Neuroscientists have come up with a mathematical equation that may help predict calamities such as financial crashes in economic systems and epileptic seizures in the brain.
Put mathematically, the complexity now grows non-linearly. This means, as banks get larger, the ability to risk-manage the assets grows much smaller and more uncertain, ultimately endangering the viability of the business.
The richness of math is in the abstraction. It allows you to take a step back from reality, and that gives us the freedom to think the way we want. Mathematicians display a great deal of imagination.
His method was adopted by everybody from bond investors and Wall Street banks to ratings agencies and regulators. And it became so deeply entrenched—and was making people so much money—that warnings about its limitations were largely ignored.