Past in Not Always Prologue -- a rebuttal of “It’s Not the Heat, It’s The Tepidity” by Clifford Asness and Aaron Brown

Clifford Asness is a hedge fund manager and co-founder of AQR Capital Management, with degrees in English, Economics and Finance.  Together with his colleague Aaron Brown, he recently published a note that analyzes global warming data and concludes that the data do not support the projections made by climate-science based IPCC models.  In these comments, I will point out some of the problems with the analysis of Asness and Brown (hereafter referred to as AB), which make their conclusions somewhat unsubstantiated and perhaps even misleading.

AB start with the global land-ocean annual mean surface temperatures, as shown in their Figure 1.  This is their “data”, where time is the independent variable or “predictor”, and the global temperature index (i.e., deviation of the recorded temperature from the 1951-1980 average) is the dependent variable or “response”.  They proceed to fit a linear regression trend line to the data (Figure 2), and compare the projections from this simple “model” with IPCC model results (Figures 3-5).  Since the linear fit in Figure 2 does not fully match the curvilinear trend in the data, especially for the post 1950 period, AB then fit a quadratic regression model to the data and compare the corresponding updated projections to IPCC model results (Figure 6).  Their main conclusion is that the global warming trend, extrapolated from a time series of past temperature readings, is at odds with IPCC projections.  To quote AB, “You can believe the models if you like, or you can look at the data and assume the most likely future is an extrapolation of the past (my bold).  What you cannot do is both.”

Let us consider the following thought experiment.  I want to predict the future movement of the S&P 500 index.  Using AB’s analytical premise, I should be able to look at the past history of this index and project it into the future.  To illustrate this point, I will use a time series of the S&P 500 Index values from 1950 until the present.  The figure below shows a chart of this data, where the index values are plotted in a logarithmic scale per normal practice.  Next, I fit a log-linear model to this data, with an R^2 value of 0.9533, indicating an excellent fit. 

Even though this fit is as good as what AB show with their analysis, does this give me any confidence that I can predict the future trajectory of the S&P 500 based on past history?  Not really.  Would any investment manager make decisions based on these projections of the S&P 500’s values – without doing his or her due diligence about future conditions?  I think not.  A reasonable analysis would require us to consider how future estimates of corporate earnings, interest rates, Eurozone conditions, investor sentiment, etc., compare to the immediate past and then decide if inferences about the future can and should be made from past data.

Extending this thought process to AB’s analysis of the global warming data, it is clear that time is simply a proxy for some underlying causal variable.  We can assume that the future can be extrapolated from the past, if and only if the time-dependence of key causal variables affecting global warming in the past is similar to that expected for the future.  In my view, this is the fundamental flaw in AB’s analysis.  The IPCC models have various scenarios that describe how CO2 emissions and other drivers of global warming can change with time as compared to current conditions.  This is what is missing in the AB analysis.  Not only that, but AB also appear to be unaware of the fact that all physics-based IPCC models are calibrated to past temperature trends and are consistent with the data.  The divergence in their projections is caused by different assumptions about future conditions with respect to CO2 emissions.  A credible model has to explain the past before it can be applied for predicting the future.

In summary, as the simple S&P 500 index example is intended to show, past is prologue only if “before” and “after” operating conditions are similar.  By most accounts, that is not the case with our understanding of how climate is changing.  The “climate-knowledge-free-statistics” based simplistic AB analysis fails to properly take into account the influence and time-dependent behavior of the relevant causal variables, thus leading to results that are incorrect and misleading.  If only AB had applied the same analytical rigor to this problem as for an investment decision!

POSTSCRIPT:  AB’s central premise (i.e., the future can be extrapolated from the past) also brings to mind the simplest weather prediction model – which posits that the weather tomorrow will be the same as that today.  Suffice it to say, in the words of the inimitable H.A.L. Mencken, “for every complex problem there is a solution which is simple, neat and wrong”.  Caveat Emptor. 

The night my heart skipped a beat…. and then some

We just said goodbye to February - designated as the American Heart Month by the Centers for Disease Control and Prevention (CDC) and Million Hearts^®–a national effort to prevent 1 million heart attacks and strokes in the United States by 2017.  Often during this month, I was reminded of the night of December 22, 2010, when I had a heart attack - one of roughly 500,000 people who suffer a heart attack for the first time each year in USA.  Here are my reminiscences of what transpired.

