David Bailey introduced me to Jon in the Summer of 2013. By then David and I had published together 5 papers in computational finance and math finance. Those papers dealt mostly with convex optimization and performance metrics. They were well received and much read, however one could consider them rather mainstream.
For our next project, I suggested to David that we worked on a rather polemic question: Are most finance’s theories false discoveries? Our thesis was that the statistical framework used to test hypothesis in economics and finance promotes false positives. A similar argument in the medical science had led to a lot of in-fight within that discipline a few years earlier. We thought that some clean-up was duly needed in finance as well, particularly when one witnesses outrageous promises of future returns in the press and TV channels.
David suggested that we got Jon involved. We pitched him the idea, and to my amazement, Jon accepted almost immediately. This was a foreign topic to him (finance, investments), but he grasped the key issue with a clarity that was astounding. Not only that, Jon realized that this fight was one that was worth the reputational risk. Please understand, academic controversies in finance are particularly dangerous. Many people make fortunes by persuading others to invest on a bad idea. Jon realized that small investors were being targeted by unscrupulous people posing as bona fide mathematicians. Nevertheless, he put his shining armor on and charged against the cannons.
After about 6 months, we had a good draft ready. Jon would not go quietly into this fight, and proposed this “on your face” title: Pseudo-mathematics and financial charlatanism (which even Dave and I worried might be a bit too strong). The paper was accepted and published in the Notices of the American Mathematical Society, followed by mentions in every major financial newspaper: The Financial Times, the Wall Street Journal, Bloomberg, Barrons, … you name it. In Jon’s first math finance paper, he achieved what 99% of academics dream to achieve at the summit of their careers: He made a real difference. Following this paper, the President of the American Finance Association published another paper acknowledging that most discoveries in financial economics are likely wrong.
Terrific, isn’t it? Well, Jon was just getting started… Right after that, together with David and I, he chose the name for the think tank that would make these ideas accessible: MAFFIA: Mathematicians Against Fraudulent Financial and Investment Advice (which again David and I worried might be too strong, but Jon wisely insisted that we use). Jon even designed some T-shirts that for some reason we didn’t end up ordering. After that, we set up a blog, with periodic updates, reminding people that the fraudsters were still misusing math to trick people into losing investments.
I think Jon really enjoyed this project because it helped normal folks. People who save all their lives to enjoy a retirement were being ripped off. Mathematics can feel sometimes like an exercise of, by and for the intellectual elites, and here Jon was giving back to the general public. People saw that a first class mathematician was calling out the fakers, telling them: “I know what you are doing. I do not fear your financial power and influence. What you are doing is scientific fraud, and I will expose it as such.” Over the next couple of years, we ended up publishing 6 papers that have been read by tens of thousands of future Finance professionals. Again, a lion’s share of the credit goes to Jon for courageously encouraging us all to say what needed to be said.
Jon was a brave man. Many will miss his incredible intellect and amazing work ethic. I will particularly miss that Quixotic spirit that I found in Jon: That willingness “to right the unrightable wrong.” [Marcos Lopez de Prado, http://www.QuantResearch.org]