the art & science of
FORECASTING
FIBONACCI’S ARITHMETIC REVOLUTION
A series of numbers known as the Fibonacci sequence revolutionized
commerce and science. But can it help traders pick the right stocks?
by Ed McKinley
A
13th-century Italian mathematician known these days as “Fibonacci” helped create the modern world of commerce and finance by introducing Hindu-Arabic numerals and mathematics to Western civilization. The decimal-based system he popularized in Europe arose in India in the 6th or 7th century and uses the numerals 0, 1, 2, 3, 4, 5, 6, 7, 8 and 9, notes Keith Devlin, a Stanford professor emeritus of mathematics who’s devoted three of his 33 books to Fibonacci. Before Fibonacci enlightened them, Westerners were still relying on clunky Roman numerals and counting on their fingers. That was holding them back in business, science and the arts, Devlin said. But Fibonacci set out to change that. In 1202, he published the book Liber Abaci— which is now spelled several different ways— to teach modern math in the Late Middle Ages. Yet the book’s revelations didn’t end there. Fibonacci wrote at length about how to run a business. That included the best practices for dividing profits, employing weights and measurements, dealing with foreign currency exchange rates, and assessing the value of the alloys contained in coins, Devlin said. Within 20 to 30 years of its publication, Liber Abaci helped establish the banking and
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