Dr. Rick Bookstaber - The Psychology of Risk

This week on Standard Deviations with Dr. Daniel Crosby, Dr. Crosby speaks with Dr. Rick Bookstaber. Dr. Bookstaber had chief risk officer roles at Morgan Stanley, Salomon, Bridgewater, and the University of California pension; worked at the U.S. Treasury post-2008; and wrote The End of Theory (Princeton, 2017) and A Demon of Our Own Design. He recently founded Fabric RQ, (fabricrisk.com) focused on risk management for financial advisors. This area has been underserved in terms of risk tools, and he wants to change that.

Outside of work you can find him at the Renzo Gracie Brazilian Jiu Jitsu Academy in midtown NYC, where I've been training for 25 years, and am a black belt.

Tune in to hear:

- How does Dr. Bookstaber think about and define risk in the most practical terms possible?

- Does the way people like us talk about risk differ in an overly academic way from how people in the street think about it?

- Which of the sort of commonly discussed current risks seem legitimate to Dr. Bookstaber and which might loom larger in peoples’ minds than they should?

- Why aren’t geopolitical conflicts  more catastrophic to the market than they are with how intertwined the global economy is?

- How should we think about a world where you have to take risks to keep up with inflation but where asset prices seem stretched by some measures?

- Do we now live in a world that’s high-risk in theory but where governments and regulatory bodies keep the scales from tipping too far in a catastrophic direction? Were the FEDs actions during Covid-19 a singular response for a singular time in history?

- How can we be skilled risk managers when we have an asymmetry in the way we weight pessimistic vs. optimistic outcomes?

https://fabricrisk.com

https://www.amazon.com/End-Theory-Financial-Economics-Interaction/dp/0691169012

Compliance Code: 0570-OAS-4/5/2022