The Physics of Wall Street

  • by James Owen Weatherall
  • Narrated by Kaleo Griffith
  • 9 hrs and 42 mins
  • Unabridged Audiobook

Publisher's Summary

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 revolutionizing finance. Taking us from fin-de-si├Ęcle 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 more, 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 more 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.

More

See More Like This

Customer Reviews

Most Helpful

Rather Boring

Any additional comments?

There are some light and accessible descriptions of both financial concepts and math/physics concepts and a history of attempts to marry the two - which is why I gave the book 3 stars.

But there isn't much depth on the concepts and there is little-to-no narrative of interest to engage the reader/listener. Not exactly a nail biter!

The book could have been an engaging story of how a small group of geniuses worked some mathematical magic and became rich, or how some university professor using his economic model saw the impending '08 crash and couldn't get anyone to believe him. But alas apparently no such luck, perhaps because no such tales exist because the results of such attempts to use Math and Physics in finance have proven mixed, at best.

The extent of the success in these models seems to me equivalent to a flea identifying that the prevailing direction of hairs on a dog are to the left. Narrow in scope and highly relative. When the wind changes direction, suddenly said flea's model is broken and is no closer to understanding the shape and motivations of the dog he is on.

Whilst I think Mr. Taleb (Black Swan) is a bit of blowhard, I find this counterpoint to be unconvincing and as a book rather boring.

Read full review

- TM "TJM"

Quantitative finance through rose colored glasses

Although the author presents a well-researched and interesting history of quantitative finance, he exhibits an almost fawning lack of objectivity with regard to the men behind it. Weatherall seems equally interested in placing them on a pedestal and absolving them of any responsibility for their contributions to global economic instability.

Much of the book is devoted to the roots of quantitative finance in gambling and money making schemes. Yet the narrative somehow never comes full circle to acknowledge that the sophisticated trading strategies which have evolved are simply more of the same.

Instead, the author concludes that the pioneers of the field who profited handsomely even during the 2008 meltdown, are all perfectly entitled to their fortunes because, well... they are just the best and the brightest. This is an argument that should sound familiar to most people by now in the aftermath.

Certainly the heroes of Weatherall's tale are worthy of praise for their insight and achievements, but he seems oversensitive to any criticism leveled at academics in his own discipline of Physics. Without this personal bias throughout the book it would have been a respectable primer on the application of higher mathematics to finance, but in the end, he should have stuck with the history, exhibited more scientific objectivity, and learned more about the very real differences between the world of finance and the real economy before tackling the topic.

The book was well written and entertaining, weaving together anecdotal personal histories with the evolution of a field that often makes for very dry reading. I would have enjoyed it much more if he had stuck with the facts and avoided opinion and speculation.
Read full review

- Brian "Asosa"

Book Details

  • Release Date: 03-25-2013
  • Publisher: Tantor Audio