In Pursuit of the Perfect Portfolio by Andrew W. Lo & Stephen R. Foerster

Author:Andrew W. Lo & Stephen R. Foerster [Lo, Andrew W. & Foerster, Stephen R.]
Language: eng
Format: epub
Published: 2021-07-15T00:00:00+00:00

From Rugs to Riches

Leibowitz was born in 1936 in York, Pennsylvania, once known as the White Rose City.2 York was then a small factory town surrounded by Amish farms. The famous York Peppermint Pattie was created in York in 1940 by the York Cone Company (and now produced by the Hershey Company).3 His parents ran a clothing store, the first retailer in the region to introduce an installment purchase plan. “We lived in modest circumstances,” he recalled. “And one thing that was very pervasive, is the attitude that you didn’t waste anything. You didn’t waste food, you didn’t waste your effort, you didn’t waste people’s time, you didn’t waste money. And, so that kind of frugal economical background I think played a role in my being interested in trying to find ways to make things efficient, and make them more economic in the efficiency sense of the word.”4

After Leibowitz’s father passed away in 1940, the family moved to Los Angeles, then to Baltimore, and then to Oak Ridge, Tennessee, where his older sister gained employment at the Atomic Energy Commission as a physicist. Leibowitz attended high school in Oak Ridge, and in 1950, he won the Junior Chess Championship of Tennessee. The next year, at age fifteen, he won a prestigious Ford Foundation scholarship to the University of Chicago.

At the University of Chicago, Leibowitz studied physics as well as the liberal arts, obtaining his bachelor of arts in 1955 and his master of science in physics the next year, at the young age of twenty. One of his physics classmates was Carl Sagan, who became a Pulitzer Prize–winning science popularizer and planetary scientist and whose Cosmos series became the most-watched show in public television history.5 Although not a student in business or economics, Leibowitz became friends with business school professor James Lorie, who would go on to establish the Center for Research in Security Prices. One of Leibowitz’s influential physics instructors, Lawrence Friedman, left Chicago for the Case Institute of Technology in Cleveland to study an emerging field known as operations research, which employed mathematical techniques to improve business and military operations. Leibowitz’s fascination with the practical nature of these problems would later prompt him to leave the study of physics. “I’d always been interested in mathematics, and particularly in applying mathematics to kind of the problems around me.”6

With his newfound interest in operations research, Leibowitz headed to San Diego, where he obtained a job at General Dynamics in its newly created operations research department. In 1958, he took a position at the Stanford Research Institute, an independent nonprofit research center established in 1946 as an offshoot of Stanford University that focused on taking research and development from laboratories to markets.7 In 1958, he published a note with the title “Metaphysical Considerations Involved in Choosing a Measure of Effectiveness” in Journal of the Operations Research Society of America. And then in the same journal in 1960, he published his first professional paper (coauthored with Stanford University Professor Gerald Lieberman), “Optimal

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