By Simon Johnson
Look forward. The holy grail of any serious financial market player must now be: Become Too Big To Fail. You can do it is as a megabank – this part is obvious. But you can also do it as a hedge fund or some other lightly regulated pool of capital – this, after all, is the lesson of Long Term Capital Management that has never been addressed.
And quantitative trading, while in principle just one approach to investing or even only set of tools, greatly increases the complexity and opaqueness of markets – further allowing you to become big (in any future sense) relative to the political and economic system, and moving us closer to a more complete version of the stock market shut-down we saw on May 6.
For more on this, see my review of Michael Lewis’s The Big Short and Scott Patterson’s The Quants – now in The New Republic’s on-line book section.