Risk or Uncertainty:: which are we confronted with now?


Listen to the “risk management” fraternity and they will tell you that they know what they are doing, blah, blah but I can, emphatically tell you that THEY DO NOT!

Here is what, the late, Hunt Taylor (former Hedge Fund Manager) had to say about the markets prior to his death in 2006:

“Let us start with what we know. First, these markets look nothing like anything I’ve ever encountered before. Their stunning complexity, the staggering number of tradable instruments and their interconnectedness, the light-speed at which information moves, the degree to which the movement of one instrument triggers nonlinear reactions along chains of related derivatives, and the requisite level of mathematics necessary to price them speak to the reality that we are now sailing in uncharted waters….

“I’ve had 30-plus years of learning experiences in markets, all of which tell me that technology and telecommunications will not do away with human greed and ignorance. I think we will drive the car faster and faster until something bad happens. And I think it will come, like a comet, from that part of the night sky where we least expect it. This is something old.

“I think shocks will come, but they will be shallower, shorter. They will be harder to predict, because we are not really managing risk anymore. We are managing uncertainty – too many new variables, plus leverage on a scale we have never encountered (something borrowed). And, when the inevitable occurs, the buying opportunities that result will be won by the technologically enabled swift.”

Ubiquity, Complexity Theory, and Sandpiles, How Change Happens

One Response to Risk or Uncertainty:: which are we confronted with now?

  1. I read this post fully on the topic of the resemblance of newest and preceding technologies, it’s awesome article.

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