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Tackle Today: When genius failed

December 4, 2019

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Tackle Today: When genius failed (Photo by Philipp Sewing on Unsplash)

« Stock market ≠ Physics »

The main purpose of Physics is to understand how the Universe behaves. Through centuries, it turned out to be one of the most fundamental scientific disciplines, studying the matter, its motion, energy and force, and its behavior through space and time.

Then we have economists, hedge fund managers, financiers, wealth managers, traders, investors and also the casual Indiana Joneses, adventurers of the markets seeking hidden treasures in the deeps of the forest. The deterministic laws of physics look very attractive to them from the perspective that a certain interaction can produce a certain outcome that is 100% predictable through calculations. What a luxury.

Once upon a time, there was this guy named Isaac Newton that way back in the spring of 1720, owned shares in the South Sea Company, the hottest stock in England at that time. Many would think that because he was a genius in Physics, his knowledge and wisdom would necessarily apply to the stock market, right?

“I can calculate the motion of heavenly bodies, but not the madness of people.”

RIP Sir Isaac Newton.

Although most of the market participants like to play Procrustes, forcing their investment or economic theories to fit into their spreadsheet no matter what, stretching them or cutting off their legs, we don’t have the luxury of predicting the motion of financial market bodies through complex calculations. The stock market is pure human behavior at least until we get run over by AI. Then, and only then, we can rejoice in pure algorithmic behavior led by quantum paranoic computers.

Until then, we will continue to envy physicists.


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When genius failed

South Sea Stock and Isaac Newton: December 1718 - December 1721

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