The Psychology of Money - An Investment Manager\'s Guide to Beating the Market

vesting is an art, not a science, as the saying goes. At that moment,

Phil Fortuna, director of quantitative research at Scudder, Stevens

& Clark and a former physics major, chimed in with a lucid expla-

nation of the Heisenberg Uncertainty Principle. (This was very lucky

for me, as I was dangerously close to trying to explain it myself.)

This principle states that when

observing a subatomic particle, one may choose to measure—

among other quantities—the particle’s position and its momen-

tum (a quantity defined as the particle’s mass times its velocity).

[But] these two quantities can never be measured simultaneously

with precision. We can either obtain a precise knowledge about

the particle’s position and remain completely ignorant about the

particle’s momentum (and thus about its velocity), or vice versa;

or we can have a rough and imprecise knowledge about both

quantities. The important point now is that this limitation has

nothing to do with the imperfection of our measuring techniques.

It is a principle limitation which is inherent in the atomic reality

[Capra, The Tao of Physics].

The last two sentences seem to address exactly the anguished

quantifier’s concern about his shortcomings in math. As in phys-

ics, the reality of investing may be that there is no Golden Rule

that applies to all situations, no matter how clever we are.

Another problem in both disciplines is the difficulty of measur-

ing effect—in other words, isolating what causes what. In the rela-

tivistic world of modern physics and investing, things get a bit

amorphous. Consider this description of the behavior of the elec-

tron by physicist Robert Oppenheimer:

If we ask, for instance, whether the position of the electron re-

mains the same, we must say “no”; if we ask whether the electron’s

position changes with time, we must say “no”; if we ask whether

the electron is at rest, we must say “no”; if we ask whether it is

in motion, we must say “no” [Oppenheimer, Science and the

Common Understanding, Simon & Schuster 1954].

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