Capital Ideas : The Improbable Origins of Modern Wall Street

552 Pages·2012·3.34 MB·English

by  Bernstein

Contents
Acknowledgments
Introduction: The Revolution in the Wealth of Nations
Part I: Setting the Scene
Chapter 1: Are Stock Prices Predictable?
Part II: The Whole and the Parts
Chapter 2: Fourteen Pages to Fame
Chapter 3: The Interior Decorator Fallacy
Chapter 4: The Most Important Single Influence
Part III: The Demon of Chance
Chapter 5: Illusions, Molecules, and Trends
Chapter 6: Anticipating Prices Properly
Chapter 7: The Search for High P.Q.
Part IV: What Are Stocks Worth?
Chapter 8: The Best at the Price
Chapter 9: The Bombshell Assertions
Chapter 10: Risky Business
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Chapter 11: The Universal Financial Device
Part V: From Gown to Town
Chapter 12: The Constellation
Chapter 13: The Accountant for Risk
Chapter 14: The Ultimate Invention
Part VI: The Future
Chapter 15: The View from the Top of the Tower
Notes
Bibliography and Other Sources
Name Index
Subject Index
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Copyright © 2005 by Peter 1. Bernstein. All rights reserved.
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ISBN-13 978-0-471–73174-0
ISBN-10 0-471–73174-9
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For Barbara
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What is history all about if not the exquisite delight of
knowing the details and not only the abstract patterns?
•••
–Stephen Jay Gould
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Acknowledgments
All authors who undertake projects like this need help from
others. I have been unusually fortunate in having had such
generous and essential assistance from the people named
below.
The book could never have taken shape without the
participation of the people whose work it describes: Fischer
Black, Eugene Fama, William Fouse, Hayne Leland, Harry
Markowitz, John McQuown, Robert C. Merton, Merton
Miller, Franco Modigliani, Barr Rosenberg, Mark Rubinstein,
Paul Samuelson, Myron Scholes, William Sharpe, James
Tobin, Jack Treynor, and James Vertin. Each of them spent
long periods of time with me in interviews, and most of them
engaged in voluminous correspondence and telephone
conversations as well. All of them read drafts of the chapters
in which their work is discussed and gave me important
criticisms and suggestions that enrich virtually every page of
the book. Most of them also provided their photographs.
Each in his own way contributed to my understanding of the
subject matter well beyond the chapters that were their
immediate concern. In this regard, I hope I may be forgiven if
I single out Paul Samuelson, my friend of more than fifty
years. He served uncomplainingly as my mentor, inspiration,
and inexhaustible research associate from the very beginning;
the accumulation of handwritten wisdom that passed from his
fax to my fax is a treasure in itself. And my thanks as well to
Janice Murray, who made our communication so easy and
rewarding.
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I have also benefited from those who were kind enough to
undertake the onerous task of reading the complete
manuscript. Michael Granito, Bernard Obletz, Roger
Kennedy, Patricia Carry Stewart, and Byron Wien were
especially helpful in providing me with many suggestions,
which I have made every effort to put to good use. Richard
Brealey’s bounteous contribution to both the theoretical and
the historical aspects of the story was invaluable. Robert
Heilbroner, my oldest friend and sometime co-author,
combined painstaking editorial advice with broad critical
observations whose influence is apparent throughout.
I am deeply indebted to Peter Brodsky, Michael Keran,
William Lee, and Lawrence Seltzer, whose encouragement
after their careful reading of early drafts gave me the impetus
to carry on when the going was hardest.
Many other people helped in supplying or guiding me to
research material without which the project would have run
into sand early in the game. I am especially grateful to John
Brush, Richard Cowles, Charles D’Ambrosio, David Durand,
Charles Ellis, Martin Fridson, Charles Henry, Judith Kimball,
the staff of the Marlboro College Library in Marlboro, VT,
Donald McCloskey, Joseph Murphy, M. F. M. Osborne, Earle
Partridge, Edward Renshaw, Andrew Roy, Richard Russell,
Hugh Weed, and Richard West.
I owe a special debt to Martin Leibowitz. The orginal plan of
the book included a long section on the bond market, where
Leibowitz has been the acknowledged leader as both
theoretician and practitioner. When considerations of space
and format led me to restrict the subject matter to the equity
markets, I was unable to use the help that he had so
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