Picking up from Part 1 of Chapter 5. We know the institutions are playing a different game. Now let’s look at the actual humans running the show and why their biology might be messing with your money.
We are now entering Part 5 of Wilmott’s book: Advanced Topics. Everything so far was classical foundation. Lognormal random walks, Black-Scholes, delta hedging, portfolio theory. Well-established stuff. From here on out, we go beyond the standard model and into territories where things get interesting, controversial, and sometimes dangerous.
By the end of 2010, Brad’s team had built a weapon. Thor worked. It protected investors from getting front-run by high-frequency traders. But here’s the problem. They had built a defense against an enemy they barely understood.
When we have a toothache, we go to a dentist. When we have a legal problem, we call a lawyer. So when we have money to invest, we go to a professional, right?
For a long time, private equity was a small, quiet industry that stayed below the radar. But those days are over. Today, it’s a global powerhouse, and that change is bringing some big questions.
Every trader has said something like this at some point: “The stock has good fundamentals, it’s cheap, but the price action looks terrible. I’m going to wait.”
If you’ve ever bought a house, you know it’s a long, stressful process. You have to get an inspection, talk to the bank, and negotiate with the seller. Now imagine doing that for a multi-million dollar company.
All the math in the world does not help if the people using it are reckless, clueless, or dishonest. Chapter 44 is Wilmott’s tour through the greatest hits of derivatives disasters. These are not abstract case studies. Real people lost real billions, institutions collapsed, and careers ended. Some of these stories are tragic, some are farcical, and a few are both.
Every person I know who works in IT started from the bottom. Fixing cables, carrying equipment, dealing with angry users. Nobody hands you a corner office in tech. You earn it by touching the actual hardware. And that’s exactly why Ronan Ryan understood something that every Wall Street trader missed.
Picking up from Part 1 of Chapter 4. We know that groups are dangerous. Now let’s look at how the way information is “framed” changes how we spend our money.