New England Pension Consultants’ Client ConferenceBoston, MassachusettsApril 6, 2000

IN THESE EXTRAORDINARY and volatile markets we are facing today, it's difficult for me to imagine more appropriate subjects than “Risk” and “Risk Control” to sound the keynote for an “Agenda for the Future”—the perennial theme, as I understand it, for this conference. It has been “Reward,” of course, that has been the keynote of the past 18 years, and most particularly for the past six years, during which the longest and strongest bull market in the history of the world has taken a new lease on life. Even as “it is always darkest before the dawn,” however, it may well always be brightest just before evening begins to fall. When reward is at its pinnacle, risk is near at hand.

Risk has been with us, well, forever. At the dawn of civilization in Rome during the second century B.C., for example, some of the characteristics of modern capitalism, financial markets, and speculation were already in place. Indeed, the term speculator—one who looks out for trouble—comes from ancient Rome. As Cato himself told us:

There must certainly be a vast Fund of Stupidity in Human Nature, else Men would not be caught as they are, a thousand times over, by the same Snare, and while they yet remember their past Misfortunes, go on to court and encourage the Causes to which they were owing, and which will again produce them.1

Although we cannot be certain ...

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