170 THE BiG DROP
way to understand and manage risk and to foresee market
collapses. I began to lecture and write on the topic includ-
ing several papers that were published in technical journals.
I built systems with partners that used complexity theory and
related disciplines to identify geopolitical events in capital
markets before those events were known to the public.
Finally I received invitations to teach and consult at
some of the leading universities and laboratories involved in
complexity theory including The Johns Hopkins University,
Northwestern University, The Los Alamos National Laboratory,
Singularity University and the Applied Physics Laboratory.
In these venues, I continually promoted the idea of inter-
disciplinary efforts to solve the deepest mysteries of capital
markets. I knew that no one field had all the answers, but a
combination of expertise from various fields might produce
insights and methods that could advance the art of financial
risk management.
I proposed that a team consisting of physicists, computer
modelers, applied mathematicians, lawyers, economists, soci-
ologists and others could refine the theoretical models that I
and others had developed, and could suggest a program of
empirical research and experimentation to validate the theory.
These proposals were greeted warmly by the scientists
with whom I worked, but were rejected and ignored by the
economists. Invariably top economists took the view that they
had nothing to learn from physics and that the standard eco-
nomic and finance models were a good explanation of securi-
ties prices and capital markets dynamics.
Whenever prominent economists were confronted with a
“seven-sigma” market event they dismissed it as an “outlier”
and tweaked their models slightly without ever recognizing
the fact that their models didn’t work at all.
Physicists had a different problem. They wanted to col-
laborate on economic problems, but were not financial mar-