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Blog

Can ideas borrowed from physics lead us to financial recovery?

By Hamish Johnston

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Given the worsening economic conditions on both sides of the Atlantic, you might be surprised to hear that a telecoms company is spending $300m to shave 6 ms off the time it takes to make a transatlantic financial transaction. The current record is 65 ms.

Hibernia Atlantic has begun laying a 6021 km cable linking London to New York and the firm is confident it will earn its keep when it goes live in 2013.

The new cable will accelerate electronic trading based on computer algorithms that buy and sell without any human input. Indeed, an article in the Daily Telegraph claims that “a one millisecond advantage could be worth up to $100m (£63m) a year to the bottom line of a large hedge fund”.

Many of these algorithms will have been created by physicists who left academia to work in finance. But some in the industry blame these “rocket scientists” – and the techniques they borrowed from physics – for contributing to the economic crisis of 2008.

In this week’s Facebook poll we are asking “Can ideas borrowed from physics lead us to financial recovery?”. We’d like to hear what you think, so please feel free to explain your vote by posting a comment on the Facebook poll.

What do I think? I agree with Isaac Newton, who after losing a bundle in the South Sea Bubble apparently said “I can calculate the motions of heavenly bodies but not the madness of men”.

In last week’s poll we asked for your opinion of art–science collaborations. Nearly half said “I love them, they’re fantastic!”, whereas only 3% said “Who cares? They’re a total waste of time”. The other options were “Hmm, some are great, some are not”, which garnered 35% and “They can be okay, but I often don’t ‘get’ the point”, which appealed to 11%.

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