Stevens alumnus James Owen Weatherall, Ph.D. ’09, recently published his first book, “The Physics of Wall Street: A Brief History of Predicting the Unpredictable,’’ a study of scientific discovery, economic turbulence, financial innovation, risk, reward, success and failure. Weatherall’s Stevens roots run deep: he’s the son of James and Maureen Weatherall, both ’78, and the brother of Katie Weatherall ’08.
Recently, Weatherall, an assistant professor of Logic and Philosophy of Science at the University of California, Irvine, discussed his book – and how life in Southern California is different from life in Hoboken.
Why write the book?
The book describes the history of how ideas from physics and mathematics have moved into finance, with a focus on what that history can teach us about modeling today. I am trained as both a physicist and a philosopher scientist. I am very interested in how scientific theories work and how we use them to learn about the world, and so the question of how ideas from physics might be used to understand markets struck a chord for me, especially because this was a case where some of the more philosophical things I am interested in make contact with important political and economic issues.
What interested you about this topic?
I first became interested in financial modeling in 2008, during the heat of the financial collapse. I was in the last year of my Ph.D. at Stevens during that fall and I read a number of fascinating articles claiming that physicists were somehow responsible for the crisis. Ultimately, though, these articles were unsatisfying: they made it seem as though mathematical modeling in finance was pure folly, and that physicists had come to Wall Street and interfered in something they could never understand. I knew there had to be more to the story than that. If physics was so useless for understanding markets, why did so many banks hire physicists in the first place? Where did the physicists on Wall Street come from, and what role did they really play in modern finance? So I started digging.
How long did it take from start to finish, from research to the final edit?
I started researching in fall of 2008, and I submitted the final version of the manuscript in March of 2012. So, about three and a half years all together.
What did you learn that surprised you when writing the book?
Lots of things! For instance, over the last few years, we heard a lot about financial products known as "derivatives," which include things like options and futures, and also more complicated products such as the collateralized debt obligations (CDOs) that became "toxic assets" in 2008. These are often described as though they were a new invention. But derivatives have been around for thousands of years. And modern derivatives markets in the United States go back to the 1970s. I also found that the most successful hedge fund ever -- the Medallion Fund, run by Renaissance Technologies -- was founded by two mathematicians and a mathematical physicist, the last of whom ran it for 20 years. And in 2008, while the traditional banks were hemorrhaging money, the Medallion Fund returned 80 percent!
The buzz on the book seems to be positive. What’s next for you?
I am currently working as an assistant professor of Logic and Philosophy of Science at the University of California, Irvine, where I teach courses on mathematics and philosophy. Now that this book is published, I look forward to focusing on my research for a little while. But who knows? Maybe someday I will write another popular book.
You live in California now, with your wife Cailin and newborn twin girls, Eve and Vera. What do you miss about life in Hoboken and the Stevens campus?
Most of all, I miss my great friends and collaborators in the physics and math departments. But I also miss walking! Southern California is beautiful and I love living here, but it's much harder to get around on foot. And the Italian food in Irvine can't compete with Hoboken!