Back in 1999, only a couple of years after I was appointed at Surrey, I went to a summer school on statistical physics, in St Andrews, Scotland. One of the lecturers was a guy called Jean-Phillippe Bouchaud. He gave some interesting lectures on the statistical physics of glasses, these are systems like window glass in which the molecules are stuck, at least most of the time. Since then our careers, and I suspect our salaries, have diverged. He is now senior management of France’s largest hedge fund, Capital Fund Management.
When my colleagues and I are running open days for prospective students, we do say that physics degrees can lead to well paid careers. That is clearly the case for Jean-Phillippe Bouchaud. I remember him wearing quite colourful t-shirts back in 1999, his wardrobe may be more formal now.
So, physics degrees can indeed lead to well paid careers, but can they save us from the incompetence and arrogance that gave us the 2008 financial meltdown? Bouchaud has some interesting things to say on this in an essay. It is on the arXiv here, and a version was published in Nature in 2008. It is well worth a read, and it is only a couple of pages.
In it Bouchaud says that the economists who contributed to the 2008 crash paid too much reliance on their models, and ignored the fact that, like most models, these relied on a number of assumptions, some of which are wrong. He suggests that they should be more like good scientists, who realise that a model is only ever an imperfect representation of a frequently messy and complex real world. I think these are good points, but I don’t know if economists will listen.
Chance & Necessity 