Phil Fernbach

That's absolutely right. And I think it happens at more than one level. So if you think about a pension fund manager who knows what a derivative is, but isn't a super expert in a derivative, he's relying on the people who do the analysis of the derivatives to kind of think, oh, this is potentially like a good investment vehicle for my portfolio. He's not thinking in terms

That's absolutely right. And I think it happens at more than one level. So if you think about a pension fund manager who knows what a derivative is, but isn't a super expert in a derivative, he's relying on the people who do the analysis of the derivatives to kind of think, oh, this is potentially like a good investment vehicle for my portfolio. He's not thinking in terms

super careful detail about what the risk profile is of that instrument. And maybe he or she should be, but they obviously didn't. But it also occurs at another level, which is the person who actually is the super expert on the derivative, even that person, it turned out, didn't understand completely how these things were going to behave.

super careful detail about what the risk profile is of that instrument. And maybe he or she should be, but they obviously didn't. But it also occurs at another level, which is the person who actually is the super expert on the derivative, even that person, it turned out, didn't understand completely how these things were going to behave.

super careful detail about what the risk profile is of that instrument. And maybe he or she should be, but they obviously didn't. But it also occurs at another level, which is the person who actually is the super expert on the derivative, even that person, it turned out, didn't understand completely how these things were going to behave.

So the big banks who were developing these instruments and selling them they would have a mathematical model that would determine exactly how these things would behave. The problem is that those mathematical models work really well most of the time, like an airplane that's highly automated, but they actually break down in very unusual situations, a black swan event, so to speak.

So the big banks who were developing these instruments and selling them they would have a mathematical model that would determine exactly how these things would behave. The problem is that those mathematical models work really well most of the time, like an airplane that's highly automated, but they actually break down in very unusual situations, a black swan event, so to speak.

So the big banks who were developing these instruments and selling them they would have a mathematical model that would determine exactly how these things would behave. The problem is that those mathematical models work really well most of the time, like an airplane that's highly automated, but they actually break down in very unusual situations, a black swan event, so to speak.

And that's exactly what happened. So the models failed. And so the super experts on derivatives even they completely misunderstood the amount of risk that was present in these products. So it was across the entire financial system that there was these sort of miscalibrations in understanding.

And that's exactly what happened. So the models failed. And so the super experts on derivatives even they completely misunderstood the amount of risk that was present in these products. So it was across the entire financial system that there was these sort of miscalibrations in understanding.

And that's exactly what happened. So the models failed. And so the super experts on derivatives even they completely misunderstood the amount of risk that was present in these products. So it was across the entire financial system that there was these sort of miscalibrations in understanding.

And there was this cascade effect that started with, you know, some slight decreases in the price of housing and then just cascaded into this massive crash and devastation that not only affected the United States, but affected... countries all over the world because the entire global system is so connected nowadays.

And there was this cascade effect that started with, you know, some slight decreases in the price of housing and then just cascaded into this massive crash and devastation that not only affected the United States, but affected... countries all over the world because the entire global system is so connected nowadays.

And there was this cascade effect that started with, you know, some slight decreases in the price of housing and then just cascaded into this massive crash and devastation that not only affected the United States, but affected... countries all over the world because the entire global system is so connected nowadays.

That is a paradox, and that is the paradox at the heart of humankind, I think. On the one hand, we have visited the moon and created incredible artificial intelligence and all these other sort of almost magical abilities. On the other hand, everybody knows that people can engage in behavior that's incredibly ignorant and extreme and foolish.

That is a paradox, and that is the paradox at the heart of humankind, I think. On the one hand, we have visited the moon and created incredible artificial intelligence and all these other sort of almost magical abilities. On the other hand, everybody knows that people can engage in behavior that's incredibly ignorant and extreme and foolish.

That is a paradox, and that is the paradox at the heart of humankind, I think. On the one hand, we have visited the moon and created incredible artificial intelligence and all these other sort of almost magical abilities. On the other hand, everybody knows that people can engage in behavior that's incredibly ignorant and extreme and foolish.

And we've all done it ourselves and we've all seen it in others.

And we've all done it ourselves and we've all seen it in others.

And we've all done it ourselves and we've all seen it in others.