Francis Galton: Investing lessons from a Victorian genius (Video 1/3)
Posted by Robin Powell on January 2, 2018
Some of us like stats, others prefer stories. Instinctively, like most journalists, I’m a story person. I’m fascinated in people, in news and historical events. I love making sense of complexity and identifying trends and patterns, even where they don’t exist.
Most of us, in fact, are story people. It’s part of who we are. From the dawn of human civilisation, storytelling has been the most effective way of transmitting meaning from one person to another.
But, in certain areas of life, our natural attachment to stories — our narrative bias, if you like — is not particularly helpful, and investing is undoubtedly one of them. What we really need to help us understand how investing and the financial markets work is a basic grasp of statistics.
That’s why I’m kicking off 2018 with a three-part series of videos about Sir Francis Galton, one of the pioneers of statistics as an academic discipline.
There’s much to dislike about Galton. He was a blatant sexist, an intellectual snob, and most people who’ve heard of him know him as a pioneer of eugenics, the distasteful idea that we can breed better people. Yet Galton was also a genius.
Although he was an expert on a wide range of subjects, he was primarily a statistician. His motto was “Whenever you can, count.” In fact he more or less invented what we now call big data.
In the second and third videos in this series, we’re going to look at two statistical concepts that Francis Galton developed which still serve as valuable lessons for investors today. But first, here’s an introduction to Galton the man and his extraordinary intellect.
Francis Galton: Flawed Genius is a three-part series of videos, produced by Regis Media, and commissioned by Index Fund Advisors, based in California. The Index Fund Advisors website, IFA.com, provides a wealth of information about evidence-based investing, and is a resource which professional and personal investors alike will find extremely valuable.
ROBIN POWELL is the founder and editor of The Evidence-Based Investor. A freelance journalist, he runs Regis Media, a specialist content marketing consultancy for financial advice firms around the world. You can follow him on Twitter and on LinkedIn.
The Evidence-Based Investor is produced by Regis Media, a boutique provider of content and social media management to financial advice firms around the world. For more information, visit our website and YouTube channel, or email Sam Willet or Christina Waider.
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Most people have never heard of him. But Sir Francis Galton was a Victorian genius. The word polymath hardly does justice to the breadth of his expertise.
Subhadra Das, curator of the Galton Laboratory at University College London says: “He was an African explorer, he was a meteorologist, but primarily he was a statistician. His motto was, wherever you can you should measure.”
Francis Galton was born here in Birmingham, England, in 1822. He knew Latin and Greek and could do long division by the age of five. At six, he was reading Shakespeare for fun. Not that his parents were particularly surprised, because genius ran in the family.
Subhadra Das says: “As this family tree shows, Francis Galton, who is probably the most important scientist that most people have never heard of, did have a cousin whom quite a lot of people will have heard of — Charles Darwin. They have a grandfather in common, Erasmus Darwin, who was a famous scientist in his own right.”
The is the Galton Laboratory at University College London. With the building due for demolition, the collection is currently in storage. It includes some fascinating items.
Subhadra Das says: “This is his personal, mobile, transportable finger-printing kit. Not a lot of people know that Galton is the person who worked out that the odds of two people having the same fingerprints is one in 64 billion, which is the basis of our criminal identification system today. He’s the one who did the maths to make that possible. And this was the kit he used to take around for taking the fingerprints of his friends. Apparently he used it to take the fingerprints of William Gladstone, who was Prime Minister at the time.”
And then there’s this tiny diary.
Subhadra Das says: “Sunday 12th June 1909. Asquith wrote about my knighthood. But just before that, it says something like, Eva came to tea. So, fairly nice and domestic.”
On the subject of tea, Galton applied his intellectual powers to that as well, even devising an algorithm for making the perfect cup.
Subhadra Das says: “And of course there’s the complementary paper on how to cut a cake on scientific principles. A lot of people think that this is quite humorous, and a very British and eccentric thing to be thinking about tea and cake, but anyone who has ever bought a cup of coffee from an automatic coffee machine will know that there is a mathematical principle that makes that possible.”
So, why does everyone know about his cousin Charles Darwin, but not Galton himself? Well, it’s fair to say he had some strange and, by modern tastes, fairly abhorrent ideas.
Subhadra Das says: “Most people will have heard of him because he came up with a particular term, and that term was eugenics — the idea that we can breed better people. Eugenics was a science. It was established here at University College London at the turn of the twentieth century, and was discredited because of the activities of the Nazis and Nazi science during the Second World War.”
One of Galton’s theories was that beauty and intelligence were connected. To produce intelligent children, you had to find a beautiful wife. Hence Galton’s beauty map of Britain. He compiled the data himself, using a pin concealed a in leather glove.
Subhadra Das says: “This is both a counting device and a rating device. So he could use the pin to make a hole in the paper. Every hole was a different number — one, two, three, four, five — and where the hole was on the paper was the rating. And for Galton, his rating was in three categories, which were attractive, indifferent and repellent. It’s a covert counting device as well, so you can imagine him as a gentleman of 64 standing on street corners with his hands in his pockets watching the girls go by.”
We don’t know what Francis Galton’s views were on the financial markets — he came from such a wealthy family that he didn’t really need to worry too much about investing — but he did develop two ideas which still serve as valuable lessons for investors today. We’re going to be looking at the first of those ideas in our next video.