Being the provincial person that I am, I long regarded a degree in philosophy as among the most useless for entry into the corporate world. In all my job interviews over the years, never once was I asked: if a tree falls in the forest and no one is around to hear it, does it make a sound? I doubt even lumberjacks need to know the answer as a condition of employment.
Much to my surprise—and I’d wager yours as well—I’ve discovered that two of the smartest people in global finance have ties to Oxford University, where philosophy has been taught for centuries and remains central to many of its most prestigious programs. One of its earlier students was a dude named John Locke, widely considered among the brightest minds of the Enlightenment and the father of liberalism.
For those who came of age in the Twitter, podcast, and TikTok era, the Enlightenment was a European intellectual movement of the 17th and 18th centuries focused on ideas concerning God, reason, nature, and humanity. Locke was the Joe Rogan of his day.
There is a growing chorus of pundits warning about a looming implosion of the private credit market. Among them is Richard Bookstaber, whose book A Demon of Our Own Design foreshadowed the financial crisis of 2007–08. Bookstaber, who holds a doctorate in economics from MIT, recently wrote in The New York Times that the private credit crisis could be even worse than the last one.
Frankly, after reading Bookstaber’s op-ed, I concluded he’s a pie-eyed optimist. There are factors he may not have considered that will make the 2007–08 crisis seem like a walk in the park. Moreover, Bookstaber is late to the game in predicting—or profiting from—a financial implosion.
I’m more impressed by those who had the foresight to warn about the implosion of private credit and private equity more than a year ago, when Wall Street and the media still acted as if the private credit industry was firing on all cylinders.
One of those early voices was Eugene Ludwig, the former Comptroller of the Currency under President Clinton. The other was Stephen Diggle, a money manager whose Singapore-based hedge fund, Artradis Fund Management, made nearly $3 billion for investors betting on the 2007–08 market collapse.
The ties that bind Ludwig and Diggle run through Oxford University—and, I suspect, a way of thinking shaped by the rigorous study of philosophy. The discipline doesn’t teach how to build financial models, but rather to question the assumptions behind them. I’m doubtful that AI, with all its supposed brilliance, can compete with the analytical instincts Ludwig and Diggle likely refined while studying at Oxford.
Otherwise, AI would have already flagged the looming private credit crisis—and recommended how to avoid it.
Ludwig attended Oxford as a Keasbey Fellow. His corporate bios uniformly note that he earned a Master of Arts degree there, before going on to Yale Law School, where he served as editor of the Yale Law Journal.
Ludwig’s Wikipedia entry says he studied philosophy at Oxford and that his degree was in politics and economics. Wikipedia isn’t always reliable—I learned that the hard way—but Oxford’s curriculum makes clear that philosophy, politics, and economics are taught as an integrated discipline.
Being selected as a Keasbey Fellow—it’s by invitation only—is about as prestigious as it gets in academia. Keasbey Fellows undergo rigorous training in logic and ethics. The Keasbey Foundation looks for leadership qualities—people who aren’t just book smart but will actively participate in public life, which Ludwig, of course, went on to do.
As a regulator, Ludwig worked to shape the banking system to make the banking system fairer and more just. Among his many accomplishments were reforming the Community Reinvestment Act and more aggressively enforcing fair banking laws.
Ludwig, in November 2024, warned in American Banker that private credit markets were “a ticking $1.7 trillion time bomb.” He applied what’s known as the duck theory: if it looks like a duck, swims like a duck, and quacks like a duck, then it probably is a duck.
Ludwig’s point was simple. If private credit funds act like banks, hold assets like banks, and create systemic risks like banks, then calling them “private” doesn’t change the underlying physics of the risk. It just obscures it.
Accordingly, Ludwig argued that private credit funds should be regulated like banks. At the time, that was Wall Street heresy. Private credit largely emerged to circumvent the regulations put in place after the last financial crisis.
Ludwig didn’t simply sound an alarm. He laid out an 11-point plan to rein in private credit before the industry blew up and wreaked widespread havoc on the financial system and the broader economy.
Ludwig has a habit of thinking in 11-point frameworks. As a regulator, he devised an 11-point plan to alleviate the credit crunch that followed the savings and loan crisis, when banks stopped lending to small businesses. His solution then was to reduce regulatory burdens to get capital flowing again. Today, private credit has effectively bypassed the very guardrails he helped put in place.
Diggle, whose corporate bio explicitly states he studied philosophy, politics, and economics, shut down his Artradis fund in early 2011 after central bank intervention drained the volatility his strategy depended on.
