Benoit Mandelbrot: The “heretics” are taking over the asylum
Saturday, 3 July, 2010 1 Comment
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Thankfully the times have changed and, much as they have resisted, institutions are finally getting the message that they can no longer get away with marginalising or burying the theories and other creative contribution of passionate and capable individuals whose work draws conclusions that challenge the very basis of their power and wealth.
Issues that were once buried or “swept under the carpet” are having to be dealt with because thinking citizens have the means to communicate (like never before) with like-minded individuals. Questions have been and will continue to be asked and for as long as Government; Church; Corporation; Financial institutions, are shown to be so deeply flawed and refuse to embrace transparency they are contributing to their own downfall.
So, unless I am a complete idiot(!) the message in this – 11 min – interview is that the whole basis of “efficient market theory” and, therefore dirty big chunks of time and money associated with modelling risk, were obtained by what can only be described as a massive deception? Well, if we are talking about deliberately and knowingly ignoring the the impact of infrequent (random) major “events” – Black Swans – on the basis that the truth was too inconvenient then what other conclusion can there be?
When it comes to interview style he ain’t no firebrand like Nassim Taleb but then again neither was the late Peter L Bernstein. But both men possess the wisdom and presence of another era with enormous relevance for NOW. NOT rebels and NOT heretics.
Pt 1: In a fascinating in-depth interview with John Authers, investment editor, 85-year old mathematician Benoit Mandelbrot discusses his now 40-year old groundbreaking critique of the “efficient markets” hypothesis and why new theories on price movement discontinuities are needed after the credit crunch. Benoit Mandelbrot is an emeritus professor of mathematics at Yale University.
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