©      ©      ©      © 

1:58 AM.  As I groggily check the luminescent readout of the bed-side alarm clock, the growing heaviness in my chest begins to sink in.  There is a feeling of burning, and of pressure.  My mind tries to focus.  Heart attack?  I try breathing deeply.  There is no shortness of breath.  I check my forehead.  There is no sweating.  I pinch my arms.  There is no loss of feeling.  Could it be heartburn?  I get up, walk to the kitchen, drink some water and come back to bed.  Let me try to sleep it off, I think and climb back under the duvet. 

Underneath the cozy comforter, sleep is hard to come by.  The heaviness in my chest refuses to subside.  Slowly, a feeling of nausea begins to creep in.  I pad over to the bathroom sink, and try throwing up.  It is an ordeal.  The chest feels no less constricted even after the heaving stops.  I decide to call for reinforcements.

Snigdha, wake up, I say, gently shaking my wife.  My chest hurts.  She sits up, immediately alert, hearing the dreaded words.  Where?  For how long?   I tell her about my symptoms, and my suspicion that it is heartburn.  Another wave of nausea sweeps over me, and the chest pain kicks up a notch, as I run to the sink.  Snigdha quickly scans her first aid book.  Call 911, I say.

She comes over, and massages my back.  Looks like a bad case of heartburn.  Let me take you to the emergency.  But first, take some antacid and drink some more water.  That should help.  I do all that, but with little effect.  As I walk around the kitchen island, massaging my chest, and hoping for relief that continues to evade me, Snigdha gently takes my arm.  Let’s get dressed and go to the emergency.  I follow her, sensing that time is of the essence.

My subconscious mind recalls a similar incident 7-8 years ago, when a childhood chum complained of chest pains, was taken to the emergency, and had a heart attack during the ER triage.  That is what saved me, I remember him saying over and over again, as I quickly change and put on my jacket.  The garage feels bitterly cold as I get into the car.  Pulling out of the garage, Snigdha pats my hand.  We’ll be there in no time.  Don’t worry.

2:39 A.M, the clock on the dashboard says.

©      ©      ©      ©

Christmas is only a few days away.  The night is crisp and clear.  The blackness of the sky is in sharp contrast with the brilliance of the snow on the ground.  It is an eerie feeling for recent transplants like us from Texas.  Snigdha begins telling me about her trip to the doctor yesterday, when she got lost and found herself at the entrance to the emergency.  I know exactly where it is, she keeps assuring me.  I listen, partly to get distracted, as I keep massaging my chest. 

The roads are completely deserted, and we get to the emergency in a few minutes.  I get out of the car, and quickly walk across to the reception desk.  The lobby is deserted, save the nurse in charge of check-in.  May I help you, she says.  I am having chest pains, I say.  It hurts.  She rushes out, gets me seated on a wheel chair, mumbles chest pain .. chest pain … to her headset, and wheels me right in.  A team of nurses runs towards us.  Room 22, one of them says.  It is set up for cardiac patients.  We enter the room, and the ER protocol rapidly kicks in.

Take off street clothes … put on hospital gown … what is your social security number … let me shave your chest to attach the EKG leads …. are you allergic to any medication ….we are going to do an IV …. how would you rate your chest pain …

Four or five nurses are bustling all around me, setting up the EKG, the IV, the blood draw, etc.  He is diabetic and also on blood pressure medication, Snigdha keep telling them, as she gives out details about my insurance.  A petite lady wearing scrubs comes in and shakes my hand.  I am Dr. Alexander, she says.  Let’s see what we have here.  The EKG readout is beginning to emerge, and I suddenly wince, as the pain intensifies.  Taking a deep breath, I look at the doctor, silently asking for a diagnosis.  You are having a heart attack, she says, as if reading my mind.

The doctor’s words take time to sink in.  I feel detached from my body, almost like a ghost hovering over the room, watching the ER team continue its drill.  There is a sense of unreal, as if the whole experience belongs to someone else. 

