It's not been too frequent, even in the wake of quants taking down the world's economy, to read a quant who has the temerity (and, possibly, gonads) to say that which must be silent. But now it has.
One quote from the interview (then I'll expect you to go off and read it):
Q: What's the biggest change you feel the credit crisis has brought to the development of quantitative finance?
A: One change is that it has pushed quants away from the illusion that their models are true. That's a good thing, but unfortunately probably temporary. People will be lulled into complacency once their models have worked well for a while. The other major change I see is that it has prompted more thought on hard but important problems. I'm thinking of things like understanding herding risk, and the real dynamics of markets.
This is a closer understanding of what went wrong, but still doesn't deal with the core issue: the data needed to identify the disconnect was readily available, but went ignored by quants. Mea culpa is always painful.
Galbraith got it right, and no one has demonstrated anything smarter: "Financial genius is a rising market". Or, as I'll be musing about anon, all the swans are black.