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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-siècle 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.
©2013 James Owen Weatherall (P)2013 Tantor
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Customer Reviews

Most Helpful
4 out of 5 stars
By CLR on 04-23-13

Fascinating alternate view of the stock market

This is a brief history of various scientists' and scholars attempts to explain and predict the behavior of the stock market. It begins in the 19th century with basic descriptive statistics and ends near the crash of 2007-8 and applications based on complexity and chaos theory. Fascinating for someone with a bit of statistics in their background... but for non-quantitative listeners it may fall flat.

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7 of 7 people found this review helpful

3 out of 5 stars
By Philo on 04-25-13

Key personalities, sketches of ideas

This is a wide survey of founders in quant finance -- Bachelier, Black and Scholes, Ed Thorp, and others of that stature, as may have been heard in other audible offerings such as "The Myth of the Rational Market" and "The Quants." Here also are some more recent thinkers' explorations in modeling of complexity and catastrophes, and herding behaviors. The concepts as explained are accessible, a bit too spare and simple, but clear as far as they go (not far). There is nothing directly actionable here, it is more an introduction and popularization, a story-based work; much is anecdotal biography stuff. I like that, for the most part. What is described is an attempted adaptation by various thinkers of math and methods of physics to admittedly social sciences, finance and economics. The fit is quite imperfect, as is discussed. It is listenable and I thought it worthwhile, though little here was new to me. I did like the explanation of ruptures in bubble (also tank and missile compartment) structures, as adapted first to earthquake prediction and then to market crashes -- that was thought-provoking. The author unfortunately at the end droned on about this dream of a financial-economic (presumably publicly funded) Manhattan project that I quickly found starry-eyed, naive, repetitive and tedious -- one point off for that.

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10 of 11 people found this review helpful

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