An interview with Mandelbrot

October 1, 2009 in Finance,Math

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 Auther'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 claim I disagree with - and later questions demonstrate some level of discomfort with the subject material. But these are relatively minor quibbles - on the whole it's a great interview.

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)

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