I’m currently reading Mandebrot’s “The misbehavior of markets” which in time I will write a review of, but about 100 pages in I have to say I’m pretty tired of him stating every couple of pages how he discovered fat tails in market prices forty years ago, and has known the whole time that Modern Portfolio Theory, Black-Scholes etc was based on the wrong assumption of a normal distribution all that time. There appears to be some interesting stuff in the book, and there is no doubt some of the basic assumptions of finance theory need a look at and possibly re-grounding, but its not like no one in the past forty years hasn’t been dealing with this.
Even though it’s very much ad hoc, markets already attempt to account for the fact that Black-Scholes is flawed, by pricing in an implied volatility smile. Similarly fat tails have been used in risk models pretty widely by now. Neither are completely satisfactory but are both clear signs that market participants at least realised the flaws in the models being used, and have tried to adjust accordingly while retaining some framework that actually lets you get on with things. Certainly this is not the impression you get from the early parts of this book where it seems keen to show that Mandelbrot is virtually alone in appreciating the problems.
There is a maxim in creative writing that an author should “show not tell” as in you reveal the abstract qualities of personality etc by showing the details not telling the abstractions directly. It would be well for non-fiction authors to realise that they will come off much better by showing us how smart they are by revealing the genius of their arguments and discoveries rather than by telling us how smart they are every couple of pages.