The Physics of Wall Street

A Brief History of Predicting the Unpredictable

By: James Owen Weatherall

Narrated by: Kaleo Griffith

Length: 9 hrs and 41 mins

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.

Download the accompanying reference guide.

©2013 James Owen Weatherall (P)2013 Tantor

could have been great

Would you recommend this book to a friend? Why or why not?

i am very mixed in the sense that it is a very cool and interesting topic but story telling is all around the place.

What could James Owen Weatherall have done to make this a more enjoyable book for you?

Dont go off on so many tangents that have nothing to do with physics or finance.

Have you listened to any of Kaleo Griffith’s other performances before? How does this one compare?

no but the performance is good. very legible.

Did The Physics of Wall Street inspire you to do anything?

Yes. I started looking for a book on the topic of physics in finance. This one seemed like a teaser.

Any additional comments?

Please re-write this book. Cut the tangents. The human stories are OK but please limit the tangents and get more on how physics is used in finance!

Good Historical Overview

Interesting history of the influence of physics-based mathematical models on investment finance. This is more about the historical evolution than a detailed discussion of the methods and approaches. Those are covered, but at a relatively high level.

More Interesting Than Expected

I found the book and it's clear connection of physics to finance much more interesting than originally expected.

interesting read. more fracture depth desired

very interesting read. I wish he would have gone into more depth on the fractures.

ECONOMIC RECOVERY

James Owen Weatherall believes in a science of economics. The thematic intent of Weatherall’s book, “The Physics of Wall Street”, is that Quants are essential resources for economic recovery, security, and stability. Weatherall suggests that science and mathematics should be pursued in economics with the vigor of WWII’s “Manhattan Project”, the equivalent of America’s monumental scientific effort to create the first working atomic bomb.

Weatherall is a brave soul suggesting that Quants are saviors rather than devils in the financial world. Quants are an elite group of educated mathematicians and physicists that work for major investment houses like Goldman/Sachs. Their job is to create investment bundles, like financial derivatives, to attract public investment. Financial derivatives were not invented by Quants but Quants use the idea of asset bundling to create new investment products.

If knowledge is power, knowledge is gathered through experience and information. Maybe it is time for America and other struggling economies to create a team of physicists, philosophers, managers, and mathematicians to build new models for a 21st century economy. Weatherall certainly thinks so.

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.

Common Joe and Economics

"The Physics of Wall Street" is a fantastic introduction for someone who wants to understand the big board. James Owen Weatherall wrote this book not for the investor, but for the common Joe to understand how economic works. It does not go too much detail into stocks and bonds, but its a cheat sheet of the grand overview on the history of economics.

I'm read my fair share on this topic and and studied in depth on how the market works, but the information that Weathrall present is easy to follow. There is a pdf companion to this book of figures and charts. As someone who likes numbers and concrete evidence, I just wish that there were more examples in the footnotes of this book.

The subject is not too draining for anyone to follow. It's like reading about history in the past, this is a recommended starter read to build a prospective future.

An excellent historical perspective

The book delivers on its promise. It gives an interesting story about physics in finance. It doesnt go too close into the details, but give you a very goid overview.

If you are interested in the history of finance, I think you will enjoy this book.

Explaining WHY Wall Street Thinks it Needs Physics

This book traces the relationship between physics, mathematics and Wall Street. As you can imagine, nobody ever thought it would get this far and the story is a long tale in which each incremental step makes sense when viewed in isolation, but now that we seem to be stuck in a cycle of relearning the same lessons over and over - yeah, this book tries to make sense of our "willful amnesia".

A captivating story of math and science

The listener is captivated by the history of individuals and breakthrough ideas and how they weave themselves from each innovation to the next.