Red-Blooded Risk: The Secret History of Wall Street

1987

In the end, none of it made any difference. All of us were wiped out on October 19, 1987. That was the day the stock market fell nearly 25 percent, far more than it had ever fallen in one day in the past. But that was not our problem. All of us were prepared for large stock market declines. We didn't expect to see 25 percent in a day, but we knew it was possible over longer periods, and we knew financial markets sometimes move two or three times as much as they ever have in the past. It was a host of other changes that happened simultaneously that got us.

Our reaction is the subject of the next chapter. I want to end this one by conveying the sense of the times. By October 1987, rocket scientists had been on Wall Street for six or seven years. We had started as brash outsiders doing things no one had ever heard of, trying to beat the Street. We had no idea if any of this would pan out. Then we had a run of uninterrupted success. Remember, we were in our twenties. We may have had more life experience of swings of fortune than some people twice our age, but it's still hard not to let success go to your head. And I don't mean just financial success. In 1980 any form of mathematics was less likely to be understood by the average Wall Streeter than !Xoon click language. By 1987, everyone on Wall Street knew there were quants and some even had a vague idea of what we did. We were a little bit cool, and we were people who had never been remotely cool before. It was even possible ...