The Self-Perpetuation Of Modellers

Was just reading an interview with a top academic and he was walking the familiar line of "it is important to understand the models so as to know where they fail"

This brings to mind an old Spaniard tale about the bullfighter who was introduced to a philosopher. "So, what do you do?", asked the uber symbol of manliness. "I think", replied the philosopher. Perplexed, the bullfighter could not fail to admire (even if perhaps not respect) the other guy´s savviness. "Man, you can never go unemployed!", came the summation.

A similar logic would seem to apply to many financial modellers. Say you build a wrongful model. Big deal? Failure? Out of a job? Not at all, for you see people need to understand why your model is wrong and who better to explain it than you? Even if the theories are flatly wrong, we need to learn them so as to know why they are wrong. In fact, this twisted logic may encourage the build-up of bad, not good, models. The more badness, the more need for explanations. Employment for life, just like with the Spaniard philosopher!

Of course, there is a caveat: someone, somewhere in some trading floor may become as perplexed as our bullfighting hero was and wonder why one would need to employ a bad model in the first place, notwithstanding the ready presence of dozens of modellers willing to help us fully understand why the model is rotten to the core.

ptriana@profesor.ie.edu