Interview with Thomas A. Tombrello - Caltech Oral Histories

Tombrello–50
philosopher? And he had a theory of justice, part of which was that in a just society people will
accept inequality to the extent they derive some benefit from it.” I said, “And the problem is to
quantify how much inequality they’ll accept.” The guy looks at me and says, “There’s a name
for people like you, Tom.” I say, “Well, what?” He says, “Child abuser.” I said, “Well, Myron,
one of the kids—not the brightest kid but a very bright kid—gets the idea he can use the Black-
Scholes option pricing theorem—for which you have just won the Nobel Prize—to solve it
where the inequality is the option price.” First he sits there, and then he says, “What’s the name
of that kid?” [Laughter] No more talk of child abuse. [Laughter]
Caltech students can take a lot of abuse. They do interesting things. That’s one of the
nastier problems, and yet I’ve asked it now twice, and the second time, a student named Michael
Woods—he graduated a couple of years ago [BS 2008]—came up with a very interesting
approach. Remember, now it’s been long enough that the memory of the first edition of the
problem is pretty much gone. He says, “I don’t know how much inequality they’ll accept. But I
know how big an insurance premium a parent will pay to make sure that their kid doesn’t suffer
inequality.” And he says, “It is the amount they are willing to put into the kid’s education. And
from my personal case, I can give it to you almost to the penny.” But the interesting thing about
the solution is that it can be put into a form that is independent of culture. In Sweden, you’re not
paying tuition, but you’re paying high taxes, so you can still figure out how much they’ve been
willing to pay. In some societies, it’s paying taxes. In some, it’s saving for college. In some it’s
taking loans. “How big a price?” It’s quite a brilliant idea. I wish Michael had worked more on
it, but it was certainly enough to get him into the course.
ASPATURIAN: How do you come up with these questions?
TOMBRELLO: I read something and I think: I bet that would be something they would find
challenging. The ideas come from everywhere. There was one time when I guess I must have
been in Boston going down to Schlumberger in Connecticut. I was on highway 84, which you
pick up in Hartford and as it goes down to Brewster, and if you’re going to Schlumberger you
get off a little bit before Brewster. As I sailed through Hartford, I thought, “I’m going to be
early.” And then suddenly, it’s as if traffic congealed. So I think, “Boy, there must be one hell
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