by Rick Nason, PhD, CFA
Partner
RSD Solutions Inc.
As I write this I am sitting in a great pub (Churchill’s) in my favorite city (Saint John, New Brunswick). I was born in Saint John (the Saint is never abbreviated – we leave that to Newfoundlanders and Quebecers). Like a really old tennis shoe, Saint John does not have a lot going for it on paper. The former industrial heart of the Maritimes has not quite kept up (although it is racing faster and further ahead in many ways) with some of the latest styles. Also, to be blunt it stinks sometimes – but a lot less than it used to. Having said all of that there is nothing that fits quite as well, or feels quite as comfortable as an old pair of sneakers. Saint John is like that. It feels very comfortable. Although it does not have a Nobu, or a permanent Cirque du Soliel, the city does have some of the nicest and most sincere people you will find on the planet. If you are in the Maritimes, make sure you visit Saint John – it truly is a wonderful place.
Back to my pub thoughts. Although I am not much of a drinker, I really do like a great Scotch (Laphroaig 30 year is my favorite, although the 15 year is the best value in Scotch period – also check out Glen Breton from Cape Breton – best Scotch for those who prefer a smoother drink) , or a great pint (Moosehead Ale – not the lager though).
Sitting in a pub with a good drink is a great way to get the ole cranium going. When I was a graduate student in Physics we spent a lot of time in pubs, and as graduate students we spent a lot of time thinking, arguing and doing physics in pubs. One of our favorite pub questions was; “If you could go back X years, what physics paper, textbook, or concept would you take back?” The point of the question of course was to get the conversation (arguments) going over what were the most important concepts in physics that if they had been known earlier would have helped the development of the field the most. The question always led to lots of discussion, and we all dramatically improved our knowledge of physics and our knowledge of the history of physics. Each week the “X years” was changed so we would have to think about different eras and different contexts for the question. Great fun! (Did I mention that we were physics students, and thus like the characters on the Big Bang Theory we really had no other social life or even prospects of a social life!?)
Now an interesting thought experiment (that I plan to do some academic research and development on – so don’t steal my idea – I need the publication for P&T) is to transfer the question to the field of finance and risk management. Namely, if you were transported back X years, what concept from Finance or Risk Management would you take back with you to help the development of the field? In physics we had no shortage of suggestions – whether we were going back 5, 10, 50, 150 or 500 years.
What would you take back in Finance or Risk Management? VAR? Markowitz Portfolios? CAPM? Black-Scholes Option Pricing Formula? Anything from Basle? (just accidentally spit out some of my beer laughing at that one!)
What would you take back 5 years? (Gaussian Copulas?) What about 10 years? (Income Trust Structures?) What about 50 years? (?)
Sometimes I miss physics, but at least I get to go back to Saint John every few months.
