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The Predictors: How a Band of Maverick Physicists Used Chaos Theory to Trade Their Way to a Fortune on Wall Street Hardcover – November 2, 1999


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Product Details

  • Hardcover: 320 pages
  • Publisher: Henry Holt and Co.; 1st edition (November 2, 1999)
  • Language: English
  • ISBN-10: 0805057560
  • ISBN-13: 978-0805057560
  • Product Dimensions: 9.2 x 6.3 x 1.7 inches
  • Shipping Weight: 10.4 ounces
  • Average Customer Review: 2.9 out of 5 stars  See all reviews (39 customer reviews)
  • Amazon Best Sellers Rank: #1,324,345 in Books (See Top 100 in Books)

Editorial Reviews

Amazon.com Review

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

From Library Journal

In 1991, physicists Doyne Farmer, Norman Packard, and Jim McGill established the Prediction Company in Santa Fe, NM, intending to use their knowledge of chaos theory (the study of complex systems) to develop predictive models and automated black-box systems for beating financial markets worldwide. That they succeeded is only part of the story, the more interesting part of this tale being its human side. In Wired contributor Bass's account, we see the primary characters deal with a broad array of charlatans and geniuses, learn from their successes and failures, grow to appreciate the problems inherent in traditional economic theory, and become adept businessmen and managers. Useful as a primer in chaos theory as well as the various challenges that face start-up firms and the complexity of financial markets, this marvelous story should interest readers in both public and academic libraries.
-ANorman B. Hutcherson, Kern Cty. Lib., Bakersfield, CA
Copyright 1999 Reed Business Information, Inc.

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Customer Reviews

And Bass never tells you if they end up making money.
Gene Bromberg
If the Prediction Company trades too heavily on these opportunities or if others discover the strategy and trade on it, the advantage is lost.
David Anderson
This is quite possibly the worst book I have ever read.
Mr. Michael Casagrande

Most Helpful Customer Reviews

133 of 138 people found the following review helpful By A Customer on March 22, 2000
Format: Hardcover
I met Doyne Farmer at his office near the Aztec Cafe in 93 and spent a pleasant hour with him at a nearby park comparing worldviews. At the time I felt the effort to "predict" financial behaviors was, to put it kindly, a misnomer. The book did not change my opinion.
What Farmer and his crew have accomplished is simply finding a set of adequate engineering models which can cut through the emotional fog of human traders and barely come out ahead, sometimes. It isn't chaos theory at all, and I am surprised that none of the critics or reviewers have mentioned this fact: Farmer (admitted) that his methods were simply engineering model-fitting with some trendy glue...they never got to the level of applying truely sophisticated ecological or evolutionary models to the market as a whole....You might say they made a mystery out of playing both ends against the middle, and were able to find someone to pay to see them do it.
The real problem of modelling real world systems was swept under the rug by the author with a throw-away reference to "the monster of dimensionality". The complexity of models increases geometrically or hypergeometrically with the addition of each variable, depending on how richly connected the model is. A model of the financial world running a few hundred variables would not come close to processing in real time--the reason that massively parallel supercomputers can render navier-stokes equations for the weather or hydrodynamic turbulence at all is because the node inputs do not require real world data...they keep riffing on data feed back from neighbors played against fairly simple transfer functions.
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23 of 24 people found the following review helpful By James G. Herrell on October 18, 1999
Format: Hardcover
The main problem with this account of Doyne Farmer and Norman Packard's attempt to predict the price of stock and commodity prices is that there is no meat on the bones. Bass touches only superficially on what it is the Prediction Company is doing out there in Santa Fe and instead choses to focus on the fledgling firm's struggle to become a player in the world of finance.
I understand that this is a complex subject, but perhaps if Bass had embellished his text with some illustrations and examples I would have come away with a better understanding of exactly wht this "new phynance" is all about. Bass makes reference to some of Farmer's work, but never goes any deeper then telling us the title.
Another problem is Bass' portrayl of the main characters. Unfortunately, they don't come across as a very colorful lot. This is no 'predators ball" for the nineties. I learned next to nothing about what is going on. Overall, I was very let down
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27 of 29 people found the following review helpful By A Customer on October 22, 1999
Format: Hardcover Verified Purchase
Fascinating subject and easy to get grabbed by, but as you near the last third of the book, you sense you will be disappointed, feeling you are about to be asked to "leave the theater before you see the end of the movie". 95% of the book builds up to telling you how these guys beat the market, and in the end you never find out if they did. The cliff hanger comes at almost the last page when you are told "the company is starting to make some good money". It's as if the author left out the last 2 solid "what happened" chapters. Also, whats with the fashion commentary? In almost every "scene" each party is described fashionwise...so and so was dressed in blue jeans, a somber black shirt and an oversize big silver buckle...who cares! The books cover promises to tell you how a band of physicists made a fortune on Wall Street, and you never learn if they did. It was a fascinating read, just wish it had an ending.
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86 of 101 people found the following review helpful By Milton Garber on February 14, 2000
Format: Hardcover
This book is all fluff and no substance. The subtitle, "How a Band of Maverick Physicists Used Chaos Theory to Trade Their Way to a Fortune on Wall Street," is a deceit.
Aside from telling us that the physicists used nonlinear equations with live data streams to build computer models of different markets, e.g., gold prices, oil prices, T-bonds, stocks, and various currency exchange rates, and that these models were then used successfully for trading purposes, the author tells us nothing. There are no specifics, not even any general descriptions, of how the models were built, what data were used, or what refinements were made along the way. There are no specifics on how much money was made and by whom.
The author treats us to much irrelevant minutiae such as who ate what at specific moments during various dinner conversations. But the author made no attempt to explain how these supposedly successful trading models were created.
If the author didn't understand the science well enough to report it, then he shouldn't have written the book. If he did understand the science but the scientists refused to reveal details to him, he should have done some research. He could have read their published papers on chaos and complex systems with respect to topics other than financial markets. He could have interviewed people who would be able to make educated guesses as to how it is done. As it is, he gives us no clues as to how the models were built or what data were used.
After wasting my time reading this book, I felt I had been swindled. There really ought to be a way to get one's money back. All I can do is say to the author (Thomas Bass) and the publisher (Henry Holt), "Fool me once, shame on you. Fool me twice, shame on me." And that's the way markets work.
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