Harry Markowitz

The Father of Modern Portfolio Theory, and the use of diversification in Finance. Today, we can't imagine Finance without complicated mathematics in each page we read. At his time, his chose to apply mathematics to the Stock Market as the topic for his dissertation (I wish I could get a PhD for that today - unfortunately they will kick me out of the program if I suggest such a mammoth topic today).

Markowitz wanted to model risk in stock markets and used the central mathematical concept that defines most of Finance theory today: Maximize the average return of the portfolio, while minimizing the variance of the portfolio. This in effect lead to the famous theory of CAPM: All you need to consider while adding a stock to your portfolio is the amount of systematic risk that you are adding. If you are well-diversified then the idiosyncratic risk does not matter.

Through Markowitz, I see the ultimate dream of Krishna taught to the world of scientists and engineers. The Power of Diversification. For everything in Krishna's life and song is diversified. A God with 16,108 wives surely believed that marrying just one woman has too much risk attached to it and so kept adding wives to his portfolio till no single woman's idiosyncrasies could affect him. Only if all the woman got together to protest against him will he ever have a day in his life when he wants sex but cannot get it. The probability of that seems pretty low. That is the central message of Krishna's love life, and of Markowitz's portfolio management, the only difference being is that sex and a portfolio of women in my example, is replaced with consumption/returns/money and a portfolio of stocks. Maybe that is why we refer to Money as like a Wife in Hindu Mythology.

I deeply believe that Diversification is the central concept of Hindu Philosophy. After all, we are said to have 330 million gods. Irrespective of the trouble you are in, I am sure one of the 330 million might be able to help you as an incarnation of either your father or mother or sister or brother or friend or teacher or neighbor or co-worker or someone else. For everyone is an incarnation of God as well, according to the diversified Hindu.

If Hinduism is updated, I am sure that the writer will add the Torah, the Quran, the Bible, the texts of science and all other non-fiction texts to the concept of Hinduism. That only will diversify away the risk of the belief in the non-existence of God. For even if you study relativity, you are just worshiping God Einstein then; who in turn is just an incarnation of the All Mighty Allah. If you study diversification in finance, then you are just worshiping God Markowitz, who again is just an incarnation of God David.

With this dream of Krishna and Markowitz, that humans learn the benefits of diversification and pray to anything and everything that works in nature, I end my post with a prayer:

Om Namah Newtonaay
Om Namah Einsteinaay
Om Namah Markowitzaay
Om Namah Freudaay
Om Namah Nobelaay
Om Namah Gatesaay
Om Namah Buffetaay
Om Namah Jesusaay
Om Namah Mohammadaay
Om Namah Davidaay
Om Namah Shivaay

OM TAT SAT