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

Physics Hits the Street 
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cause he liked to sing and Harvard had a great glee club. from the very 
beginning, he was determined to chart his own course through aca-
demia. He refused to do the work he was assigned and instead wrote 
papers on topics he decided were interesting. After a few semesters 
of introductory courses, he decided to enroll in graduate classes. He 
picked an interdisciplinary major called “social relations,” which com-
bined several social science disciplines, and then promptly began con-
ducting experiments with himself as the subject. for instance, he would 
modify his sleep schedule, alternating between four hours awake and 
four hours asleep, all while taking careful and copious notes on how 
his body reacted. He began taking drugs, including hallucinogens, and 
tracking the effects. Most of his friends were graduate students.
come junior year, however, he started having second thoughts 
about his choice of major. Social relations was interesting, but Black 
wanted a career in research. Like osborne and thorp, Black was a 
natural-born scientist, constantly experimenting and coming up with 
theories to test, and he just didn’t see how social relations could get 
him the kind of job he wanted. So he turned toward the hard sciences, 
flirting with chemistry and biology before finally settling on physics. 
He wanted to do fundamental, theoretical work, and so the next year 
he applied to graduate school, once again only to Harvard, to do a Phd 
in theoretical physics. He won a prestigious national Science founda-
tion graduate student fellowship and Harvard admitted him. In the fall 
of 1959, Black started graduate school as a physicist.
But by the end of his first year, his attention had begun to stray 
again. He took only one physics course, filling his first year instead 
with electrical engineering, philosophy, and mathematics. He was a 
little interested in everything, but not enough interested in anything to 
stay focused for long. After just a few weeks, he switched departments, 
to study applied mathematics instead of physics; then, come spring 
semester, he was devoting all of his time to an artificial intelligence 
course at MIt, taught by AI pioneer Marvin Minsky; by fall 1960, he 
was back to the social sciences, taking two courses in psychology.
It would be wrong to say that Black did poorly in school. But his 
tack was certainly unconventional. on the one hand, he barely passed 
some courses — including the one physics course he enrolled in. dur-

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ing his second year he failed a psychology course because it empha-
sized “behavioralist” methods, while Black saw himself as aligned with 
the newer, more fashionable “cognitivist” school. But he was certainly 
one of the best minds at Harvard. In an open competition during his 
first year, he successfully solved a challenge problem offered by one of 
his mathematics professors, which earned him an endowed scholar-
ship for the following year. And so his abilities were never really in 
doubt. It is nonetheless easy to see oettinger’s worry: two years into 
graduate school, Black was no closer to settling on a major than he 
was as an undergraduate. If anything, the rate at which he swung from 
discipline to discipline was accelerating. As Black saw it, he was sim-
ply curious, and he wasn’t going to be pinned down by some stodgy 
old school’s rules about what constituted appropriate academic work
— even if it meant leaving Harvard.
Ultimately, Black did earn a Phd in applied mathematics. But he took 
the scenic route. When Harvard asked him to leave, he found a job 
at Bolt, Beranek and newman (BBn), a cambridge-based high-tech 
consulting firm. BBn hired Black because of his computer skills, and 
most of his time there was spent working on computerized data re-
trieval systems for a project commissioned by the council on Library 
resources. As part of this project, Black wrote a program that used 
formal logic to try to answer simple questions. the program would 
take an input such as “What is the capital of romania?” and try to 
deduce an answer based on a list of facts it had stored in a database. 
A major part of this project was devoted to simply parsing the ques-
tion, trying to determine what the questioner was even after. Black’s 
work represented an important early contribution to the field known 
as computational linguistics, in which people try to figure out how to 
make computers understand and produce natural language.
Word spread quickly around cambridge of Black’s work at BBn. 
In the spring of 1963, Minsky heard about Black’s question-answering 
program. He was sufficiently impressed — and sufficiently influential
— that he negotiated readmission to Harvard on Black’s behalf. Min-
sky took responsibility for Black’s work, with a professor at Harvard 
named Patrick fischer serving as the official advisor. over the next 
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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

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