[.ca] The Predictors: How a Band of Maverick Physicists Used ... (ISBN 0805057579)

From Amazon.com:
Using a computer to beat Wall Street from afar is, arguably, the new American dream. While it will remain just that for most of us, an offbeat gang of academics turned financial wizards is showing it can be done. Led by acclaimed physicists Doyne Farmer and Norman Packard, the Santa Fe-based Prediction Company has proven since its 1991 founding in an adobe bungalow furnished with plastic lawn chairs and top-of-the-line Sun workstations that it is indeed possible to make millions in the world's financial markets by anticipating trends and developing software that automatically capitalizes on them. In The Predictors, Thomas A. Bass colorfully relates their tale of fiscal triumph--and reveals in the process how even an unorthodox group of antibusiness intellectuals in far-off New Mexico can make the world's biggest institutions sit up and take notice. Long esteemed in the scientific community, Farmer and Packard have become legendary in hacker circles since their failed attempt to beat the roulette tables in Las Vegas with toe-operated computers was chronicled in Bass's well-regarded 1985 book called The Eudaemonic Pie . This time, though, the two hit the jackpot with their cutting-edge computer programs and the company they created to trade German marks, Chicago commodities, Japanese treasury bonds, Texas oil futures, and New York securities. Bass's prose is a bit flowery at times, but his perceptive you-are-there account is nonetheless entertaining and sure to cement the pair's reputation as today's ultimate masters of "phynance," the successful, and now oft-copied, merger of physics and finance. --Howard Rothman

Interesting Topic not Handled Well:
I agree with many of the other reviewers. This book is 90% filler. Instead of discussing the topic at hand, we are repeatedly bombarded with a desciption of the weather, the El Paso fiesta season, etc... This is a story about a group of (in my opinion, uninteresting) characters, and not a book on Investing or Science. Not recommended.

Another book about a start-up:
This book is less about the market and more about the personal relationships and dealings of a business start-up. I'm surprised that the book lists its category as BUSINESS/SCIENCE when truly it lies in the former. I guess mentioning chaos theory, neural networks and genetic algorithms was all that was needed. Regardless, it was an entertaining story about a group of physicists, being totally ignorant of the market, decide that they can predict the market. The storyline follows what I would consider typical of any start-up; the fights, arguments, doubts, meetings galore, etc... As I said, entertaining but not too much different from any other story about a start-up. My two biggest complaints: 1) The back cover from the San Francisco Chronicle calls this book "one of the best books ever written about commodities, currency, and derivatives trading." I don't think they even read the book since this book isn't about trading but all about the traders. 2) The over use of descriptive fashion and landscape. I lost track of how many times we needed to be told who was wearing what and how blue the sky was in Santa Fe. It really got annoying after awhile.

You would learn a thing or two,:
Well I picked up the book as I am interested in complexity science. Most of the reviews here are quite harsh, and probably it was bad expectations management on writer's / publisher's part. Even though the book sometimes is promoted as an investing book, it is not. It is not meant for day traders who just expect to discover next holy grail of financial markets reading such books. There is no holy grail in markets, but thats another thing. With that said, it may be clear that it is not a TRADING / INVESTIING book. The book is story of two renowned physicists turning to use their physics, specifically chaos theory, to model financial market. The story part is dealt with great care. I am sure you learn a thing or two reading this book. This book was quite reasy to read and time I spent reading was worth more than had I spent reading a Grisham novel or watching some stupid soap on TV. It is real life here folks. Bass is not a novelist so I did not expect him write a literary piece here. He has written a true story in a very good way and struggle of Farmer and Packard in estabilshing a company and utilizing their knowldge in a productive way is very cleverly depicted. There are tonnes of other relevant information that come and go, and an intelligent reader would surely pick something here. There is a lot of current history explored here. With that said, this is NOT a book for the NEXT TRADING SYSTEM, nor does it preach that their system was PERFECT.

Full of adventure:
Interesting adventures, better than the Hardy Boys! On one page Doyne's replacing the differential in his old van in the desert, several pages later he's suited up (unwillingly, presumably) dueling intellectually with the experts at Goldman-Sachs. In between he's writing checks to keep the fledgling company alive. Like I said, beats Hardy Boys hands down! Bass includes a good description of neo-classical economics ideas, still widely believed by many economicsts far and wide, as in the case of the failed LTCM, not to mention Enron, the IMF, world Bank, and US advisors to Mexico, Argentina, Brazil, thailand, Russia, .... . Significantly, LTCM was guided in part by two Nobel Prize winning neo-classical economists who characteristically proceded implicitly as if there would be 'springs' in the market to enforce the 'no arbitrage' assumption at long (but not too-long...) times. I personally don't believe that the future can be forecast reliably, but then according to a member of The Company they found a small (few %) advantage and sold it to UBS. A gambler with a small bankrole would suffer the gamblers' ruin while trying to bet on such weak correlations. Actually, the hat on the cover looks vaguely familiar, but then what's in a hat?

Anticlimatic:
I am a trader. I traded in the pits for years. I traded over-the-counter. Futures and options, vanilla and exotic. I also hold degrees in physics and electrical engineering from MIT. I was hoping to relate to the characters in this book. I didn't at all. First, my comments on the book as a story. I was interested at first, but was struggling to get through the last third of the book, as characters were developed that seemed like little more than filler. I tired of the endless descriptions of wardrobe and scenery. And, in the end, we don't really find out what happened. Some reviewers complain about lack of technical detail. The book was obviously not written as a scientific treatise, but as a story, so those readers really have no reason to be disappointed in that aspect. Secondly, my thoughts about the science and the scientists featured in the book. Nonlinear dynamic systems have been studied by all Wall Street firms, even at the time Prediction Co. was doing it. I actually have a fair amount of distaste for this whole subject. What it amounts to is traders, banks, uber investors, etc. looking for the next quick money making opportunity within the latest development (fad some might say) in informational science. That in and of itself is not a bad thing, but a reasonable quest. The reason most of these kinds of endeavors fail is that unification of Wall Street and academia can only be successful if the researchers or modelers have a firm grasp of BOTH worlds. The models ultimately fail because what is really being modelled is human psychology and reaction. Numbers alone do not tell the tale. There is no (legal) way of knowing that the trader at MS just had a blow up with his risk advisor and is angrily dumping his yen position inefficiently, and that UBS knows MS is also long calls so they begin crushing call volatility since they know MS will liquidate them as well. Sure, a chart may have predicted a squeeze, but the details of the actual trading couldn't have been prophesied. Prediction Co. was running thousands of models? This should be the first tip off that they had no idea what the principal components of the market were. They were shooting in the dark. This was a perfect example of banker types with no technical prowess whatsoever trying to work with ivory tower types with no street savvy. It doesn't work. "Well, traders and quants work together in most trading firms." True, but this is different because there was no established program or models that the quants were running. This was fly by the seat of the pants almost. While I admire the accomplishments of these researchers in academic realms, they were definitely not cut out to be businessmen with their communistic, hippy, and honestly, somewhat lazy, approach to life. Yes, some succeed, you have your accasional Bill Gates (although I would argue he was extremely business-headed), but not many. Look at the dot-com debacle. Same story. Lastly, do you really think that anyone who truly tapped into the Holy Grail of trading would actually allow a book to be written about it?