Review of The Predictors

Title:

The Predictors

Author:

Thomas A. Bass

Publisher:

Owl Books

Date:

2000

ISBN:

0-8050-5757-9

Pages:

309

Price:

$15.00

Reviewed by Nick Christenson, npc@lvrevealed.com

August 22, 2002

In my opinion, the most compelling evidence that self-proclaimed psychics cannot predict the future is that none of them are billionaires. I know with absolute certainty that if my predictions about what would happen one hour in the future were just 5% more accurate than random chance, I would have been able to retire to my own private island years ago. Predicting the future in this manner in a casino can make someone rich. Predicting the future in this manner in the world's capital markets, ... well, that's just in another league. Many people have claimed to have an edge in the casino of world finance, and most of those have wound up broke. In The Predictors, Thomas Bass chronicles the story of a group of scientists who use their expertise in the field of nonlinear dynamics (chaos theory) to try to beat the biggest casino of all.

In a previous book, the entertaining but unfortunately out-of-print Eudaemonic Pi, Bass chronicled the story of how a group of UC Santa Cruz students developed equipment, strategies, and procedures that allowed them to beat the game of roulette, at least when their equipment was working. In that book, Bass mentions, almost parenthetically, that members of this group were doing some research in the field of nonlinear dynamics, more commonly called chaos theory. What he didn't tell the readers is that this group of researchers performed some truly groundbreaking work that helped lead to fundamental breakthroughs in how scientists understand the natural world. In The Predictors, Bass chronicles the story of two members of this original group, Doyne Farmer and Norman Packard, as they try to use what they learned about predicting the behavior of chaotic systems to predict the movement of the financial markets.

In this book, Bass intertwines the development of the computer software that our heros hope will predict the market with profiles of the many colorful characters that are part of this story. At the same time, we also get a crash course in the recent history of successful and failed attempts for individuals and institutions to beat the market using increasingly sophisticated mathematical models. The author makes these complex topics accessible to a non-technical audience, although I'd expect that those without at least a mild feel for major financial markets could get lost in the maze of currency contracts, treasury bills, options, and even more complex instruments.

High finance aside, there's very little in this book that won't be accessible to the average reader. This has the potential to disappoint folks like myself who might be interested in more technical details. Little is mentioned concerning which mathematical theories our protagonists were attempting to exploit, although we are given some hints. Also, at times the author plays a little bit fast and loose describing the types of predictability that can be obtained using these theories. Nonetheless, the reader does get a feel for how difficult it is to bring a complex software project like this to life, even for a group as talented as the one depicted in this book.

While the Predictors may not appear to be a typical book about gambling, it definitely qualifies as one. This author and this crew have dabbled with the "regular" gambling world before. What these folks were attempting here is not substantially different than trying to find an edge at any other form of gambling. The only difference is that their endeavors are considered more credible by the "straight" world (if no more comprehensible), and the stakes are much higher.

I enjoyed reading Bass' book. It's a fun, well-written tale covering a longer period of time than I believe the author originally intended. Personally, I would have enjoyed an even more technical look at what they were doing, but despite this, the story remained interesting to me. I would have also very much enjoyed hearing about the events which occurred during the year following the conclusion of the book, but the author had to go to press with it at some point. People who think they might enjoy hearing about high finance and big bet gambling with a little science thrown in should enjoy this book.

Capsule:

Somewhat of a sequel to Bass' famous Eudaemonic Pi, several of the same cast of characters use their extreme mathematical skills to take on the biggest casino of them all: The world financial markets. This is an engaging tale which covers the range from new mathematical theories to high finance, although its coverage of the former is far less detailed than the latter. Anyone to whom this tale sounds appealing will probably enjoy this book. I did.

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