Complexity and Market Order/Disorder: A Deep Read: Bexland

[Garpal Gumnut]

https://aeon.co/essays/complex-systems-science-allows-us-to-see-new-paths-forward

I have read this fascinating article from the Santa Fe Institute published in Aeon, a mine of useful information for the delinquent such as I.

It explores complexity in markets this year, the effect of black swans and the influence of the "last event" on future behaviour.

New entrants to complex systems as well as black swans and biases are explored.

I will re-read it a few times this weekend as it is what I call a bexland piece, wherein the reader needs a powder of bex after the first read to re-align the ears correctly outside the brain.

Just a taste.

One of the many challenges in designing systems that flourish under uncertainty is how to improve the quality of information available in the system. We are not perfect information processors. We make mistakes and have a partial, incomplete view of the world. The same is true of markets, as the investor Bill Miller has pointed out. This lack of individual omniscience can have positive and negative effects. From the system’s point of view, many windows on the world affords multiple independent (or semi-independent) assessments of the environment that provide a form of ‘collective intelligence’. However, each individual would also like a complete view, and so is motivated to copy, share and steal information from others. Copying and observation can facilitate individual learning, but at the same time tends to reduce the independence and diversity that’s valuable for the group as a whole. A commonly cited example is the so-called herd mentality of traders who, in seeing others sell, panic and sell their own shares.

gg

 

[ghotib]

Hi GG,

Reading this article sent me back to one of the best books of popular science and maths that I know of: "Chaos" by James Gleick. It's an easier read than the Aeon article, in spite of covering more material in more detail: no Bex required, IMO