This episode explores the history of investing, beginning with ancient Mesopotamia and tracing the evolution of financial instruments like coins, bonds, and stocks. It then focuses on the development of modern portfolio theory, highlighting the contributions of Harry Markowitz and his seminal work on diversification. The text further discusses the efficient market hypothesis (EMH) and its implications for investment strategies, particularly emphasizing Eugene Fama's research and its impact on the understanding of market efficiency and asset pricing models. Finally, it examines the work of William Sharpe and his capital asset pricing model (CAPM), including its subsequent refinements and challenges. The overall narrative culminates in a discussion of the "Perfect Portfolio" concept, as viewed by each of these influential figures.
