Bookstaber’s pre-boarding call for the “flight to simplicity”
Jan 10th, 2008 | Filed under: CAPM / Alpha Theory, Hedge Fund RegulationIt was 8 years in coming. An idea that began as a set of notes back in 1999 slowly and methodically grew over the years to eventually become a manifesto of modern risk management. According to author Richard Bookstaber, “A Demon of Our Own Design” began as a labor of love. It seems that the result represents a sort of catharsis - therapy for a hedge fund insider who has been a first-responder at the scene of some of history’s most calamitous financial crashes.
The labor of love now has 55,000 copies in print and has received accolades from The Economist, Business Week, Forbes, and (most prestigious of all) AllAboutAlpha.com. Bookstaber was in Toronto earlier this week addressing a sold-out event organized by AIMA (The Alternative Investment Management Association). I had the chance to join him for dinner before his speech and found him to be a casual and disarming kind of guy who is equally comfortable discussing championship dog breeding as he is dispensing sapient advice on the global financial system.
He gives credit to others - particularly an editor at The Economist - who have recently advocated a “flight to simplicity” for adroitly summarizing the main idea behind his book. Bookstaber basically says that one can’t fight complexity with more complexity. Adding ever more complicated financial regulations can (and will) have unknown and unintended consequences for the functioning of capital markets.
To continue reading this article please login (at the right) or click here to learn more about accessing our archives.
[…] Short term liquidity events are evidence that opportunities to generate alpha will always exist. (All About Alpha) […]
For an earlier use of the phrase “flight to simplicityâ€, see this article from the Financial Times 21 October 2007
http://www.ft.com/cms/s/0/956c69d2-7ff0-11dc-b075-0000779fd2ac.html
The phrase is attributed to the head of fixed income from an unnamed US investment bank.