Why I Wrote Lecturing Birds On Flying
Let me try to offer an adult response to “Peter”´s rather infantile rants. First of all, and as “Peter” aptly emphasizes, I am a stranger in a strange land. I am a non-quant non-theoretician who´s infiltrated the mathematical finance sphere for the past three years, via my Lecturing Birds On Flying and several models-doubting articles. I have never produced a mathematical paper or taught a math-heavy course. My direct experience with the quanty universe is limited to my student days, to my days as a derivatives marketer, and to the brief period when I dated a New York girl who had just dated a (rich) quant. I am not a quant, and have never pretended otherwise. In fact, I thank “Peter” for reproducing those parts of my book where proper disclaimers can be found.
The key issue, then, becomes: can a non-quant non-theoretician write a book dealing with finance theory and quantitative finance? Sure, why not? Many great tomes have been authored by people without direct membership in the world that´s being described. The best books on LTCM were penned by a general journalist with no markets experience, and by a financial journalist with no markets experience (but, granted, high-level science background); and those were wonderful efforts. Michael Lewis has written fantastic books dealing with fields as alien to his professional background as football, baseball, politics, the internet, and Subprime CDOs. Non-academic journalists John Cassidy and Justin Fox have compiled good chapter after good chapter on the history of financial economics. Peterson from the WSJ wrote “The Quants”, even though I have a feeling he couldn´t personally be further away from quantyland. Someone has recently produced a bestselling bio of Cleopatra, even without being Egyptian, having ever met the lascivious vixen, or having ever participated in the construction of a pyramid.
Compared to those efforts, Lecturing Birds could almost be accused of having been written by an uber expert. Again, I spent several years studying the tools (I got an A in stochastic calculus!), I read some of the key textbooks (Musiela, Shreve´s class notes, Neftci, Wilmott), I read Risk magazine, I read (and almost understood) Taleb´s Dynamic Hedging, I read Derman´s My Life As A Quant, I built an exotic options calculator that was used by NYU students, I have taught advanced derivatives at top international schools, I have published in Risk, I have published with Risk Books and Wiley, I read Fisher Black´s Biography, I read Capital Ideas, I have met some of the world´s top financial economists and mathematicians, I have sold exotic derivatives, I have professionally interacted with top-bank quants, I have read tons of research papers, and, last but not least, I´ve been fortunate to have dinner with leading theory-agnostics Nassim Taleb and Espen Haug. In other words, this non-quant had quite a lot of ammunition at his disposal to write a book subtitled “Can Mathematical Theories Destroy The Financial Markets?”, plus his intellect was sizable enough to pick up new stuff as things evolved (Gaussian Copula stuff, VaR stuff).
In any case, what I am trying to say is that you don´t need to have had first-hand direct experience in a field to successfully muse about happenstances pertaining to that field, provided that you are resourceful and intelligent enough to find good sources and to learn on your own. Bestselling authors do it, and have done it, all the time. Did that guy Chernow ever ride with George Washington? Certainly not. Does that diminish the value of his work? Certainly not. Should we doubt his conclusions because of that? Certainly not.
What you should do is make clear from the get-go what your possible limitations may be, and that I do in spades in Lecturing Birds, as “Peter” so graciously remains us. If I am not a bona fide citizen of quanty land, why then did I sacrifice my time for this endeavor? Because the topic was too relevant to ignore, too influential to abandon. Once it became clear that flawed, yet widely popular, models had contributed to the 2007 crisis there was no option but to spread the word. Just like there was no option but to try to summon the world into seriously considering the proper role (if any) of quantitative finance models going forward.
Lecturing Birds was aiming at a serious, adult, responsible audience that, even if perhaps in profound disagreement with my dictums, would rise to the occasion and focus on the unavoidably serious themes under consideration. I am pleased to say that some top quantitative priests did regale us with value-adding commentary, gentleman scholars like Steven Shreve and Aaron Brown who are more than capable of rebutting an argument without recourse to cheap, unintellectual, childish ad hominism. But “Peter” (like many others who´ve displayed similar behavior towards the book) doesn´t seem to have the same gravitas, appearing as a much smaller figure than those two giants.
The stakes are too high to waste our time with tired and empty ramblings. This was supposed to be a debate for grown-ups.
