Explaining Quants' August Meltdown

This essay does a nice job of explaining what happened to quant funds in August and why some were crushed while others managed to survive.

Schumpeter on Academics

"The layman thinks he knows what a professor is. However, this term denotes a group of people who differ widely in type, function, and mentality. There is the academic administrator; the university politician; the teacher in the sense of a man who imparts current knowledge; the teacher in the sense of a man who imparts distinctive doctrines or methods; the scholar in the sense implied by 'learnedness'; the organizer of research; the research worker whose strong point is ideas; the research worker whose strong point is skillful technique, experimentation and its counterparts in the social sciences. And all of those--and others--are very different chaps and hardly ever fully understand and appreciate one another. Yet it takes all of them to make a modern university and it takes recognition of all these types and the way they cooperate or fail to cooperate in order to understand what a university is and how it works. And he who insists on merging them into a unitary professorial type and leaves it at that will obliterate not only secondary details but essentials."

Possible Classic Papers

Alchian, A. 1950. Uncertainty, Evolution and Economic Theory. JPE 58: 211-221.

Friedman, M., and Savage, L. J. The Utility Analysis of Choices Involving Risk. JPE 56(4): 279-304.