To mark the recently passed 30th anniversary of the stock market crash of 1987 (“Black Monday”), Bloomberg Markets asked players throughout the marketplace to reflect on the day and its lasting impact. Some of the people who shared their memories were the winners “who seized the moment as an opportunity not only to make money, but also to insert themselves in the new financial order” – such as Paul Tudor Jones, Stanley Druckenmiller and Nassim Nicholas Taleb. Other reflections came from Michael Lewis, Howard Marks, Jim Chanos, Jim Leitner and Ed Thorp.

You can access the article here – a good read, especially for those interested in financial history.

Some of the lessons / takeaways below (direct quotes from the article):

• Howard Marks: “It really reinforced the idea that anything can happen in a market, and it doesn’t require a rational process.”
• Jim Leitner: “Black Monday woke me up to the fact that black swans happen much more frequently than a normal distribution would imply. I became more of an options buyer than a seller and put the onus of the risk management on the other guy. I started thinking about when it made sense to pay the extra premium to be long options.”
• Nassim Nicholas Taleb: “The first lesson I learned was that these things happen. The second lesson I learned was that when they happen, what you make everywhere else disappears. Unless you’re hedged for events like Black Monday, whatever alpha you think you’re going to get, you’re not going to get.”
• Jim Chanos: “Black Monday made a huge difference in how I manage my fund. It was my lesson that as a short seller, I was an unsecured lender to a prime broker. It forced me to understand my back-office operations, and that really helped in 1990 when Drexel failed, in 1998 during LTCM, and again in 2008. I understood how to hold collateral in the form of Treasuries. It was an immensely important learning experience, and luckily I didn’t have to pay financially for it.”
• Ed Thorp: “Academics described stock price movements using a lognormal distribution, but those underestimated the likelihood of very large changes. In the short-term version of our price model for individual stocks, Black Monday was an outlier, but not anywhere near the impossible extreme of the lognormal model. There were several features of our model which each said such a move was much more likely than people thought.”