No One Would Listen: A True Financial Thriller Read Online Free PDF Page B

business. Instead, I handed him a reading list of about 14 books and told him his job that summer was to read all of them so we could discuss them. Among the books on my list were Market Wizards by Jack Schwager (New York Institute of Finance, 1989); Justin Mamis’s The Nature of Risk (Addison-Wesley, 1991); and Minding Mr. Market (Farrar Straus & Giroux, 1993) by James Grant. My objective was to provide him with the education he wasn’t going to get in an academic curriculum. Although I don’t dislike business schools, I believe half of what they teach students will be obsolete within five years and the other half is just outright false. Generally, they teach formulas that no one uses, case studies that no longer apply in the real world, and concepts that are just going to get people into trouble if they try to apply them. These formulas are an attempt to model the financial world in a simplified form, but they can’t possibly take into account the extraordinary complexity of the markets. It’s important to know these formulas, though; once you’ve mastered them you can begin to make the necessary adjustments for the real world.
     
    Neil spent about half his time helping prepare monthly statements, confirming trades, tracking dividends, downloading reports, and doing all the other work done in the back office. The other half was spent reading books on my list. He sat across the desk from me, and I literally would quiz him. If he didn’t know the answer, I’d expect him to find it. And I insisted he do all the math by hand. Neil remembers (I don’t) that one afternoon I gave him the Dow Jones Industrial Average for 30 stocks and their price fluctuations for a day and asked him to calculate the actual point change in the Dow. It was not difficult to pull it up on a calculator, but I insisted he do the math.
     
    Neil was obviously smart, but even as an intern, he was headstrong and opinionated. If he disagreed with something I said, he would not hesitate to let me know quickly and forcefully. And like a pit bull, once he got his teeth into an argument he wouldn’t let it go. Now, I had spent 17 years in the military. Among the lessons I had learned was that you can raise an objection once, maybe twice; but once a command decision was made, you didn’t continue to question it. Neil hadn’t learned that lesson, so when he believed he was right he wouldn’t let go. But these weren’t frivolous arguments; he knew his stuff. That’s what made him so valuable when we began to analyze Madoff’s numbers.
     
    Math came naturally to Neil. Like me, maybe even more than me, he could glance at numbers and draw meaningful conclusions from them. At Bentley College, he played a lot of poker, ran a small bookie operation, and came to believe firmly in the efficient markets hypothesis. Believing that concept was where Neil and I differed most. The efficient markets hypothesis, which was first suggested by French mathematician Louis Bachelier in 1900 and was applied to the modern financial markets by Professor Eugene Fama at the University of Chicago in 1965, claims that if all information is simultaneously and freely available to everyone in the market, no one can have an edge. In this hypothesis having an edge means that for all intents and purposes you have accurate information that your competitors don’t have. It basically means that you can’t beat the market, that there is no free lunch.
     
    After the first few weeks, Neil and I began going out to lunch together, to a local Greek place, naturally. The most important thing I taught Neil that summer was that what he learned in the office was not going to determine his success in this business. The only possible way of gaining an edge in the financial industry is by gathering information that others don’t have. There are so many smart people in this business that it’s impossible to outsmart them, so you simply have to have more and better information than they do.