August 27, 2007
Chasing “Tail Risk”
A typically good piece (over 8,000 words but worth it) from Michael Lewis on the “culture of catastrophe.”
“John Seo thinks that much of the academic literature about finance is nonsense…. ‘These academics couldn’t understand the fact that they couldn’t beat the markets,’ he says. ‘So they just said it was efficient. And, ‘Oh, by the way, here’s a ton of math you don’t understand.'’ He notes that smart risk-takers with no gift for theory often end up with smart solutions to taking extreme financial risk — answers that often violate the academic theories. (’The markets are usually way ahead of the math.’) He prides himself on his ability to square book smarts with horse sense. As one of his former bosses puts it, ‘John was known as the man who could price anything, and his pricing felt right to people who didn’t understand his math.’”
- via kedrosky.com -
August 27th, 2007 at 7:15 pm
Chasing fat tails *can* be risky, can’t it? Oh, sorry he meant in trading financial markets. My bad! ;-)
August 27th, 2007 at 7:19 pm
steve: Right, I’m constantly pricing tail and find that I usually can’t afford her.
August 28th, 2007 at 1:57 am
Thanks for the heads up on this excellent piece. For those who care about football, Lewis’ Blind Sided is a fun read and a definitive study of the role of the offensive left tackle.
August 28th, 2007 at 4:30 am
“If there’s been a theme to John’s life,” says his brother Nelson, “it’s pricing tail.”
It’s funny…trying to ascertain the fair price for “tail” has always been a major theme in my life too.
August 28th, 2007 at 6:13 am
pricing tail….hehe =)
August 28th, 2007 at 8:12 am
Rod Roth: I don’t think there’s a single thing that Lewis has written that I haven’t enjoyed.
August 28th, 2007 at 8:19 pm
I’m with you. Starting with Liars’ Poker.
August 29th, 2007 at 12:08 am
Great article. Does anyone know where to find all of Michael’s articles? Is there a repository?
August 29th, 2007 at 12:38 am
For more on Michael Lewis, try here: