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Polishing the Dimon Principle

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Zweig cautions against putting too much faith in experts, or quant models such as "value at risk" or VAR, used by JP Morgan to assess risk. He cites physicist Richard Feynmann: "You must not fool yourself- and you are the easiest person to fool." And the address Feynmann gave at the 1974 commencement of Caltech, in which he said avoid the "cargo cult" mentality of Pacific Islanders who believed that just by standing on runways they could make plane full of food and clothing land, similiar to the ways they did after World War II. Exaggerated returns of over 50% call for more vigilance to look at risks of failure.

Jason Zweig on risks and investing

05/11/2012

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