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If this book had a hero, it would probably be Sir Isaac Newton. Today
there is an entire branch of physics known as Newtonian. Newton made
great discoveries in mathematics, optics, and physics, and his formulation of
the lawof gravitation is still in use today. By the age of 23, he had developed a
workable version of calculus, and his thinking was ahead of any other
mathematician in Europe. As president of the Royal Society, Newton
became theworld’s first great administrator of science, laying the foundation
for the way research is conducted today.
In short, Newton was a true genius. Not just a very smart guy, but the real
deal, a man who could, by sheer force of intellect, uncover the deepest
mysteries of nature.
Yet, as this book will describe, when Newton deduced that a crash in
England’s young stock marketwas inevitable, he chose not to withdrawfrom
the market and lost the equivalent of over a million dollars (in today’s
money). He later commented ‘‘I can predict the motions of the planets, but
not the limits of human folly. ’’ His mistake looked much like that made by
many investors in America’s dot.com crash.
Sometimes apparently intelligent individuals, even geniuses, do things
that look exactly like stupidity. That is what this book is about.
In general, we don’t worry about smart people making stupid decisions.
We believe that having smart people involved in an enterprise means things
will turn out well. Smart people are well paid. Corporations, the
government, and academia seek them out for their talent. When things
gowrong,we look for smart people to fix them.Why? Becausewe think that
they will get it right. |