Once a physicist: Nick Dunbar
Nick Dunbar is a financial journalist and editor of the Bloomberg Risk newsletter
What got you interested in physics?
I actually found it boring at first. Like a lot of kids, I was into science fiction and Star Wars, but physics lessons were all about things like inclined planes, and I wasn't particularly good at maths when I was younger. Then when I was about 16, I was given an old textbook that had advanced sections about thermodynamics and quantum mechanics where you had to solve partial-differential equations. One holiday, I was rather bored, so I started going through the book and something just clicked. I found I could understand it, and I suddenly realized you could do a lot more with this stuff than I had ever thought possible.
You went on to study physics at university
Yes, I got my BSc at the University of Manchester, then I did Part III of the Mathematical Tripos at Cambridge. That was an incredibly stimulating experience – I was sitting in lecture theatres with really clever people. But I realized that you have to be extremely good to contribute to theoretical physics at that level, so when I was offered a scholarship to Harvard I decided to focus instead on applying physics to climate change. I found it fascinating that you could model the Earth's climate and oceans as a physical system.
How did you get into financial journalism?
After a time I decided that a PhD wasn't for me – I was young and impatient and I was interested in writing, so I decided to leave Harvard and go into journalism. This was an extremely competitive area, with thousands of ambitious people trying to make their way in the industry every year. I found it quite a struggle. Then I ran into some old friends who had finished their PhDs and had ended up working in finance at places like Goldman Sachs and Morgan Stanley. They told me that what they were doing was all based on physics, and that I should be writing about it because no-one else was. So I got a job at a specialist publication, Risk magazine, and in 1999 I wrote my first book, Inventing Money, about the Long-Term Capital Management hedge fund, which had collapsed in 1998.
Did you ever want to work in finance yourself?
No, I've never liked banking as such. These days it's fashionable to be anti-banking because the banks have caused so many problems for the economy, and they are seen as a negative force. Back in the 1990s, that wasn't the case, but I always felt it wasn't for me. I thought that what society really needed was people who understood finance and could explain it.
What is the biggest story you have covered?
The most important scoop of my career came in 2003, when I found that quite a few people at Goldman Sachs were helping the Greek government conceal its debt ratios from the EU. I wrote a story about that, and it was published, but it was pretty much ignored until the whole Eurozone crisis blew up in the last couple of years.
What are you working on now?
Since 2011 I've been an editor at Bloomberg, a large organization that publishes news and is at the centre of gathering and distributing financial data. For me, this is like having a better train set to play with – I'm able to help people understand where the current financial system is going. I am also thinking of some book ideas, but it's too early to say what they are going to be about.
How has your background in physics helped your career?
Being numerate has helped a lot. In finance, large organizations or investors often try to put across their version of a story – they try to create some kind of reality. If you are able to understand financial contracts and risk, and to look at things in a statistical or mathematical way, you can go beyond the messages you are fed by public-relations people. The great moment for journalists is when someone says "no comment" because there is nothing else to say – they can't contradict you because you have uncovered the truth about what they are doing.
Do you think physicists in finance may have caused or exacerbated the financial crisis?
I think the financial system is seen to have become over-complex, and some of those complex products were used to help mislead investors. I wrote about this in my most recent book, The Devil's Derivatives. Part of that complexity was linked to the cult of modelling and the perception that these "quants", some of whom came from physics, had a handle on financial risk thanks to some clever models. That was a very dangerous idea, but you shouldn't necessarily blame the physicists – in a sense they were used by the bankers who wanted to make money and get their bonuses. Using models built by physicists was a means to that end.
This article appeared in the December 2012 issue of Physics World.