Of Butterfly Wings, Earthquakes and Market Movements – An interview with Richard Edwards of HED Capital – Part 1

Posted in Whitepaper on September 4th, 2008
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This article is written by Francis Goldwyn, Managing Director, Quorum Associates LLC

I believe it was in January 2000 when I first met Richard Edwards. It was a cold and wet evening in London and I was introduced to this remarkable person by a mutual friend. As the bell to the flat rang, my friend said “I’m going to introduce you a friend of mine, but I do have to warn you he seems to me a bit eccentric. I also have to admit that I have no idea what he does or talks about most of the time, but I think you will like him. He is very entertaining.” With that brief introduction into my world bounded one of the more exceptional people I have ever met.

Richard made an entrance into the living room that would have made Douglas Fairbanks proud. Surveying the empty room as though it was full of important people he quickly sorted through those of little interest until he came to me. With a mischievous twinkle in his intelligent eyes and a smile, he looked at me, then at my friend, and while thrusting his hand out to shake mine said, “So I finally meet the American!" Turning back to me, smiling broadly, he said in his best John Wayne voice, “Howdy, Pilgrim!”

The first meeting with Richard was to talk about Quorum Associates’ approach to executive search. We laughed a lot, talked high-brow strategy, and Richard gave me intelligent and thoughtful observations and advice. Our second meeting was over dinner, and now it was my turn. “So Richard, what do you do?”

“Well” he responded, “I am working on an application of nonlinear mathematics to financial markets.” At this he paused to see if my eyes glazed over with either ignorance or boredom. “Oh!” I responded, “Chaos theory! Really, tell me more.” Over the last eight years, Richard has been patiently educating me on the application of new science to the study of markets.

Richard read Law and Mathematics at Trinity College, Cambridge. He began life as a trader, trading commodities and what ever else struck his eclectic fancy. At one point in his career he was the number one commodity trading advisor in the world. He has lived and worked in London and Kuwait. He is married to a terrific woman and has two children, who repeatedly prove the aphorism, “The leaf does not fall far from the tree.”

Before we begin this interview, I have a few comments. First, some of the ideas Richard talks about are complex and somewhat counterintuitive. To the extent possible, I will try to either give a much abbreviated summary of the idea or refer to a good source. Second, I am a lay person when it comes to mathematics and how markets behave, so I am going to ask questions and interrupt Richard when he uses a term or explains an idea that I do not understand. Third, I hope everyone will find Richard entertaining as well as interesting.

 

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