In Memoriam: Dr. Harry Markowitz
I’d like to take a moment to remember and honor the passing of Dr. Harry Markowitz who died last Thursday. Among the many Economists I admire, Harry holds a special place. Most years since I completed my graduate studies at the University of Chicago, I’ve reread at least one of Harry’s papers. I’ve probably read his groundbreaking 1952 paper (the paper that started it all) more than a dozen times.
In the conclusion of that Journal of Finance paper, “Portfolio Selection”, Harry noted the following:
“I believe better methods [of estimating expected return and expected risk], which consider more information, can be found. I believe that what is needed is essentially a ‘probabilistic’ reformulation of security analysis. I will not pursue this subject here, for this is ‘another story’. It is a story of which I have read only the first page of the first chapter.”
What a bold call to action to future investment managers! Among the many insights packed into this groundbreaking paper’s svelte 15 pages, those four sentences have given me motivation every day since I first read them to learn more and to robustly quantify more. It is a call to action to embrace statistical learning and use more data to achieve better outcomes. Thank you, Harry for the inspiration!
Below are a few links that summarize the arch of Harry’s many contributions to our field of investment management, including Harry’s fascinating autobiography penned for the Nobel Committee. For good measure, I’ve included Gene Fama’s Brief History of Finance which never fails to give me a good laugh when I read this part: “Rumor has it that at the time [Harry] wrote his [1952] thesis, the people in the [Economics] department said, ‘This is nothing.’ ”
Thank you, Dr. Markowitz. May you rest in peace.
— David Marra
Links:
New York Times Obituary:
“After submitting his landmark dissertation, Dr. Markowitz took a job at RAND and was fully confident that “I know this stuff cold” when he returned to Chicago in 1955 to defend it. Within a few minutes, however, Professor Friedman told him that while he could find no mistakes, the topic was extremely novel. ‘We cannot award you a Ph.D. in economics for a dissertation that is not economics,’ he said.
At this point, Dr. Markowitz recounted, ‘my palms began to sweat’ and he was sent into a hallway, where he waited for about five minutes. Finally, a panel member emerged and said, ‘Congratulations, Dr. Markowitz.’ Dr. Markowitz insisted that he had not suspected the joke.” https://www.nytimes.com/2023/06/25/obituaries/harry-m-markowitz-dead.html
Autobiography Harry penned for the Nobel Committee:
“In high school I also began to read original works of serious philosophers. I was particularly struck by David Hume’s argument that, though we release a ball a thousand times, and each time, it falls to the floor, we do not have a necessary proof that it will fall the thousand-and-first time. I also read The Origin of Species and was moved by Darwin’s marshaling of facts and careful consideration of possible objections. From high school, I entered the University of Chicago and took its two-year Bachelor’s program which emphasized the reading of original materials where possible. Everything in the program was interesting, but I was especially interested in the philosophers we read in a course called OII: Observation, Interpretation and Integration.” https://www.nobelprize.org/prizes/economic-sciences/1990/markowitz/biographical/
The 1990 Nobel Prize in Economics Press Release:
“The first pioneering contribution in the field of financial economics was made in the 1950s by Harry Markowitz who developed a theory for households’ and firms’ allocation of financial assets under uncertainty, the so-called theory of portfolio choice. This theory analyzes how wealth can be optimally invested in assets which differ in regard to their expected return and risk, and thereby also how risks can be reduced.” https://www.nobelprize.org/prizes/economic-sciences/1990/press-release/
Gene Fama’s: A Brief History of Finance and my Life at Chicago which mentions Harry:
“Let me tell you a bit about the evolution of finance. Finance has its birth in 1952 with the PhD thesis of Harry Markowitz on portfolio theory that he did in the Department of Economics. Harry got the Nobel Prize in 1990. Rumor has it that at the time he wrote his thesis, the people in the department said, “This is nothing.” That’s how perspicacious they were.” https://www.chicagobooth.edu/review/a-brief-history-of-finance
