead to new treatments targeting those genes. "A parasitic infection is a balance between the parasites trying to suppress the immune system and the host trying to attack the parasite," Sternberg observes, "and by analyzing the genome, we can uncover clues that might help us alter that balance in favor of the host."

Credit: K.Batygin/Caltech

Earth is special, not least because our solar system has a unique (as far as we know) orbital architecture: its rocky planets have relatively low masses compared to those around other sun-like stars. Planetary scientist Konstantin Batygin has an explanation. Using computer simulations to describe the solar system's early evolution, he and his colleagues showed that Jupiter's primordial wandering initiated a collisional cascade that ultimately destroyed the first generation population of more massive planets once residing in Earth's current orbital neighborhood. This process wiped the inner solar system's slate clean and set the stage for the formation of the planets that exist today. "Ultimately, what this means," says Batygin, "is that planets truly like Earth are intrinsically not very common."

Credit: Nicolás Wey-Gόmez/Caltech

Human understanding of the world has evolved over centuries, anchored to scientific and technological advancements and our ability to map uncharted territories. Historian Nicolás Wey-Gόmez traces this evolution and how the age of discovery helped shape culture and politics in the modern era. Using primary sources such as letters and diaries, he examines the assumptions behind Europe's encounter with the Americas, focusing on early portrayals of native peoples by Europeans. "The science and technology that early modern Europeans recovered from antiquity by way of the Arab world enabled them to imagine lands far beyond their own," says Wey-Gómez. "This knowledge provided them with an essential framework to begin to comprehend the peoples they encountered around the globe."

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At Caltech, researchers study the Earth from many angles—from investigating its origins and evolution to exploring its geology and inner workings to examining its biological systems. Taken together, their findings enable a more nuanced understanding of our planet in all its complexity, helping to ensure that it—and we—endure. This slideshow highlights just a few of the Earth-centered projects happening right now at Caltech.

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More Money, Same Bankruptcy Risk

In general, our financial lives follow a pattern of spending and saving described by a time-honored model that economists call the life-cycle hypothesis. Most people begin their younger years strapped for cash, earning little money while also investing heavily in skills and education. As the years go by, career advances result in higher income, which can be used to pay off debts incurred early on and to save for retirement. Indeed everyone is well aware that later in life earnings will drop and spending will outpace savings.

But how does the life-cycle hypothesis hold up when the income pattern is reversed—such as in the case of young, multimillionaire NFL players who earn large sums at first, but then experience drastic income reductions in retirement just a few years later? Not too well, a new Caltech study suggests.

The study, led by Colin Camerer, Robert Kirby Professor of Behavioral Economics, was published as a working paper on April 13 by the National Bureau of Economic Research.

"The life-cycle hypothesis in economics assumes people have perfect willpower and are realistic about how long their careers will last. Behavioral economics predicts something different, that even NFL players earning huge salaries will struggle to save enough," Camerer says.

"We wanted to test this theory with NFL players because there is a lot of tension between their income in the present, as a player, and their expected income in the future, after retirement. NFL players put the theory to a really extreme test," says graduate student Kyle Carlson, the first author of the study. "We suspected that NFL players' behavior might differ from the theory because they may be too focused on the present or overconfident about their career prospects. We had also seen many media reports of players struggling with their finances."

A professional football player's career is not like that of the average person. Rather than finding an entry-level job that pays a pittance when just out of college, a football player can earn millions of dollars—more than the average person makes in an entire lifetime—in just one season. However, the young athlete's lucrative career is also likely to be short-lived. After just a few years, most pro football players are out of the game with injuries and are forced into retirement and, usually, a much smaller income. And that is when the financial troubles often begin to surface.

The researchers decided to see how the life-cycle model would respond in such a feast-or-famine income situation. They entered the publicly available income data from NFL players into a simulation to predict how well players should fare in retirement, based on their income and the model. The simulations suggested that the players' initial earnings should support them through their entire retirement. In other words, these players should never go bankrupt.

However, when the researchers looked at what actually happens, they found that approximately 2 percent of players have filed for bankruptcy within just two years of retirement, and more than 15 percent file within 12 years after retirement. "Two percent is not itself an enormous number. But the players look similar to regular people who are making way less money," Carlson says. "The players have the capacity to avoid bankruptcy by planning carefully, but many are not doing that."

Interestingly, Carlson and his colleagues also determined that a player's career earnings and time in the league had no effect on the risk of bankruptcy. That is, although a player who earned $20 million over a 10-year career should have substantially more money to support his retirement, he actually is just as likely to go bankrupt as someone who only earned $2 million in one year. Regardless of career length, the risk of bankruptcy was about the same. "It stands to reason that making more money should protect you from bankruptcy, but for these guys it doesn't," Carlson says.

The results of the study are clear: the life-cycle model does not seem to match up with the income spikes and dips of a career athlete. The cause of this disconnect between theory and reality, however, is less apparent, Carlson says.

