Gustavo Ballvé on February 8th, 2012
Food for thought, Home, Mental models, Portfolio Management, Risk management

MIT economist Andrew Lo had published a paper (41-page PDF available here) where he reviews twenty one (yes, 21) books about the global financial crisis. In search of common explanations and themes, he found confusion instead. “After each book, I felt like I knew less,” Mr. Lo told the NPR reporter whose article was highlighted by Tuesday’s Dealbook email. “For an academic, that’s a pretty frustrating feeling.” In his introduction to the paper, Mr. Lo highlights Akira Kurosawa’s Rashomon, a movie classic where two crimes are explained by four different people and no single vision can be ultimately extracted from their accounts. He calls this “multiple truths” and the implications of this to actually learning something useful from the crisis are very interesting.

There is, of course, always the choice of simplifying the matter and assume that risk “comes from not knowing what you’re doing”. If more people had followed this simple idea – from homeowners to Central Bankers – then past, present and future impacts from the crisis might have been less severe.

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