Questions About Booking a
LAVIN Keynote Speaker?
1 800 265 4870
The Lavin Blog
Informative & Fun: James Owen Weatherall's <em>Physics Of Wall Street</em> Is A Hit
Economics | April 11, 2013

Informative & Fun: James Owen Weatherall's Physics Of Wall Street Is A Hit

Within a month of hitting North American bookshelves, The Physics of Wall Street—the new book from economics speaker James Owen Weatherall—was already generating a lot of buzz. It secured the #1 spot in the categories of Mathematical Physics, Chaos Theory and Finance on Amazon, and was an Editor's Choice pick in The New York Times Book Review. Now, his book is also gaining traction in the U.K. (under the slightly altered title The Physics of Finance). In a recent review in The Telegraph, it is described as "an informative and frequently fun look at the history of financial thinking, and its cross-pollination with physics." Weatherall argues that major market crashes came as a result of the "failure of some very sophisticated financial institutions to think like physicists." Weatherall argues that if a million people acting individually create an economy, that same individually random behavior then creates a [somewhat] predictable group. In science, you can explain the collective behavior of a group of individually functioning gas molecules fairly accurately. As Weatherall argues, you can use that same logic and apply it to Wall Street.

What's important to note, however, is that these models—mathematical, economic, or science-based—are not fool-proof. The Telegraph review makes note of Weatherall's keen perception of this important fact—that models of anything are approximations and must be treated as such. As Weatherall explains in an opinion piece in The Financial Times, investors blamed the math behind a portfolio insurance model for major market crashes. However, he is quick to note that blaming math models is an easy way out. "The trouble with [mathematical] models arises not because they can sometimes fail but because they are often built in ways that force us to trust them implicitly," he says. You should use these models—such as the Black-Scholes model associated with portfolio insurance—as a tool in your strategy. But, Weatherall warns, it should never be the whole story. As these models were designed to operate on normal trading scenarios, should a market go haywire—you need to be prepared with other strategies to prevent a massive crash.

In his book and his captivating talks, Weatherall provides an accessible account of the forces that shapes today's financial markets. He also presents a unique perspective on the way these markets operate today, and uncovers the intriguing connection between physics and Wall Street stock markets. With a knack for making the complex superbly comprehensible, Weatherall (a physicist, philosopher, and mathematician) shows us how we can use these new discoveries to strengthen our economic models and stabilize Wall Street.
Sign up for our e-newsletter * Required
First Name *
Last Name *
Email *
I'm Interested In *