September 16, 2008 | 7:16 pm
Posted by Brad A. Greenberg
While Merrill Lynch was saved by BofA, anybody who worked for Lehman Brothers is now out of a job. Lehman, as you may have known, was started a century and a half ago by three Jewish brothers who had just immigrated from Bavaria.
Nextbook has a short story about how Henry, Emanuel and Mayer’s business survived the Civil War. The site also has a profile of the man behind the Minsky Moment—that point in a credit cycle when spiraling debt leads to a cash-flow crisis.
The man behind this theory was Hyman Minsky, whose economic outlook was shaped by a Jewish upbringing:
To my mind, Minsky’s sensitivity to a systemic risk that others could not see was rooted in his experience as a Jew in the twentieth century. That he was not alone in this only strengthens the point. The greatest authority on stock market investing is generally thought to be Benjamin Graham who, as the saying goes, taught Warren Buffet everything he knows. Graham taught at Columbia University and Buffet was his student. The professor came from an Orthodox Jewish family whose original name was Grossbaum, and in his memoirs Graham wrote, “My Jewish birth has brought me only small disadvantages, and that these have been more than offset by certain gifts of mind and personality.” If those Jewish gifts are apparent anywhere, they are in the single most important statement in Graham’s landmark book, The Intelligent Investor. Near the book’s end, Graham sounds a Minsky-esque note on the prevalence of risk and the attendant need for safety. “The secret of sound investment,” he wrote, can be expressed in three words: “MARGIN OF SAFETY” (capitalization his).
Other Jewish economists have shown similar sensitivity to the prevalence of risk. Harry Markowitz, born in Chicago in 1927, won the Nobel Prize in economics for his Modern Portfolio Theory of investing. His key insight, according to the profile on his web page, was to realize that an earlier theory “lacks an analysis of the impact of risk. This insight led to the development of his seminal theory of portfolio allocation under uncertainty.” And today, the most prominent economist to laud Minsky and predict economic catastrophe is Nouriel Roubini, a professor of economics at New York University. A month ago, a year after the Minsky Moment was first mentioned, The New York Times ran a major feature on Roubini, who admitted that he has “more concerns about potential risks and vulnerabilities than most people.” Roubini is a Turkish-Iranian-Israeli-Italian Jew whose peripatetic childhood amounted to a crash course in instability. His life as a “global nomad” is easily seen as a continuation of an archetypal Jewish experience.
And so it seems that uncertainty, risk, and the need for safety have been common themes in the work of no fewer than four prominent Jewish economists (a group led by Minsky, perhaps the most famous risk-oriented economist in the world).
The rest of Nextbook’s article on Minsky is here.
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