It is an axiom that even smart people need beach reads. And in a perfect world, the advisor incubating latent workaholism might prefer his/her beach read to have some relevance to what we do. If so, I have just the thing.
Robert Harris is one of the most fascinating novelists of our time. In addition to a three-volume fictionalization of the career of Cicero, and the closest we’ll ever come to an understanding of what actually happened at Pompeii, Harris does fiendishly clever alternative-history novels.
In Fatherland, Nazi Germany has won WWII, and obliterated all traces of the Holocaust – until a guilt-ridden attendee at the Wannsee Conference turns up dead. In Enigma, there’s a spy at Bletchley Park, the British codebreaking facility – but who is he, and for whom is he spying? In Ghost (filmed by Roman Polanski as The Ghost Writer), a Tony Blair-like former British Prime Minister turns out to have been such an ardent supporter of America’s Iraq War because he has in fact been a creature of the CIA since university days.
But Harris’s absolute bell-ringer for advisors is The Fear Index, in which a genius-level quant running a fabulously successful computer-based hedge fund begins experiencing very strange events – both in his personal life, and in the operations of his algorithm.
First, people and things start showing up in his life that he seems to have summoned, but of which he has no memory. Yet they know his interests, his secrets, his access codes at home and the office. And we know that he has a history of mental instability, going back to his academic days as a researcher into artificial intelligence. Is he finally cracking up?
Simultaneously, the ingenious algorithm at the heart of his fund somehow begins putting on its own trades. It seems to have developed a particular awareness of nascent catastrophe, and operates brilliantly on the short side, specializing in trading the VIX – the fear index.
As the main character goes ever more erratically around the bend, the algorithm starts not merely anticipating but quite possibly engineering negative events. And on the climactic day, with the fund short the world and long the VIX, there’s a spectacular meltdown on the New York Stock Exchange. It may seem a bit far-fetched, until you realize that Harris is recounting, minute by minute, the actual “flash crash” of May 6, 2010.
This is fascinating stuff, by a master storyteller. The Fear Index weaves together themes of the emotional price of genius, the threshold of artificial intelligence – and the fragility of the world’s trading systems. For our tribe, it’s a crackerjack – and totally guilt-free – summer read.
© 2016 Nick Murray. All rights reserved. Reprinted by permission. Nick reviews current books, articles and research findings in the “Resources” feature of his monthly newsletter, Nick Murray Interactive. To download the current sample issue, visit www.nickmurray.com, and click on “Newsletter.”