The Physics of Wall Street: A Brief History of Predicting the Unpredictable

The Physics of Wall Street A Brief History of Predicting the Unpredictable After the economic meltdown of Warren Buffett famously warned beware of geeks bearing formulas But as James Weatherall demonstrates not all geeks are created equal While many of the mathematic
  • Title: The Physics of Wall Street: A Brief History of Predicting the Unpredictable
  • Author: James Owen Weatherall
  • ISBN: 9780547317274
  • Page: 352
  • Format: Hardcover
  • The Physics of Wall Street: A Brief History of Predicting the Unpredictable
    After the economic meltdown of 2008, Warren Buffett famously warned, beware of geeks bearing formulas But as James Weatherall demonstrates, not all geeks are created equal While many of the mathematicians and software engineers on Wall Street failed when their abstractions turned ugly in practice, a special breed of physicists has a much deeper history of revolutioniziAfter the economic meltdown of 2008, Warren Buffett famously warned, beware of geeks bearing formulas But as James Weatherall demonstrates, not all geeks are created equal While many of the mathematicians and software engineers on Wall Street failed when their abstractions turned ugly in practice, a special breed of physicists has a much deeper history of revolutionizing finance Taking us from fin de si cle Paris to Rat Pack era Las Vegas, from wartime government labs to Yippie communes on the Pacific coast, Weatherall shows how physicists successfully brought their science to bear on some of the thorniest problems in economics, from options pricing to bubbles The crisis was partly a failure of mathematical modeling But even , it was a failure of some very sophisticated financial institutions to think like physicists Models whether in science or finance have limitations they break down under certain conditions And in 2008, sophisticated models fell into the hands of people who didn t understand their purpose, and didn t care It was a catastrophic misuse of science The solution, however, is not to give up on models it s to make them better Weatherall reveals the people and ideas on the cusp of a new era in finance We see a geophysicist use a model designed for earthquakes to predict a massive stock market crash We discover a physicist run hedge fund that earned 2,478.6% over the course of the 1990s And we see how an obscure idea from quantum theory might soon be used to create a far accurate Consumer Price Index Both persuasive and accessible, The Physics of Wall Street is riveting history that will change how we think about our economic future.
    The Physics of Wall Street: A Brief History of Predicting the Unpredictable By James Owen Weatherall,
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      352 James Owen Weatherall
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    About " James Owen Weatherall "

  • James Owen Weatherall

    JAMES OWEN WEATHERALL is a physicist, philosopher, and mathematician He holds graduate degrees from Harvard, the Stevens Institute of Technology, and the University of California, Irvine, where is presently an assistant professor of logic and philosophy of science He has written for Slate and Scientific American.

  • 393 Comments

  • This book is a wonderful introduction to history of predicting stock prices using mathematics and concepts from physics It is basically a history of pricing models from the earliest mathematical models to the most modern ones Of course, the best ones are maintained in secret by some super secretive investment companies, for good reason The only way a pricing model can be profitable is it to be better than most others being used.The author, James Weatherall, has a PhD in physics, and is presently [...]


  • The author is a physics professor and someone who holds academics in high regard The latter becomes a big problem later on in the book The good chunk of the book is devoted to the history of how academic and finance intersect The section on a Louis Bachelier, whose pioneering work was largely ignored by his peers, was particularly fascinating Other interesting anecdotes include Edward Thorp, a mathematician who beat the casinos at blackjackHowever, and how the DuPont team that invented pantyhose [...]


  • The quote that stands out for me from this book is, The business of prediction has become an industry I am always tinkering around in Excel spreadsheets building models in my unsophisticated, non formally trained manner, trying to predict everything from various customer behaviors at work to stock prices and lottery numbers in personal life While I ve had some success at work and on picking stocks that meet my goal of making a 5% profit in nine days or less in which I consider myself a long term [...]


  • Journalistic wish wash Some stories are interesting for entertainment value but opinions by author ironically highlight his own lack of rigor.


  • A better review is worth putting up One illustrious professor of finance wrote an 18 part blog series on why this is the worst book in the world, or at least arrogant and inaccurate minyanville business n That series is indeed very informative to date I haven t quite finished it, but I have finished the book and found it terrific not knowing so much about economics The former CFO of Microsoft a former chair of NASDAQ praises this work by James Owen Weatherall, agreeing from the back cover with s [...]


  • I very much enjoyed this one You don t have to be a physicist to catch all the author wants us to understand He does a very good job of popularizing the science involved There is story telling and history than science anyway, and that makes it quite entertaining I particularly loved all the examples of borrowing between different disciplines like beating odds at gambling to predicting stress fractures in Kevlar to earthquakes to wall street and beyond Quite fascinating and surprisingly took awa [...]


  • The book started nice but got worse from chapter to chapter It should definitely have another title Physicists of Wall Street But even then the author is loosing the path of the story after the first two chapters It is nice to tell all these little stories how a physicist turns into a hedge fund manager but what does this really mean Btw being a physicist managing a VC fund myself.


  • Sort of like Michael Lewis finance journalism in tone but less skeptical of the whole enterprise Less of a narrative, but a little better about getting into the gritty facts As always, I d like math, but that wouldn t sell, would it Enjoyed.



  • I don t understand the purpose of this book I though it would describe how physicists gave up science for Wall Street It comes across as the type of book you d find in a college s career center.



  • Loved this book While being a book on how finance was influenced by physics it managed to get me really interested in some physics concepts The history of how physicists got involved in finance is very interesting by itself.


  • The role that Math Physics plays on Wall Street has a controversial and complicated history This book was a fun read and helped provide an historical context to place people like Thorp, Black, Simons, Mandelbrot and others from just the criticisms or praises I ve heard read elsewhere about them In the controversy surrounding the EMH Efficient Markets Hypothesis , the point that Weatherall makes about the Scientific Process as applied in the Financial Markets is a good one e methodology in action [...]


