Self organization, from Zubin Al Genubi

February 28, 2023 |

The concept of pattern-formation as a result of self-organization is common in such disciplines as chemistry and physics. For instance, in Chapter 1 we discussed the patterns formed by the Belousov-Zhabotinsky reaction, the ripples on a sand dune, and Bénard convection.

The challenge, is to see whether particular instances of adaptive, group-level pattern formation can be explained largely or fully in terms of a small set of relatively simple behavioral rules for members of the group. These rules are often implemented in the form of a mathematical model or simulation.

Interesting definitions found useful for markets:

A Pattern is an arrangement in time or space. It is created internally without external direction. It is created locally by individual element's reaction to nearby changes without larger awareness or control. The complex patterns result from simple local rules. Very market appropriate.

How does self organization occur? Random fluctuations and positive feedback can form patterns or trends. Humans follow rules, I do what you do. Sygmergy, information from work in progress, such as chart patterns, can accelerate creation of patterns.

Self organization in complex systems exhibits emergent properties known as changing cycles such as Bernard cells. Change occurs due to positive and negative feedback, outside influence, information from neighbors, stigmergy. Self organizing systems can be quantified and modeled! They tend to be stable but can exist in chaotic states, chaos meaning without pattern. Alternatives to self organization are: Leaders (powell), blueprint, recipe.

Nils Poertner writes:

probably a good book to read indeed - thanks for sharing.

yeah. in the human created world - we tend to think leaders run the show - and they do- to some extent
but obviously it is left-brainy to think that is all and not a way make money from (e.g ppl looking at the lips of Powell to trade the next tick…..close to insanity - that is). it is more a mass psych kind of game.

Zubin Al Genubi adds:

Schools of fish self organize to avoid predators. The are able to coordinate by the Trafalgar effect where communication with neighbors is fast like Lord Nelsons ships. Traders self organize - bulls v bears. What is their mode of communication? Volume, tape, executions, speed, change, amount of change, order depth, density of trades, resting orders, many others which could be quantified.

Nils Poertner responds:

fish don't get the clue from adjacent fish (alone) - - they "tap" in their common field (morphogenic field) of that special group - see Sheldrake on this note it is "same" time almost. wild animals have this super- power since they think less - thinking (the cousin is worrying) seem to interfere here (actually in theory humans have the same). can*t verify this but Sheldrake says: the idea is that the brain of animals (also humans) is more like a receiver and sender at the same time - sort of like a TV that emits as well memory is not in the brain per se.

Zubin Al Genubi replies:

It's possible to build a simple model for fish schooling based solely on reaction to the neighboring fish. I wonder if trader behavior might be modeled with similar simple parameters. Trader buys when other traders buy. Trader sells when others sell. Negative feed back starts as buying slows. Test parameters.

H. Humbert responds:

Morphogenic fields are contained within the organism and used for cell coordination such as embryonic development, so it's hard to believe that the fish respond to it as a group. As for morphic resonance pioneered by Sheldrake, while I think it's a promising idea that would explain a lot, casually using it to explain simple events without extraordinary proof is like using some random primitive god to explain natural phenomena. If he is right, than we have to discard most of our knowledge about biology, psychology, etc.

It also seems that modeling traders, many of whom are equipped with machine learning devices, and many who like to buy when others sell, as fish relying on a couple of sensory signals seems too simple to predict the future. Seeing clouds and predicting rain kind of works, but it's not a good starting point for weather modeling by an individual in modern times given the state of the art.

Nils Poertner replies:

Yes probably. But then a lot of older cultures knew it all the way already. see Amazon tribes people or study Carlos Castaneda. Sheldrake found some statistical evidence of telepathy in rare occasions. I don't know to what extent that is correct - for my own purpose I am interested in "intuition" which is somehow linked to telepathy eg being a tad earlier in mkts than others etc.

[Re: Sheldrake: below, a review of Sheldrake's A New Science of Life. -Ed.]

A Book for Burning? by John Maddox, Nature, Sept 1981

As things are, however, Sheldrake's book is a splendid illustration of the widespread public misconception of what science is about….Sheldrake's hypothesis is no better than the hypothesis that a person equipped with a water-divining rod is able to detect subterranean water as a consequence of some intervening "field" generated by the presence of water, and his proposals for experimental tests no better than the argument that since water-diviners succeed in making money, there must be something in the theory.

H. Humbert writes:

As I mentioned, using this theory without proof is like using some primitive deity to explain rainstorms and earthquakes. But I wouldn't be as adamant as the reviewer in attacking it. It has puzzled me for a long time that so many people somehow don't recognize that there is something fundamental missing about our understanding of reality, and different aspects of it. Like when people start talking abut AI becoming sentient while we have no clue about what it really means to feel pain or see colors in the human sense from any kind of scientific point of view (vs having some regions of the brain light up). Or what I mentioned about how various instincts/behaviors are inherited by animals. Like can 20,000 or so genes, mostly used to encode the creation of proteins, really transmit to animals what foods to like, how to have sex, how to be afraid of certain predators, how to fly south from Maryland to Brazil over the Gulf of Mexico and predict hurricane seasons fairly well, or a thousand other complex concepts. Or more fundamentally, what enforces various laws of physics over vast regions of space. So strange theories that try to explain the nature of the universe shouldn't be so easily rejected even if they lack in the scientific method orthodoxy.

Nils Poertner comments:

good that people here are skeptical. as always - for traders - believe nothing, verify things for yourself
(and start with things that are relevant and simple) and go from there.

Comments

1 Comment so far

Rick Ellis on February 28, 2023 8:08 pm
FA Hayak makes the point that Capitalism is the result of self-organization as opposed to top-down socialist thinking in his book “The Fatal Conceit, The Errors of Socialism”

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