The Physics of Wall Street by James Owen Weatherall

Author:James Owen Weatherall
Language: eng
Format: epub, mobi
Tags: SCI055000, BUS027000, BUS086000, SCI040000
Publisher: Scribe Publications
Published: 2013-03-24T16:00:00+00:00

The ideas at the heart of Farmer’s and Packard’s work were first developed by a man named Edward Lorenz. As a young boy, Lorenz thought he wanted to be a mathematician. He had a clear talent for mathematics, and when it came time to select a major at Dartmouth, he had few doubts about what he would choose. He graduated in 1938 and went on to Harvard, planning to pursue a PhD. But World War II interfered with his plans: in 1942, he joined the U.S. Army Air Corps. His job was to predict the weather for Allied pilots. He was given this task because of his mathematical background, but at that point, at least, mathematics was of little use in weather forecasting, which was done more on the basis of gut feelings, rules of thumb, and brute luck. Lorenz was sure there was a better way — one that used sophisticated mathematics to make predictions. When he left the service in 1946, Lorenz decided to stick with meteorology. It was a place where he could put his training to productive use.

He went to MIT for a PhD in meteorology and stayed for the rest of his career — first as a graduate student, then as a staff meteorologist, and finally as a professor. He worked on many of the mainstream problems that meteorologists worked on, especially early in his career. But he had some unusual tastes. For one, based on his experience in the army, he maintained an interest in forecasting. This was considered quixotic at best by his colleagues; the poor state of forecasting technology had convinced many that forecasting technology was a fool’s errand. Another oddity was that Lorenz thought computers — which, in the 1950s and 1960s, were little more than souped-up adding machines — could be useful in science, and especially in the study of complicated systems like the atmosphere. In particular, he thought that with a big enough computer and careful enough research, it would be possible to come up with a set of equations governing how things like storms and winds developed and changed. You could then use the computer to solve the equations in real time, keeping one step ahead of the actual weather to make accurate predictions long into the future.

Few of his colleagues were persuaded. As a first step, and as an attempt to show his fellow meteorologists that he wasn’t crazy, Lorenz came up with a very simple model for wind. This model drew on the behavior of wind in the real world, but it was highly idealized, with twelve rules governing the way the wind would blow, and with no accounting for seasons, nightfall, or rain. Lorenz wrote a program using a primitive computer — a Royal McBee, one of the very first computers designed to be placed on a desk and operated by a single user — that would solve his model’s equations and spit out a handful of numbers corresponding to the magnitude and direction of the prevailing winds as they changed over time.

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