The Physics of Wall Street: a brief History of Predicting the Unpredictable

Animals, translated as Aelian (1959 [200 a.d.]).
168
“An ancient Indian astrologer . . .”: See Bhat (1981).
168
“. . . he and Sauron published a paper . . .”: this paper was Sornette and Sor-
nette (1996).
169 
“It was not the very first paper . . .”: the most important precursors 
to the Sornettes’ idea were vere-Jones (1977), Allegre et al. (1982), Smalley and turcotte 
(1985), and voight (1988).
169
“The moment of inspiration came two years later . . .”: this moment 
occurred while Sornette was working for Aérospatiale. It was developed in conjunction 
with pressure tanks in a series of publications over the following years, beginning with 
Sornette and vanneste (1992), followed by Sornette et al. (1992), vanneste and Sornette 
(1992), and Sornette and vanneste (1994). the discovery of the log-periodic acoustic 
emissions before a critical rupture was first presented in detail in Anifrani (1995). this 
idea was then tested experimentally, and results were presented in Lamaignère et al. 
(1996, 1997) and Johansen and Sornette (2000).
170 “. . . predict a critical earthquake . . .”: Sornette and collaborators first intro-
duced the idea of a critical earthquake in Sornette and Sammis (1995), building on ideas 
presented by Bufe and varnes (1993). the idea was then elaborated in Sammis et al. 
(1996), Saleur et al. (1996a, b), Johansen et al. (1996), and Huang et al. (1998). the idea 
was tested experimentally in Bowman et al. (1998).
170
“On Monday, October 27, 1997 . . .”: these numbers are from the U.S. Securities 
and exchange commission (1998).
171 “Sornette and Ledoit, however, made a 400% profit”: See Sornette (2003, p. 
250).
171
“Historians now explain the worldwide crash . . .”: See, for instance, radelet 
and Sachs (2000).
172 “Critical phenomena often have . . .”: See, for instance, Batterman (2002) and 

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t h e p h y s i c s o f wa l l s t r e e t
references therein for a detailed account of the role of universality in the study of critical 
phenomena.
173 “Sornette’s first foray into economics . . .”: the first paper with Bouchaud was 
Bouchaud and Sornette (1994).
173
“. . . realized that Sornette’s earlier work . . .”: the first paper on this topic was 
Sornette (1996); it was greatly expanded the following year in Sornette and Johansen 
(1997).
174 “. . . in 1841, Charles Mackay wrote a book . . .”: this is Mackay (1841).
174
“Perhaps the most striking example . . .”: for more on tulip mania, see dash 
(1999) and Goldgar (2007); for another, more skeptical perspective, see thompson 
(2007).
175 “That winter, a single bulb . . .”: these numbers are from dash (1999).
176 “Since first predicting the October 1997 crash . . .”: See the description of his 
predictions in Sornette (2003); my reports on his more recent successes are from private 
communication.
178 “. . . he calls them ‘dragon kings’”: See Sornette (2009).
8. A new Manhattan Project
181 “Pia Malaney put her arms on the table . . .”: Again, this opening section is a 
dramatization, but the essential facts are correct. Malaney and Weinstein’s story has not 
been told before. the version presented here is told from their point of view — including 
their speculations about the motivations of some of the principal characters involved —
and is based primarily on numerous interviews with Weinstein, as well as an interview 
with Malaney and an interview with Lee Smolin. Malaney and Weinstein read an earlier 
draft of the chapter and offered helpful comments on tone and accuracy.
183 “How much is money worth?”: for background on index numbers, see 
Mankiw (2012) and Krugman and Wells (2009). for more detailed discussions, see tur-
vey (2004), Barnett and chauvet (2010), Handa (2000), or Allen (1975).
185 “In June 1995 the U.S. Senate appointed . . .”: See Boskin et al. (1996) for the 
final report, as well as Boskin et al. (1998). Histories of the Boskin commission can be 
found in Sheehan (2010), Baker (1998), Baker and Weisbrot (1999), and Gordon (2006). 
An account of how the Bureau of Labor Statistics responded to the Boskin report can be 
found in Greenlees (2006).
185