From the Age of Frankenstein to the Age of the Cockroach

I finished reading A Demon of Our Own Design. The last chapters venture into some profound and intriguing philosophical considerations. I don't quite agree with everything RB says, and I'll probably get back to that in future posts, but there are copious servings of food for thought there.

In conclusion, Doctor Bookstaber's prescription for curing or at least improving our current accident-prone financial system boils down to this: "Simpler financial instruments and less leverage". This will usher in a less finely-tuned system but it will be coarse and robust enough to survive unexpected adverse change.

Like the lowly cockroach, it won't be the most advanced and sophisticated (financial) organism out there but a least it won't be on the brink of annihilation each time a radical change in the (financial) environment comes along.

We lived in an era of wide-eyed innovation in a young industry (quantitative finance is around 20 years old) where the mantra was "let's try anything even it might blow up in our faces". The financial industry may now be entering a more mature phase, where tinkering away at the risk of producing potential financial Frankensteins is no longer deemed acceptable. 

The big question obviously is: is it even possible to set back the clock on innovation? And come to think of it, picking the cockroach as the ultimate basic, no-nonsense, master-of-survival creature might have been slightly misguided. It turns out there are 4,000 species of cockroach, some extremely advanced and, yes, complex.