Call for the pharmacist …. give him some heparin … we don’t have a cath lab here … we’ll have you air lifted to the heart hospital midtown … check his BP … are you allergic to any medication …. how would you rate your chest pain …. are you cold ….here are some blankets ….

The med flight team arrives, and takes charge.  A new gurney is called for and I am gently slid onto it.  The doctor comes over and touches my shoulder.  You are going to be all right.  We have you stabilized and Dr. Silver is waiting for you at the heart hospital.  Good luck.  Snigdha is standing by the door, holding my clothes.  She pats my forehead, and gives me a wan smile.  I am coming to the hospital, don’t worry, she says, as the med flight team wheels me away.

3:23 AM, reads the clock over the doorway.

©      ©      ©      ©

 We move quickly through a long and empty corridor and step out of the building into an open ramp.  My body goes into shock at the sudden drop in temperature.  The med flight crew races towards the waiting helicopter and quickly directs my gurney into the chopper’s belly.  I feel like being trapped inside a metal coffin.  The gurney is strapped on, and a pair of headphones is put over my ears.  Relax, the disembodied voice of one of the crew says, we’ll be taking off in just a minute.  I can barely turn my head around. 

The helicopter engines whine and rev higher as we take off.  Claustrophobia begins to battle the pain in my chest.  I close my eyes and reach for my chest.  Om tryambakam yajamahe, I start chanting silently, willing away any sense of panic.  It will be OK, I tell myself, everytime I reach the end of the mantra, mryutyor mukhshiya mamrutat, before starting all over again.

We land, and the med flight team rushes me through the parking lot and a maze of corridors into the brightly lit cath lab.  Everyone is in scrubs looking bright eyed and alert.  The doctor steps in and introduces himself.  He is completely bald, with a peaked nose, and a serious demeanor.  I am Dr. Silver, he says, shaking my hand.  You had a heart attack.  We are going to inject some dye into you and find out where the arterial blockage occurred.  Then we’ll take care of it.

They slide me from the med flight gurney onto the operating table and start some more medication through the IV.  A local anesthetic is applied to my groin area.  It is wet and cold, and my teeth begin to chatter.  I am swaddled with more blankets.  The relaxant begins to take over.  I can barely hear Dr Silver’s voice telling me about the catheter, the wire, the dye, the balloon, the stent, as my heavy eye lids begin to close of their own volition.

3:55 AM, is the last thing I remember as I drift away.

©      ©      ©      ©

My eyes gradually focus on Dr. Silver’s glistening forehead as I come out of anasthesia.  How are you feeling, he asks.  OK, I mumble, slurring my words.  You did great, he says.  One of your arteries was almost completely blocked.  I removed the blockage and put a stent.  Another artery also has some serious blockage.  I need you to come back in a month so that we can fix it.  He stops to watch me digest the news.  You got lucky, he says after a long pause.  We caught the heart attack just in time.

There is another flurry of activity to get me ready for the move to the cardiac ICU.  I keep mulling over the fact that I just had a heart attack.  Or was it somebody else?  Denial takes over, until we come out of the cath lab and I see Snigdha’s smiling face mirroring a huge sense of relief.  Realization follows – something serious did happen to me. 

A bubbly nurse takes charge of transporting me to the ICU.  Snigdha holds my hand as we navigate a maze of corridors and finally check into my ICU cabin.  I am partially immobilized from all the attachments to my body.  The nurse gets me settled, introduces me to the ICU crew, wishes me luck, and leaves.  I close my eyes and doze off for a bit. 

When I open my eyes, I see Snigdha sitting in the lone visitor’s chair, sleep weary, sipping a cup of water and looking in my direction.  I wave at her.  She comes over and gently strokes my face.  How are you feeling? she asks. Not bad, just a little bit of pain in the chest, I say.  I am so glad, she says.  Let me go home and check on the children.  I nod in agreement.  You rest now, she says.  I will be back in a couple of hours.

She gives my hand a final squeeze, gathers her purse and coat and steps outside. Thank you for giving me my life back, I silently mouth after her.  She stops at the door to look back at me.  Reassurance is writ large on her face, a calamity averted.  A smile flits across her face, as if to say, You’re welcome. 

5:43 AM, the ICU clock reads.

©      ©      ©      ©