Friedman, Fortune Tellers

I just finished reading Walter A. Friedman’s Fortune Tellers: The Story of America’s First Economic Forecasters (Princeton University Press, 2014), which I highly recommend. Readers will probably be familiar with some of the main characters, but in a depersonalized form—for instance, Babson action/reaction lines and Moody’s Investors Service. Other characters, such as Herbert Hoover and Irving Fisher, are rescued from the one-sided simplifications of history—failed president during the Great Depression, false prophet who claimed just prior to the 1929 crash that the stock market had reached “a permanently high plateau.”

Friedman accomplishes two main tasks in this book. First, he brings his characters to life, recounting their personal, intellectual, and entrepreneurial successes and travails, their pet social and political ideas—some that now seem appalling, and the battles they did with one another. Second, he describes the dominant styles of forecasting (and, by extension, investing) of the period, which remain with us today—“historical patterns, mathematical models, expectations, and empirical analogies.” (p. 210)

The book is a darned good read and belongs in the library of every investor and trader. After all, despite all protestations to the contrary, we are fortune tellers too.