The FT has posted a lengthy video interview with the brilliant mathematician Benoit Mandelbrot, whose book The (Mis)behavior of Markets first inspired me to enter finance and risk management in particular.
I do find that some of John Auteur’s questions mar an otherwise interesting (but extremely high-level) overview of Mandelbrot’s thoughts on finance. Right from the beginning, he introduces Mandelbrot by discussing his early critique of “the theory of efficient markets, which led to the very complicated investment product that crashed disastrously in the last two years, causing the crisis” – a bizarre claim – and later questions demonstrate some unfamiliarity with the subject material.
The second part of the interview looks into how the efficient markets hypothesis was able to capture the attention of financial economists, and Mandelbrot concludes that it is because it makes the world appear simpler than it actually is – a direct analogue to the manner in which VaR rose to popularity.
In any case, though there’s little in the interview you haven’t heard before, Mandelbrot is always fascinating and the video is well worth your time.
(via Charles Davi)