Excess Returns · Tuesday, July 28, 2026
Harry Markowitz, a key figure in modern portfolio theory, developed his influential ideas on risk as variance while studying at the University of Chicago. His dissertation, initially voted down by Milton Friedman, gained traction later in the 1960s with the work of Bill Sharpe.
“Here's this 20, 22, 23-year-old kid. And he was a kid. I mean, he's a nice boy. I mean, you know, played the violin, got good grades, you know, he didn't, you know, respect his peers and his, you know, things of that nature, he's a great kid. But, you know, he was a liberal arts major at Chicago, University of Chicago, the only school that he ever applied to.”
“And so he came up with this theory, just out of the blue. I mean, it's, you know, there's no source, no, you know, somebody said this, I'm quoting this and then he just, kind of dreamt it up.”
“As a matter of fact, Milton Friedman, and this is in the book, too, but, you know, Milton Friedman, uh, voted down the dissertation. He didn't like his work.”
“And Sharpe tracked him down. And, um, you know, the problem with Markowitz's, you know, work was that he was doing correlations between stocks. If you had a negative correlation, that was a good diversifier.”