  • A great primer or history of the mathematics of finance, and the interplay between theory and empirical results This book does a good job of showing how scientific economic theories are intuited and build upon one another, and how their complexity increases with the maturity of the field Clearly written, with well illustrated connections between the principal actors and suggestions of their motivations There is a surprisingly deep connection between physics and quantitative economics and we shou [...]


  • I was going to give this book 3 stars as I was not particularly impressed Midway through the book, I could already see that it had two very big flaws First, there s not as much meat as I was hoping for In particular, he goes in for very long tangents unrelated to Wall Street, e.g the creation of nylon and the Manhattan Project Those are great topics, but if I wanted to read about that there are many fine books about the Manhattan Project don t know about the creation of nylon I wanted to read ab [...]


  • As a history book, The Physics of Wall Street is interesting enough, in a trivia night sort of way I learned lots of interesting little tidbits and enjoyed most of the book My alarm bells were silently ringing throughout, but then they blasted a hole in my eardrums when Weatherall implied that physicists studying chaos theory introduced the idea that an economy was the sum of individual parts to financiers, who though it was the future, and then to economists, who thought it was nonsense It was [...]


  • The Physics of Wall Street A Brief History of Predicting the Unpredictable by James Owen Weatherall was an interesting exploration of the history of probability, economics, and physics and how scholars in all those fields have crossed discipline lines and collaborated to understand and predict economic forces I especially enjoyed how the author gave the back story for each of the people he highlighted This book also explained how buying short can be profitable in a way that I finally understand [...]


  • A highly enjoyable book focusing on the history of the interaction between physics and finance While I was familiar with most of the story Bachelier Osbourne Thorpe Black Scholes Merton and the contrarian axis of Mandelbrot Taleb plus related Sornette I still enjoyed the book, because Weatherall has a very enjoyable style.The finance and physics is kept at a very superficial level i.e basic pop sci writing.The book of course has political agenda, somewhat unfairly compressible to physics in fin [...]


  • I was expecting the book to bite much deeper into the physics and mathematics of finance I was also disappointed by the epilogue of the book where the author makes a weak case for greater involvement of physicists and quants in finance I sympathize with the view that the concepts from physics cannot be imported into the field of finance because it is populated by actors with information, incentives, and agency whose behavior may change precisely because you have found a way to predict them I als [...]


  • To be perfectly honest, I don t have the slightest idea who is the target audience of this book I doubt it is economist, because the Econ theory explained in the book is at best rudimentary and at worst miss guided And it can t be the general public because of the authors gliding over the complex mathematics Ergo must the target audience be physicists that are looking for a historical overview of the influence of physics on to economics One thing is sure, the author isn t succeeding in his stat [...]


  • This is an excellent and very understandable book about the history of finance theory as seen from the physicists researchers perspective It s impressive how many physicists through the 20th century dedicated their life to develop option pricing and finance theory, starting with Henri Poincare s mathematics student Bachelier, to our days The book approaches some topics about finance theory itself, not only history, and they re very well explained I highly recommend this book for anyone intereste [...]


  • Definitely for the Maths or Physics geek but not too intimidating A fascinating insight into the world of the Financial Markets from the mathematical physics point of view and into some of the highly interesting breakthroughs in forecasting Entertainingly written and will give you a background into some of the finance speak that you see and hear in the financial media Full disclosure I AM a maths physics geek and I worked for many years in the computer side of the financial industry.


  • The history that I have recounted in this book supports the closely related claims that models in finance are best thought of as tools for certain kinds of purposes, and also that these tools make sense only ion the context of an iterative process of developing models and then figuring out when, why and how they fail so that the next generation of models are robust in ways that the old models were not Page 206


  • I enjoyed this book, it brought up a lot of good points For example in economics, subject was very theoretical and is only now starting to see heavy application of math and science Putting our fate on pure theory is not prudent, it s hight time all economists had Masters degrees in Physics as well There are many other good points However the market does seem to be still too uncontrolled given how much it can effect nearly every person on earth with it s ups and downs.


  • the title of this book seemed like it would be something right up my alley, but it wasn t To be fair, I read this book many months ago, and all that I remember about it was that it was an unsatisfying reading experience and the book didn t go into enough detail beyond mostly tiresome anecdotes I do remember making note of works cited in the footnotes and bibliography, since the primary sources seemed like they would be meaty, satisfying, and interesting.


  • Interesting history of the influence of ideas from physics and mathematics on the problem of predicting stock prices He deals straightforwardly with the problem of just how predictable we should expect prices to be Like many others, I expect, I wanted to hear about the methods, presumably proprietary, Jim Simons apparently used to make money off the great recession.


  • This book is really good in the first part where it shows a history of ideas that come from math and physics that find their use elsewhere Towards the end is a desperate plea not to strip physics away from Wall Street Yes Physics is an awesome tool No physics is not the cure for what ails Wall Street.


  • Brief biographies of physicists, the theories of which are used in finance Louis Bachelier was the first to apply statistical ideas to financial markets Maury Osborne found that returns, not prices, are normally distributed Benoit Mandelbrot developed fractal geometry Ed Thorp and Fisher Black used math tools in day to day trading.


  • This book was fairly interesting and gave a good background on many financial models The claim at the end seemed abrupt though and I don t completely agree with it I didn t take away anything I can apply in my personal finance skills, but gained a deeper understanding of some potential problems in modern economics.


  • Recently The Big Year made a surprise place for itself among my time 3 to 5 books of all time The unusual part for me is for it to be done by a piece of journalism I like The Physics of Wall Street as much or nearly as much This piece of journalistic magic was written by a physicist.


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