"There are many reasons why the players may struggle to manage their high incomes," says Carlson. For example, the players, many of whom are drafted directly out of college, often do not have any experience in business or finance. Many come from economically disadvantaged backgrounds. In addition, players may be pressured to spend by other high-earning teammates.

This work raises questions for future research both for behavioral economists and for scholars of personal finance. Because football players, by nature, might be more willing to take risks than the average person, are they also more willing also make risky financial decisions? Are football players perhaps saving for retirement early in their careers, but later using bankruptcy as a tool to eliminate spending debt?

"Indeed it may well be that these high rates of bankruptcies are partly driven by the risk attitudes of football players and partly driven by regulatory practices that shield retirements assets from bankruptcy procedures," says Jean-Laurent Rosenthal, the Rea A. and Lela G. Axline Professor of Business Economics and chair of the Division of Humanities and Social Sciences, who also specializes in the field of behavioral economics.

"These results don't say why the players have a higher incidence of bankruptcy than the model would predict. We plan to investigate that in the future with additional modeling and data," Carlson says. "The one thing that we know right now is that there's something going on with these players that is different from what's in the model."

The study was published in a working paper titled, "Bankruptcy Rates among NFL Players with Short-Lived Income Spikes." In addition to Carlson and Camerer, additional coauthors include Joshua Kim from the University of Washington and Annamaria Lusardi of the George Washington University. Camerer's work is supported by a grant from the MacArthur Foundation.

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Wednesday, April 29, 2015

At the Intersection of Art and Science: A Conversation with Joyce Carol Oates and Charlie Gross

Caltech Economist Richard Roll Wins Onassis Prize in Finance

Richard Roll, the Linde Institute Professor of Finance at Caltech, has been named one of two recipients of this year's Onassis Prize in Finance. Awarded only once every three years, the Onassis Prizes honor the contributions of top thinkers in the fields of finance, international trade, and shipping.

"As the Linde Professor of Finance, Richard Roll anchors a revitalized program in finance at Caltech that is now making great strides in both original research and in improving the course offerings for both undergraduate and graduate students," says Jean-Laurent Rosenthal, chair of the Division of the Humanities and Social Sciences at Caltech. "It is wonderful to see him recognized with this prestigious prize."

The Onassis Prizes are awarded jointly by the Alexander S. Onassis Public Benefit Foundation and the Cass Business School, part of City University London. Roll shares this year's award for finance with Stewart Myers, an economics professor at MIT.

"The Onassis Prize in Finance has been awarded previously to Nobel laureate Eugene Fama, Caltech trustee and Deutsche Bank Prize recipient Stephen Ross, along with my esteemed corecipient this year, Stewart Myers. I am humbled and deeply honored to be included in such company," says Roll.

In a statement, the Cass Business School and Onassis Foundation noted, "This year's winners have made foundational contributions to finance since the beginning of its transformation to a rigorous science-based discipline, nearly a half century ago: Stewart Myers in corporate finance and Richard Roll in capital markets."

Roll is known for his work on portfolio theory—the design of optimal investment portfolios—and asset pricing. His most widely cited paper has come to be known as "Roll's Critique." That work cast into doubt empirical tests of the capital asset pricing model, then a premier model of risk and return. Roll has also collaborated with Caltech alumnus and trustee Stephen Ross (BS '65) to test Ross's alternative model of risk and return known as the arbitrage pricing theory. Roll continues to work in this area; in his most recent working paper, he proposes a new way to test the most prominent modern asset pricing theory.

Roll joined the faculty at Caltech in 2014 after spending nearly 40 years at the UCLA Anderson School of Management. He has also held faculty positions at Carnegie-Mellon University, the European Institute for Advanced Study of Management in Brussels, and the French business school Hautes Études Commerciales near Paris.

He earned his undergraduate degree in aeronautical engineering from Auburn University. He then was employed by Boeing, where he worked on the 727 and wrote the operating manual for the first stage booster of the Saturn moon rocket, while earning his MBA at the University of Washington. Realizing that he was more interested in business than engineering, he quit his job and completed a PhD in economics, finance, and statistics at the University of Chicago. 

In addition to his academic positions, Roll has founded several companies and has served as a consultant to numerous governmental agencies and corporations. He was a vice president of Goldman, Sachs & Co. from 1985 until 1987. He also served as president of the American Finance Association in 1987.

Roll has published more than 100 peer-reviewed articles and has won Graham and Dodd Awards for financial writing four times. Among other achievements, Roll has won the Leo Melamed Award for outstanding scholarship by a business school professor (1990), the Roger F. Murray Prize from the Institute for Quantitative Research in Finance (2001), and the Nicholas Molodovsky Award from the Association for Investment Management Research (2002), and was named "Financial Engineer of the Year for 2009" by the International Association of Financial Engineers. He is also a fellow of the Econometric Society.

The winners of the Onassis Prizes were announced by Alderman Alan Yarrow, the Lord Mayor of London, at Mansion House in London on March 20. Roll and the other 2015 honorees will receive their awards at a ceremony in September.

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Caltech Economist Wins Onassis Prize in Finance
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Friday, April 10, 2015
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