Vale Benoit Mandlebrot

The world is a lesser place for the passing of Benoit Mandlebrot over the weekend. Mandelbrot is known as the father of fractal geometry but he was much more than that. To us he was one of the most important writers on the fallacy of the EMH and other tenuous financial theories.

His writing, with Richard L. Hudson, "THE (MIS)BEHAVIOUR OF MARKETS - A Fractal View of Financial Turbulence" was a wonderful and revolutionary retake on conventional wisdom. He was often criticised because his theories on finance helped explain and not predict market movements. The simply niavete and arrogance of such assertions always left us baffled. Only slaves to a non-existant perfect world of rational optimisors and efficient frontiers could even think to make such criticism.

In revealing modern fiancial and portfolio theory to be a sham which violated the scientific oath of "do no harm mandelbrot wrote:

"whether guide or master, modern portfolio theory bases everything on the conventional market assumptions that prices vary mildly, independantly, and smoothly from one moment to the next. Iif those assumptions are wrong, everything falls apart. rather than a carefully tuned profit engine, your portfolio may actually be a dangerous, careering rattletrap."

The Independant this morning has the following paragraph in its small article on Mandelbrots death

"Scientific and mathematical geniuses are distinguished by a particular elegance of mind. Fiendish complexity becomes something the non-specialist can comprehend. Rarer still is the scientist whose mental elegance creates, or reveals, something of physical beauty...

Benoit Mandelbrot, whose death has just been announced, was a mathematician who made it his life's work to find beautiful shapes in nature and decode their secrets. In minute ways, he saw perfect order in apparent chaos, and enabled others to see it, too. He devised, and developed the study of, fractals – seemingly random shapes that conformed to patterns when broken down into one repeating form. 

His fractals were invariably things of beauty – seen in phenomena as different as snowflakes and cauliflowers. But his methods also had practical applications that included generating graphics and producing actual works of art. He turned his mind also to economics, declaring the global financial system too complex to function properly. How right he turned out to be. If yesterday belonged to the economists, perhaps tomorrow will be the mathematician's world."

Indeed it may. Like Hyman Minsky before him perhaps Mandelbrot will find his theories to find most traction after his passing. But we'll leave the final word to Mandelbrot from the aforementioned book.

"I am a persistent man. once I decide something, i hold to it with extraordinary tenacity. i pushed and pushed to develop my ideas of scaling, power laws, fractality, and mulitfractality. i pushed and pushed to get out into the scholarly world with my message of wild chance, fat tails, long term dependance, concentration, and discontinuity. Now I am pushing and pushing again, to get these ideas out into a broader marketplace where they may finally do some concrete good for the world."

Benoit Mandelbrot  24/11/1924 - 14/10/2010 R.I.P