Interview with Thomas A. Tombrello - Caltech Oral Histories

Tombrello–262
TOMBRELLO: That’s a very interesting story, and I hope someday they can tell how it actually
worked, because he fooled a lot of people. I mentioned Jim Simons. When he was a
mathematician, he did some of the mathematics for the Maxwell-Chern-Simons theory, which
underlies string theory. Then he formed the Renaissance Technologies hedge fund and became a
billionaire. He was a trustee for the State University of New York at Stony Brook, and he got
them into an investment in Bernie Madoff’s fund. I think he felt sufficiently chagrined about his
advice that he ended up giving them a lot of money. So there’s probably a net win for SUNY,
but— Madoff fooled a lot of people. You know people will sometimes believe in perpetual
motion, even though it’s impossible.
ASPATURIAN: Well, he fooled a lot of people, but there were some very clear warning signals,
and they were repeatedly ignored. It’s almost like the Challenger disaster again.
TOMBRELLO: It’s like a lot of things—you have Brooksley Born warning the Clinton
administration in 1997, when she was head of the Commodity Futures Training Commission,
that the derivative thing needed control. And by the way, she had written a set of proposed
controls; she got beat down by Larry Summers, Bob Rubin, and Alan Greenspan. And in 1998,
my wife’s baby brother’s little startup, Long-Term Capital Management, went belly-up. They
had a trillion dollars in play, and it was based on about $5 billion in capital. Fortunately, only
the $5 billion was lost and not the $1.25 trillion. But Brooksley said that was a close call and we
need more regulation. They beat her down again and she ended up resigning from the
commission. Last year, she won the Profiles in Courage Award. I would love to see that woman
on the Board of Trustees. I think she’s extraordinary. Where is she now? She got her law
degree at Stanford. The whole time—she’s probably roughly my age—she was reminded that
she was taking up a space a man could be in. Of course, she was the top of the class and edited
the law review.
ASPATURIAN: What do you think about the trend that has a lot of gifted graduates in math and in
physics heading for Wall Street, where they are putting together these immensely complicated
financial algorithms?
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