Simply put, Diggle bought the financial equivalent of expensive fire insurance— policies that only became hugely valuable if the entire financial neighborhood burned down. When the Fed turned on the sprinklers in 2009, the premiums started eating him alive. To Diggle’s credit, he never “gated” redemptions. While other managers locked the doors during the 2008 panic, Diggle left the exit sign illuminated, allowing investors to leave whenever they wished.
Last May, Diggle decided conditions were once again ripe and launched a new fund, VAILS.
“In 2025, financial markets are riddled with several fault lines,” Diggle told MarketWatch. “But now the bubble and the dangerous leverage is centered on private equity and private credit.”
When Diggle gave that interview, the fissures in private credit were barely on the public radar. Outside Wall Street, few had even heard of the market.
Diggle’s firm uses AI to scrape and analyze thousands of individual loan data points—far more granular than what traditional bank analysts typically track. Just as Ludwig used the duck theory to identify private credit funds behaving like banks, Diggle is using data to identify “zombie” companies pretending to be solvent.
That allows VAILS to pinpoint where leverage is being masked—and where it is most likely to break first.
If Ludwig is the prophet warning about the bomb, Diggle is the operative trying to locate it.
Much of the media focus these days has been on private credit—roughly a $2 to $3 trillion market that has grown rapidly in the shadows of the regulated banking system. The concern isn’t just its size. It’s that many of these loans don’t trade, making their true value difficult to determine until stress hits and investors rush for the exits.
But private credit may not be the biggest problem. Private equity likely is.
Depending on how it’s measured, private equity is a roughly $7 to $10 trillion market—and far more deeply embedded in the financial system. Pension funds, university endowments, and retirement systems depend on private equity returns to meet their financial obligations. If those returns are overstated, the consequences won’t be confined to Wall Street. They will show up in pension shortfalls, reduced benefits, and financial strain for millions of retirees.
Private equity’s biggest investors—pension funds and endowments—depend on steady cash distributions. Instead, returns have lagged the S&P 500 over one-, three-, and five-year periods, even as firms continue to report optimistic valuations.
That’s where Wall Street Journal reporter Jonathan Weil comes in—the first reporter to question Enron’s financials.
Within months of Diggle launching VAILS, Weil reported on the hocus-pocus accounting maneuvers private equity firms use to put lipstick on their numbers.
One favorite trick exploits an accounting loophole: buying stakes in other private equity funds at steep discounts on the secondary market, then immediately marking them up to official net asset values—a move critics call “volatility laundering.” In some cases, that creates paper gains of 1,000% or more in a single day.
Some firms make these markups obvious. Others bury them. Instead of listing investment costs in main tables, they hide them in dense footnotes, forcing anyone trying to verify gains to manually match cost figures with reported valuations—sometimes an impossible task.
Weil singled out Partners Group Private Equity (Master Fund), the largest SEC-registered PE fund with nearly $16 billion in net assets. Its latest report listed 1,089 investments in the main table—but 1,095 cost figures in the footnotes, spread across three single-spaced pages.
“In other words,” Weil wrote, “there is no way someone reading the annual report could determine which cost figure applied to which investment—and no way to gauge which investments might have fishy markups.”
“Investors would be fair in suspecting that something here doesn’t add up,” he added.
Weil’s reporting didn’t caused much of a stir—nor did his latest bombshell.
This week, he reported that Cliffwater—the firm behind a $42 billion private-credit fund that recently couldn’t meet roughly half of investor redemption requests—admitted it had made an erroneous public disclosure after Weil questioned its numbers.
A fund Cliffwater told investors would be liquidated last June was still operating. The firm booked a nearly $13 million gain on an investment that, by its own disclosure, should no longer have existed. Cliffwater called the discrepancy an “error.”
Weil also reported that roughly 28% of Cliffwater’s holdings were in other private investment vehicles, with valuations based on figures supplied by those managers rather than independently verified.
Valuations built on top of valuations. That structure has a familiar ring.
Before the 2008 financial crisis, Wall Street built securities on top of other securities—mortgage bonds inside CDOs inside even more complex structures.
Cliffwater investors recently sought to redeem about 14% of the fund’s shares. The fund could meet only about half those requests. Investors in other private credit funds are also heading for the exits.
If that doesn’t give you a high-octane jolt, consider this: Weil reported that Paul Atkins served as a trustee of Cliffwater.
Who is Paul Atkins?
He’s President Trump’s appointee to serve as chairman of the SEC.
To borrow from Butch Cassidy and the Sundance Kid, Ludwig, Diggle, and Weil have 20/20 vision. Much of Wall Street and the corporate media are still squinting through bifocals. When reality comes into focus, the American public will be left to shoulder the burden.