The fundamental rule of political analysis from the point of psychology is, follow the sacredness, and around it is a ring of motivated ignorance.
I would say that's true for scientific analysis too.
Derman: But I think Black-Scholes is much better than CAPM. Although it is based on the same idea. Because different stocks really have such different risk characteristics that the assumptions of geometric Brownian motion and the assumptions in CAPM don't hold very well for individual stocks.
Derman: I know Burton Malkiel reviewed my book in the Wall Street Journal, and he liked it generally, he was complimentary, but he claims in one paragraph that I was putting too much weight--he sort of claimed that all the efficient market model says is, I don't know what's going to happen next, as opposed to saying that current prices are right.
Russ: The first claim is a modest claim.
Derman: Yes, it is a modest claim. And I think maybe he is technically correct, but I think in everyday parlance people strive for a stronger version of it.
Russ: Yeah; I think the way you wrote it in the book is that prices reflect all publically available information.
Today, many of these leaders display a Goldman Sachs culture quotient of exactly zero percent. I attend derivatives sales meetings where not one single minute is spent asking questions about how we can help clients. It’s purely about how we can make the most possible money off of them.He sees the problem that his company maximizes profits, not helping the customer. This is a common refrain, one made by Einstein, who noted that socialism was better than capitalism because one system produces for everyone, the other for profit.
My proudest moments in life — getting a full scholarship to go from South Africa to Stanford University, being selected as a Rhodes Scholar national finalist, winning a bronze medal for table tennis at the Maccabiah Games in Israel, known as the Jewish Olympics — have all come through hard work, with no shortcuts.Talk about selfish, such accomplishments didn't help anyone but him! There is no customer that will pay for self-indulgent status climbing in irrelevant hierarchies, regardless of how much we encourage our kids to play such games. That is, ping pong is a fabulous avocation, a pathetic vocation. We all want our children to play and engage in poetry, and when they excel at these things we are rightfully proud. Yet these are things kids do to develop skills like discipline, creativity, courage, that ultimately are valuable because of what they can do for others. They are not good in themselves, at least to society at large.
The stress-test results—together with signs that bank lending is perking up in the U.S.—suggest the unpopular bailouts of 2008 and 2009 helped to stabilize the banking system during the financial crisis and put the economy on the path for recovery.
Everybody’s young days are a dream, a delightful insanity, a sweet solipsism. Nothing in them has a fixed shape, nothing a fixed price; everything is a possibility, and we live happily on credit. There are no obligations to be observed; there are no accounts to be kept. Nothing is specified in advance; everything is what can be made of it. The world is a mirror in which we seek the reflection of our own desires. The allure of violent emotions is irresistible. When we are young we are not disposed to make concessions to the world; we never feel the balance of a thing in our hands—unless it be a cricket bat. … Since life is a dream, we argue (with plausible but erroneous logic) that politics must be an encounter of dreams, in which we hope to impose our own.
To rein in one's own beliefs and desires, to acknowledge the current shape of things, to feel the balance of things in one's hands...these are difficult achievements; and they are achievments not to be looked for in the young.