[This is a book review I wrote for the Arkansas Democrat-Gazette three years ago, which the book review editor decided not to use. Probably a good decision, as it's an obscure book and why write a highly critical review of an obscure book? Yeh, so nobody will buy it! Like anybody was gonna anyway, hey? I edited it some more before posting it. I just love to write and especially, apparently, critiqueing everthang physics-related. I did have a review, a positive review, of the book
Faust in Copenhagen, by Gino Segre, published in the ADG earlier in 2008. Got a whopping $75 for it! Then in March 2009, as if to end my attempts to write reviews for them, the higher-ups at the ADG unceremoniously jettisoned the two-page book review section from their Sunday edition in order, one assumes,to stay afloat financially or to just look good (i.e., lean and mean) to Wall Street. Oh, yeh, speaking of which...]
Physicists on Wall Street and Other Essays on Science and Society, by Jeremy Bernstein, Springer, 182 pages, $34.95.
Some of the tasks performed by physicists and accountants are rather similar, and also rather straightforward. They both, for instance, work with balance sheets, although physicists’ balance sheets must conform to natural laws called conservation laws, and accountants are only required to follow man-made laws.
Physicist at the Large Hadron Collider in Geneva, for instance, are looking at the known masses and energies going into the proton-proton head-on collisions, and balancing or equating those with the masses and energies of particles coming out of the collisions. The collisions occur at near the speed of light.
In theory it's simple, at least if you know your relativistic physics well enough, but in practice identifying particles and energies after the collisions is a complicated engineering task. The process requires not only huge particle detectors but also special computer programs that statistically search for the presence of new and already-known elementary particles.
Nowadays, accountants and financial analysts face similarly monumental tasks in figuring out the results of complicated financial transactions. Some of these analysts also, of course, invented those complicated financial transactions, purposely making them hard for industry regulators and investors to figure out. By their (man-made) nature, financial instruments that are the hardest to figure out also make the most money—if the people trying to profit from them don’t get fooled themselves.
Because of the complex, computer-intensive nature of their work, quantitative financial analysts—also called “quants” or financial engineers—are often recruited from the PhD pool of applied mathematicians, engineers, computer scientists, and even elementary particle physicists.
Jeremy Bernstein himself is an elementary particle physicist and a professor emeritus at the Stevens Institute of Technology in New Jersey. He was a staff writer for The New Yorker from 1961 until 1995, and his compact scientific biography of Albert Einstein, simply titled Einstein, was nominated for a National Book Award in 1974. Since then he's written over twenty books on physics, physicists, and other subjects, including mountain climbing.
With a background like that, Bernstein should be a sure bet. Of late, however, he’s been having a bad run. His two books published last year--Nuclear Weapons: What You Need to Know and Plutonium: A History of the World’s Most Dangerous Element—don’t deliver what their titles promise and often read like extemporaneous lectures directly transcribed into books. And we’re not talking Feynman-type lectures either. These books seriously needed a good editor.
It does seem that Bernstein has lost his muse, or maybe just his editor. He says in the acknowledgements at the beginning of his Plutonium book, “When I first started writing books, now some decades ago, they were made up of things that had first appeared in the New Yorker.” He then gives credit to that magazine’s longtime editor, the late William Shawn, for helping him learn how to write about science for the general public.
The publication of Physicists on Wall Street, a hodge-podge collection of essays on science, economics, and language, should set Mr. Shawn to spinning in his grave, if he has one. The book could provide nonfiction writing instructors with many examples of how not to write, starting with the first line in the preface: “Everyone has their own way of learning.”
(That could easily have been changed by an editor, or by Bernstein himself, to “Different people have different ways of learning.” Or at least it could be grammatically correct if it read “Everyone has his or her own way of learning.”)
If all the problems with Bernstein’s writing were so slight, things wouldn’t be so bad. But his narrative bounces around like it’s following the random walk or Brownian motion (also called the drunkard’s walk) that was analyzed statistically by Einstein in 1905 and put to use on Wall Street in the 1970s as something called the Black-Scholes formula.
For example, Bernstein writes this about a physics PhD named Emanuel Derman: “He interviewed at Salomon, where eventually he took a job for a very unhappy year, after which he returned to Goldman. One of the groups at Salomon that he interviewed with was one that had been handpicked by John Meriwether."
The mention of John Meriwether leads Bernstein off in another direction, into a discussion of Meriwether's ill-fated hedge fund, Long Term Capital Management, which financially imploded in 1998. That particular debacle, from which regulators of the financial industry seem to have learned nothing, is also described in the book When Genius Failed: The Rise and Fall of Long Term Capital Management, by Roger Lowenstein. Emanuel Derman tells his own story in My Life As a Quant: Reflections on Physics and Finance, published in 2004. Either of these would be a better choice for learning about Meriwether and Derman than Bernstein’s rambling anecdotal account.
Bernstein’s writing on science and scientists of various sorts is only slightly better than his discussion of stock market economics. And his writing about language and linguists is too lengthy to maintain the reader’s interest. Again, the problem seems to be a total lack of much-needed editing.
Bernstein at least does make one astute and timely comment about the financial markets. "The key to everything was the assumption that the market would behave rationally,” he says in a chapter called The Rise and Fall of the Quants. “This continuity of behavior was one of the assumptions, for example, that went into deriving the Black-Scholes formula. If in the Brownian motion, for example, the drunkard suddenly falls down a manhole, all bets are off."
That’s a pretty good description of what actually happened to the financial world just after Bernstein’s book was published in August 2008. The cover of the September 29th issue of The New Yorker tells that same story pictorially: a businessman walking in front of the New York Stock Exchange, preoccupied with a cell phone call, is about to step into an open manhole. The cover is titled "Downward Mobility."
