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The (Mis)behavior of Markets

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The (Mis)behavior of Markets

A Fractal View of Risk, Ruin, and Reward

Basic Books,

15 min read
10 take-aways
Audio & text

What's inside?

Just how risky is the market? Before risking your bottom line on orthodox thinking, read these unconventional heresies.

Editorial Rating



  • Innovative
  • Applicable


Finance is a difficult and recondite subject, perhaps second only to mathematics in its inability to inspire excitement in most readers. Yet Benoit Mandelbrot and Richard L. Hudson, co-authors of this book, manage to turn financial math into a great yarn, full of interesting characters and dramatic events. Some of what the book actually says will be old news to market professionals, but it says it quite interestingly. Mandelbrot did some of his most important financial work in the 1960s, but his ideas about leptokurtosis (which deals with the shape of probability functions), fractals (which deal with repetitive patterns) and such have received quite a bit of subsequent attention in trading rooms and in the finance departments of major universities. So, perhaps, it is merely a dramatic device that this book presents Mandelbrot as a solitary, clear-thinking prophet struggling against a blind and hostile economic orthodoxy. That presentation certainly succeeds as drama – the story races along and the reader keeps rooting harder and harder for Mandelbrot to win. The co-authors have spun an excellent saga that says important things in a new way. getAbstract thinks every investor, every business journalist and every financial professional ought to read this book.


The Maverick

Benoit Mandelbrot likes to relate the story of how his father, a prisoner in WWII France, managed to cheat death. When Resistance fighters attacked the camp and opened the gates, most of the prisoners started down the road toward Limoges. Mandelbrot's father was canny enough to see the stupidity of staying with the group. He peeled off alone and made his way through the thick woods. Not long after, a German Stuka bomber strafed the easy target presented by a group of closely packed escapees on the open highway.

Mandelbrot's family had emigrated from Poland to France in 1936 to escape the gathering storm of war and oppression. When the Vichy government made life tough for Jews in France, he hid in Lyons, where sympathetic benefactors provided him with false documents and ration cards. During this period, hiding in a school, he discovered his extraordinary mathematical intuition – an ability to see immediately the truths that others could only reach after long struggle and elaborate proof.

Clearly, Mandelbrot's childhood prepared him to accept the possibility of the unthinkable – even, under certain circumstances, its probability. His intuitive genius...

About the Authors

Benoit Mandelbrot, the inventor of fractal geometry, is Sterling Professor of Mathematical Sciences at Yale University and a Fellow Emeritus at IBM’s Thomas J. Watson Laboratory. Richard L. Hudson is former managing editor of The Wall Street Journal’s European edition.

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