Author Diana B. Henriques discusses the lasting lessons from Black Monday – the biggest drop in Wall Street history – and the relevance in understanding today’s markets, along with insights from her extensive reporting on the Bernie Madoff scandal.
On the lasting lessons of Black Monday: “Even in good times, markets are fragile because they rest on human emotion, and we know a lot more about behavioral economics [and] cognitive function now than we did in 1987. In 1987, everyone was still enthralled with the rational market theory, the efficient market hypothesis, and it utterly failed to explain 1987. But now we're, I hope, smarter about the role that human passion plays in markets...and human nature is what produced Black Monday.”
On what she learned about Bernie Madoff: “It became clear to me that this is a man with a pathological fear of failure. It is as essential as oxygen to him that he be admired, that he be seen as a success.”