Financial Rigor

ByHeather

One of the things you learn in engineering is to be rigorous. If you build a bridge that falls down on a windy day, there’s going to be hell to pay. Financial markets are not like that; they are very noisy. It’s hard to tell who’s skillful and who’s just lucky. And a lot of analyses are done in extremely haphazard, primitive ways, but the investing public doesn’t know any better.

— Dan diBartolomeo, From the Feb 23, 2009 issue ofWired.

Dan diBartolomeo is the head of Northfield Information Services, a Boston financial analysis firm. He has a long history of analyzing investment strategies and complex securities. His comparison of financial markets to the rigors of engineering is noteworthy.

The “quants” of Wall Street, with their Ph.D.’s in advanced science and mathematics, have been painted in the press as geniuses who created financial products of such astounding complexity that mere mortals could not hope to comprehend them. I can’t help but wonder if they weren’t more akin to wizards and alchemists who used their formulas and models as a screen for the ultimate confidence game.

People who are smart look ahead to anticipate the implications of their actions. People who are smart create holistic systems rather than piecemeal schemes. People who are smart apply rigor and discipline to their ideas. It seems to me that the quants of Wall Street were more like pawns in a sea of opportunists than true geniuses.

Similar Posts

  • Persistence

    ByHeather

    Nothing in the world can take the place of persistence.
    Talent will not; nothing is more common
    than unsuccessful men with talent.
    Genius will not; unrewarded genius is almost a proverb.
    Education will not; the world is full of educated derelicts.
    Persistence and determination alone are omnipotent.

    — Calvin Coolidge

    This is one of my all-time favorite quotes. I have committed it to memory at various times in my life and had it posted on the wall of my office on many occasions.

    I am a firm believer that the tortoise always wins the race in the end. Every worthwhile journey is long and arduous. Determination and persistence compel me to continue to put one foot in front of the other and trod on.

  • Soaring to the Highest Heights

    ByHeather

    . . . those who can soar to the highest heights can also plunge to the deepest depths, and the natures which suffer most sharply are those which also enjoy most keenly.

    — Lucy Maud Montgomery, Ann of the Island

    I grew up in a home where showing emotions was not encouraged. As I set out on my own I was proud of my ability to maintain an even keel. But as time wore on I came to realize that holding my emotions in check was just a cloak for numbness. A dear friend offered me this quote and I was suddenly free.

    In order to soar to emotional heights I had to allow myself the possibility of plunging to the deepest depths. Goodbye even keel. I learned to embrace the lows and reveled in the highs. Sometimes you have to live with the rain. But when the sun eventually comes out — and it always does — the warmth and the light are more glorious than ever.

  • Dear United: It Didn’t Have To Be This Way

    ByHeather

    Last summer I had a Delta flight out of La Guardia bound for Detroit. It was a Saturday morning and the airport was swarming with passengers, the gate area for my flight was like a mosh pit. As we approached the time to board, a gate agent announced that the flight was oversold by seven passengers. An audible groan rippled through the waiting area as we all clutched our boarding passes and jockeyed further for position in the boarding process. This was not going to be easy.

    The Delta / traveler negotiation process began when the agent offered the usual $400 travel voucher for anyone willing to take a later flight. In a delightful New York accent, a lady standing beside me smirked, “They’ll pay more.” Sure enough, moments later they announced that a $500 voucher was now available to any travelers with flexible travel plans. I smiled as I acknowledged the prophetic power of my fellow traveler. As my plans did not feel flexible, I gratefully made my way onto the plane.

    After the plane was fully loaded, with the last few passengers jamming bags into the overhead bins, a voice rang out over the airplane announcement system that Delta still needed one more passenger to give up their seat. This time, however, they had upped the ante.

  • Important Moments in Life

    ByHeather

    Sooner or later we all discover that the important moments in life are not the advertised ones, not the birthdays, the graduations, the weddings, not the great goals achieved. The real milestones are less prepossessing. They come to the door of memory unannounced, stray dogs that amble in, sniff around a bit and simply never leave. Our lives are measured by these.

    — Susan B. Anthony

    I have never been very big on holidays like birthdays, anniversaries or Christmas. They seem like such artificial constructs to me. Years ago I reached a peaceful truce with my family and friends to not exchange gifts at such times. We have all been enjoying stress-free holidays ever since.

    I don’t mean to demean the important moments in life.

  • The Illusion of Knowledge

    ByHeather

    The greatest obstacle to discovering the shape of the earth, the continents and the ocean was not ignorance but the illusion of knowledge.

    — Daniel Boorstin

    To really appreciate the profundity of this quote you have to think back to Galileo (1564 – 1642) and his epic battle with the Roman Catholic church over the nature of our solar system. Although Copernicus (1473 – 1543) had developed the heliocentric theory a hundred years earlier, the “prevailing wisdom” maintained that the earth was at rest at the center of the universe while the sun and the planets revolved around it.

    But Galileo had a telescope — and became convinced that Copernicus was right. He championed the sun-centric “theory” at great personal risk. He was declared a heretic, forced to recant, and spent the last years of his life under house arrest. The church did not lift its ban on the general prohibition against works advocating heliocentrism until 1758.

One Comment

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.