This was the caption on an old Nike poster. It's special because it used to hang on the wall in Mr. Fischer Black's office at Goldman Sachs. The following is a small memoir of him.
As one the first generation of "Quants", Fischer stood out for his famous Black-Scholes equations. But for me, he stood out because he seems to have a clear view of what's important in this field. Professor Emanuel Derman, who used to work with Fischer, describes in his book "My Life as A Quant" what Fischer is like when they were developing the BDT Model: "Fischer wanted the paper we were writing to be clear, accurate and yet not overly mathematical." Having read the paper, I was startled by how clear and easy to read the paper was, given that it was written by top quants and I am by no means mathematically sharp. This trait of Fischer could be found if we compare Black and Scholes's paper on option pricing and Merton's. Fischer's paper is 18 pages with 27 equations, while Merton's paper is 43 pages long with more than 62 equations. The other difference is their tones: Fischer's paper feels more like a conversation, while Merton's more like a serious teaching. In fact, Fischer even wrote a paper called "Noise" without a single equation.
Fischer's research style was best described by Professor Derman that "His approach seemed to me to consist of unafraid hard thinking, intuition, and no great reliance on advanced mathematics...He gave you the sense (perhaps misguided) that you could discover deep truths with whatever skills you had, too, if you were willing to think hard... and he was tenacious in trying to attain insight before resorting to mathematics." Derman also wrote "Fischer preferred reality to elegance in modeling."
Fischer helped explain lots of things that confused me. Being surrounded by equations over the past 18 months, I feel the whole quantitative finance community, as a subcategory in finance industry, seem very eager to identify itself with a more nerdy, geeky and scholarly self-image, an image never before could exist on Wall Street. Mathematical skills gradually become an honored badge, a certificate of capacity and a source of pride within this community. I have never been fond of this culture, because I always see math skills as only a tool in understanding capital markets. Math is neither something to be worshiped nor something to be disdained. It's a tool. And trying to identify myself with this tool for a sense of belonging is unacceptable. After all, finance is about people. Markets are essentially crowd activities with lots of noise. “The effects of noise on the world, and on our views of the world, are profound”, wrote Fischer, “…Most generally, noise makes it very difficult to test either practical or academic theories about the way that financial or economic markets work.” However, the respect for this complexity and humility in front of markets is seldom mentioned in my surroundings.
There is one detail I remembered very clearly. When asked is it okay to call the model "Black-Scholes-Merton" instead of "Black-Scholes", "Fischer replied with a message saying it was OK", Derman wrote, "...because it was Merton who had come up with the replication argument for valuing an option. Then he added...that 'that's the part that many people think it's the most important.'"
P.S. The following video is from Professor Derman. Having worked closely with Fischer, he shares some of the same values as Fischer’s. I think what he is trying to convey is that, math is important, but it could only get you so far. Innovation can only come from deep thinking.
