Are All Complex Systems Always Unpredictable?

  • Kahneman, a statistically minded economist, in his book “Thinking, Fast and Slow” discusses that intuition can work in simple settings with limited outcomes, but not in complex systems such as the financial markets. Most of his reasoning is very statistics focused with some shades of psychology. As evidence, he presents the lack of statistical significance in the performance of professional money managers as a whole for outperforming the index.
  • Taleb, a former options trader, in his book “Antifragile” states that complex systems cannot be predicted. He considers complex systems driven by volatility and guided by responses to stressors. And he discusses concepts like Black Swans. Taleb dislikes the simplified mathematical and model based approach to finance and economics in the currently accepted theory. I also dislike and disagree with many parts of the current financial and economic theories.
  • Gladwell is a sociologist and in his book “Outliers” discusses the role of chance in drastic outcomes of highly successful people. He argues that people, who we consider outliers, got a lucky break at some point and their exceptional abilities were random and not predetermined. Luck is an important component in life and clearly a shaper of everyone’s future.
  • Thomson, a media writer, in his book “Hit Makers” uses his knowledge and background to illustrate the evolution of popular phenomena in film, music, graphic art and other forms of media. He traces the random instances that made an obscure media phenomenon become a global media phenomenon. He later discusses some ideas about predictability of hits and chaos theory and extends it to the spread of all new phenomena.
  • For compound interest one mode of damping is a progressive tax.
  • For Silicon Valley’s network effect some modes of damping are the high rent prices, traffic and talent shortage.
  • For a high growth disruptive startup the damping is the inefficiency of scale and bureaucracy of structures.

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Stephan Shahinian

Stephan Shahinian

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The Oracle — Best in the World @ Financial Markets, Macro-Economics, Identifying Geniuses, Forecasting Future