Sunday, June 04, 2006

Insights on Love from an Outside Observer

As I walked past the TV on my way to bed, an exchange between George Clooney and Julia Roberts caught my attention.

Clooney, as Danny Ocean: Does he make you laugh?
Roberts, as Tess: He doesn't make me cry.


Some years ago, (and you're going to have to forgive me for not getting all the facts straight, but since I doubt anyone reading my blog is an avid financial history buff, you can just take what I say in it's essence), Merton, Black and Scholes came up with a mathematical formula to completely eliminate risk. In 1993, Merton, Scholes and another guy (Meriweather, Black had died) set up a hedge fund to do this very thing, and the very minimum buy-in (apparently I've been playing too much poker lately because I can't think of the word to buy part of a fund) was something like $100,000.

So, they had this very lucrative fund, and for quite some time, the fund had huge positive returns. Merton, Meriweather and Scholes had eliminated risk in the market.

To make a long (and probably boring) story short, around 2000, this trillion dollar fund was on the verge of collapse. The Federal Reserve had to bail the fund out so it wouldn't cause complete financial collapse the world over.

Why did it fail? In short, it is impossible to completely eliminate risk.


So, what's more important? That we laugh or that we don't cry?

It is impossible to have a risk-free relationship. We can never structure it so that we always laugh and never cry. There is no formula to eliminate heartache. But perhaps that is the risk we take in order to experience love.


Anyway, not sure where that came from, but I found the quote from Ocean's Eleven vastly intriguing.

And, wow, tonight's a double header.

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