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A Greater Sense of Security Than Warranted

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Jarod was surrounded by monitors, green numbers streaming over black. Sydney had been watching him study them for weeks. The books sat behind him on a table: Investment Strategies of Hedge Funds, Barbarians at the Gate, Liar's Poker, Hedge Funds: An Analytical Approach, Money and Power, The Invisible Hand.

Sydney didn't know who had hired the Centre to study the stock market. Maybe no one had at all. Maybe the higher ups had decided to use their internal resources to better invest their portfolio. It was different than the usual simulations, but Jarod always enjoyed novelty. Privately, Sydney was enjoying watching his prodigy pit his genius against some of the smartest men in the world, in one of the most competitive places in the world. He was confident who would win, even if the people Jarod beat would never know it.

"I'm borrowing money to make more investments." Jarod said, staring at the screens. "I've increased the leverage to 40 to 1."

Jarod typed on his keyboard, bringing up a list of holdings. "These investments—they're all in different countries, different market sectors. They all respond to different conditions. If the yuan falls, this investment goes down, but this one goes up," he said, pointing to different items. "If the price of oil goes up, these are adversely affected, but these positively. It's the perfect system. I've eliminated all risk. I can borrow as much as I want; no matter what happens in the market, my portfolio will increase in value."

"That's it. So their strategy, it's foolproof?"

"I think so, yes," Jarod said, but his emphasis on the pronoun let Sydney know he was still speaking as the banker. Sydney waited as Jarod's eyes lost focus.

"But there's a flaw." He turned back to the screens. "These investments, they're all completely unrelated."

"Exactly. To eliminate risk." Sydney leaned in next to him.

"But they are related. They are all related. Because I chose them. I'm the common factor."

"Explain."

Jarod looked at Sydney. This was always the best moment—the moment when Jarod knew the answer, and Sydney would be the first one to hear.

"I buy all these investments. I publish them in my prospectus, to try to get people to invest in my hedge fund. Other hedge funds find out about my holdings, they buy them too, trying to replicate my earnings. A web of investors all buy these particular investments. They become connected.

"All it will take is for one hedge fund to run into trouble: they're forced to sell all their holdings. All of these investments go down in value together, which forces other funds to sell, driving the price down further."

Jarod sat back. "It's a house of cards."

"So the answer is…" Sydney prompted.

"It's impossible to eliminate risk. Everything is connected. And because of how much I've borrowed, I lose everything."

"This fund is going to fail?"

"Yes," Jarod said. "Inevitably."

"So if I were an investor, the safe bet would be to short this fund?"

"If you short it, you make it fail faster. If you try to copy it, you make it fail faster." Jarod stood up. "But why would I do that, Sydney? The more I borrow, the more risk. With lower leverage, I'd still be making more than the country's average household income, and the fund would never fail. Why would I take risks just to accumulate more?"

Sydney was used to this process by now. Jarod wasn't truly seeking an answer to his question—he was talking through an inconsistency in human behavior he'd uncovered. Over the past thirty years of working together, Sydney had grown used to their pattern. "Think, Jarod. What would more money get me?" Sydney played his role.

"The obvious: material possessions. But wouldn't this strategy risk the possessions I already have?"

"Is it about possessions, Jarod? Or is it about power?"

"No," Jarod said, in the tone of voice that Sydney knew meant he was closing in on an answer. "It's not about possessions or power. It's a scorecard. The money is just a way to prove that I've won. That I'm smarter than everyone else."

"Yes, Jarod! And are you?"

Jarod paced the room. "Why would I need to prove it? If I'm smarter than everyone else, why use that talent here, on this?" He gestured at the screens, and Sydney felt they were no longer discussing the simulation.

"He's won a Nobel Prize," he said, referring to subject of the simulation, "he could change the world."

"Maybe the money is for that, to change the world."

"No, no, it's not! It's just to prove that he wins. So that everyone he's ever met knows that he won."

"At what?"

"Life?" Jarod shrugged. "But there's no purpose in that."

"What would you do, Jarod?" Sydney knew it was a loaded question when he asked it. But after all these years, he did wonder sometimes. Sydney's life's work was standing in front of him: a man, a genius, a tool to solve any puzzle, capable of insights and intuitions no one else could even dream of. Sydney had found his purpose. It was here, guiding Jarod. But had Jarod discovered his own purpose?

"I would…" he trailed off. Sydney thought he was thinking at first, but when Jarod looked away, he knew that Jarod didn't need to think of an answer. He already knew it. He was thinking of what was safe to say. To Sydney. To the cameras. "I would help people."

Sydney moved into his line of vision. "Which is what you are doing, here, at the Centre."

"Yes," Jarod said, not meeting his eyes. Jarod had always been so very bad at lying to him, ever since he was a boy.

~*~

It wasn't until later, when Sydney was in his office, that he realized he knew the answer to the question he'd asked Jarod, or the answer Jarod always used to give. "I would find my family. I'll never give up, Sydney. I'll never give up."

But Jarod hadn't said anything about his family, his name, his past, not during this simulation, not during the one before. Sydney found he couldn't remember when he'd last heard Jarod's heartfelt refrain. Could it be that Jarod had accepted his work, his role here in the Centre? No. Sydney knew Jarod better than anyone else. Jarod worried at every problem until he had an answer, and this puzzle, the one closest to him, he wouldn't have let go.

Which left only one other possible answer. Jarod was trying to convince him that he was loyal. He hadn't tried to run away in years. Each attempt in the past had failed, but he'd been a boy then, and not at his full potential. The only reason why the talk of finding his family had stopped, why the attempts had stopped, was that Jarod had learned from past failures, and this time he was going to wait until he had everything figured out before he left.

Sydney closed his eyes. The best moments of his life had been with Jarod. He'd never felt such fulfilment in his work as he did when the two of them worked together. He was too old to find a new protégé. When Jarod left, it would hurt terribly. But Jarod would leave, no matter what Sydney did. He just hoped that if he let Jarod go, someday he'd come back.