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The Modular-Finance Matrix
  • Complexity Economics
  • Multiple Modalities 
  • Design Thinking
  • Adaptive Markets
  • Street Smarts
  • New Smarts
  • Imagination
  • Artificial Intelligence
  • Game Theory
  • Multiple Models
  •  Orgel's Rules 
  • Big Data
  • Worldly Wisdom  
  • Emergence
  •  Machine Learning 
  •  Combinatory Play

Welcome to MAIN & WALL University

The Institute for Modular-Finance...™

StreetSmarts 4 The Game of Life...

 

Man & Machine beats Man or Machine... 

The World of Finance in The 21st Century...

MFiM... Modular-Finance~in~Motion...™

Complexity / Chaos / Culture / Catastrophe / Cybernetics / Neuroscience / Cognitive Psychology / Behavioral Finance / Anthropology / Efficient Markets / Adaptive Markets / Radical Markets / Biomimicry / Multiple Models / Wicked Problems / Design Thinking / Lean Startup / Blue Ocean / Inductive Reasoning / Deductive Reasoning / Agent Based Modeling / Systems Thinking / Humility / Combinatory Play / Radical Transparency / Principles / Integrative Thinking / Stationarity / Modularity / Reflexivity / Metacognition / Capitalism 4.0 / The Fourth Industrial Revolution / The Third Wave / Code / Recode / Decode /  ReThink / Unlearn / Blink / Factor Investing / ESG / EBI / HFT / Just Capital / Financial Economics / Emergent Behavior / Antifragility / Fat Tails / Fat Tony / Black Swans / Generation Flux / Thermodynamics / Asymmetrical Information / Asymmetrical Math / Fractal Geometry / Big Data / Data Science / Artificial Intelligence / Machine Learning / Algorithmic Trading / Game Theory / Shareholder Value / Stakeholder Theory / Wisdom of Crowds / Madness of Mobs / Skin in the Game / Nudge / Ubiquity / Udacity / Obliquity / Optionality / Animal Spirits / Orgel's Rules / Entropy / Information / Imagination / Competition / Evolution / ATBPO ~ And The Band Plays On... / MFiM ~  It's not rocket science... It's more complicated than that...

 

Key Components of Modular-Finance*...

Complexity Economics - Adaptive Markets - Multiple Models - Orgel's Rules

Business Intelligence:

Design Thinking & Systems Thinking

Machine Intelligence:

Big Data - Machine Learning - Artificial Intelligence

Human Intelligence:

Street Smarts - New Smarts -  Worldly Wisdom - Principles - Imagination - Humility - Combinatory Play


During a visit to the London School of Economics as the 2008 financial crisis was reaching its climax, Queen Elizabeth asked the question that no doubt was on the minds of many of her subjects; "Why did nobody see it coming?" The response, especially by the University of Chicago economist Robert Lucus was blunt: Economics could not give useful service for the 2008 crisis because economic theory has established that it cannont predict such a crisis. As John Kay writes, "Faced with such a response, a wise sovereign will seek counsel elsewhere." And so might we all.

Hat tip ~ Richard Bookstaber - The End of Theory

 

Modularity, Evolution & Emergence:

The Design Principle and Behavior of Complex Adaptive Systems

The Adaptive Market Hypothesis

The Adaptive Market Hypothesis is based on the insight that investors and financial markets behave more like biology than physics, comprising a population of living organisms competing to survive, not a collection of inanimate objects subject to immutable laws of motion. This simple truth has far-reaching implications. For one thing, it implies that the principles of evolution - competition, innovation, reproduction, and adaptation - are more useful for understanding yhe inner workings of the financial industry than the physics-like principles of rational economic analysis. ...

Math is Overated

For the past 50 years, academic finance has been dominated by highly mathematical models and methods that derived from phyics. These sophisticated quanitative techniques spawned a wave of financial innovation, and triggered an evolutionary change within the world of finance. However, Lo argues that despite the advantages these advanced quantitative techniques provided, this mass "mathematization" of finance has significant flaws.

Finance isn't physics, despite the similarities between the physics of heat conduction and the mathematics of derivative securities, for example. The difference is human behavior and the role of evolution in its development....The financial crisis showed us that investors, portfolio managers, and regulators do have feelings, even if those feelings were mostly disappointment and regret during the last few years. Financial economics is much harder than physics.

"The good news is that, contrary to common perception, math for its own sake does not get you far in the economics profession. What's valued is "smarts": the ability to shed new light on an old topic, make an intractable problem soluble, or devise an ingenious new empirical approach to a substantive question. In fact, the emphasis on mathematical methods in economics is long past its peak."

Trading Economics: a new theoretical system

Hat tip ~ Wang Zhenying

Crisis destroy, but crisis also create.

The outbreak of each crisis gives rise to new economic theories. Marx's theory of Surplus Value was created amist frequent economic crisis in the late 19th century and Keynes's revolutionary theory was put forward during the Great Depression in the 1930's. Today, with a worldwide financial tsunami only now receding, people are expecting a new economic theory in response to the failure of the pre-crisis mainstream.

"What the human being is best at doing is interpreting all new information so that prior conclusions remain intact."

~ Warren Buffett

Connecting The Dots:

As Maria Popova puts it, "In order for us to truly create and contribute to the world, we have to be able to connect countless dots, to cross-pollinate ideas from a wealth of disciplines, to combine and recombine these pieces and build new castles." This understanding of creativity as connection and recombination makes the blank piece of paper not only unhelpful but actually counterproductive. So, ditch it.

Design Thinking:

In Design Thinking & Systems Thinking,  We must start with ....What IS....and work from there...


Financial Graph

Complex Adaptive Systems

Ant colonies, bird flocks, rain forests, business, organizations, communities, the stock market, and the global economy all have something in common. They are complex adaptive systems. "Complex" means composed of many parts which are joined (literally twisted) together. "Adaptive" refers to the fact that all living systems dynamically adapt to their constantly changing environments as they strive to survive and thrive. "System" means everything is interconnected and interdependent.

Complexity represents the middle area between static order on one end and chaos at the other. Thus, complexity is sometimes called the edge of chaos. If we think of static order as ice and chaos as water vapor, complexity would be liquid water.


Using powerful computers, scientists from a wide range of fields, including some Nobel Prize winners, have developed special models. On screen, they simulate the evolution and changes that occur as complex adaptive systems move, adapt, survive, and thrive — or, if their strategies are wrong, die.

Unlike non-adaptive complex systems like the weather, complex adaptive systems have the ability to internalize information, learn, and modify their behavior (evolve) as they adapt to changes in their environments. In other words, they have brains and are intelligent systems.


Complexity Economics

Complexity economics is the application of complexity science to the problems of economics. It is one of the four "C's" of a new paradigm surfacing in the field of economics. The four C's are:

  • Complexity
  • Chaos
  • Catastrophe
  • Cybernetics