On the Effects of Chaos and Turbulence in Game Theory.
Back in the 1980’s, three books came into prominence that taught me more than I have ever been able to share with any single person. Those books were “The Fractal Geometry of Nature” by Benoit Mandelbrot, then an IBM research fellow, and two books by author James Gleick, “Chaos”, and “Genius”, the definitive biography of physicist Richard Feynmand, whose bandwidth and multi-dimensional intellect made him look like Einstein on Brain steroids.
Fractal Theory emerged from IBM’s Research Fellowship program, and the work of one of its scientists, the now legendary Mandelbrot. It found the mathematical relationships in all of nature that defined a nearly infinite range of relationships existent in nature, from the form and formation of shorelines, to the shape snowflakes, to the design of radio antennas, and more, much more.
At about the same time, the great weather researcher Lorenz was defining his “strange attractor” theories, of particular relevance to weather events and forecasting. In the early 1980’s, Gleick, who was then the Science Editor of the New York Times Magazine Section began a series of articles on the whole new emerging science of “Chaos Theory”. He covered the spectrum in a radically intelligible way, and in the process captured the imagination of thousands of arm chair scientists, inventors and tinkerers worldwide.
That led to him compounding the content of his articles with transitional pieces on this space, resulting in his publication of the book “Chaos”, which became a non-fiction science and general information NY Times bestseller. The opening quote was of what was represented to be the last words of Feynman on his death bed, just before his life would be taken by the second recurrence of Stomach cancer. It was: “If only someone could have understood turbulence.”
His next book would in fact be the definitive biography of Physicist Richard Feynman, who at 23 was the youngest scientist in what became the Atom Bomb’s Manhattan project at Los Alamos. “Genius” is a breath-taking description of Feynman as both a human being and an analytical superman, and it remains on of the few I have re-read more than once, along with “American Caesar”, the great William Manchester biography of Douglas MacArthur.
Unbeknownst to Feynman, some 30 plus scientists and teams in many different disciplines had been working for decades towards a common goal of understanding systems all of which shared a common link: They all had sensitivities to initial conditions of their existence, which in turn could be used to predict and model their eventual outcomes. From such a simple description came a whole new world of science, one that today impacts thousands of spaces of knowledge, and even the design of products, particularly those with ergonomic implications and intersections.
How could such a thing happen, that 30 plus disciplines could be on the same path and not know it? It was a result of the insularity of academia, and that each of these parties were publishing similar findings, but they didn’t go to the same conferences, or talk about the same subjects, or publish in the same journals. That was all to change, and there began a whole new world of sharing and communication, which is up and down, but mostly up.
How can this be significant to the average reader? Everyone needs to understand that everything in the world is linked, no matter how random outcomes may appear to be. One recurring question used to describe this to a non-technical professional is now deemed to be an old one: “Does the flapping of a butterfly’s wings in Brazil eventually cause a Typhoon and Tsunami in Japan?”
The answer is maybe it does, but you have to look at everything.
Our financial system today now seems to be racked by chaotic, turbulent and supposedly unpredictable behavior. Nothing could really be further from the truth, and the best and the brightest have used this knowledge for both good and bad, by integrating an understanding of this mathematically predictable behavior of turbulent systems with the disciplines of Von Neumann’s gaming theory. I have heard other writers recently speak of the system being “gamed”, when they have no real understanding of what is going on, or what is possible.
The answer is that if you think you have a problem down to one variable being controlling, you don’t understand the system or the problem. Years ago, I saw an incredibly well executed presentation to the executive team at a major Wall Street firm. The slides and charts were both beautiful and entertaining. The big problem was they were also wrong, terribly wrong and simple minded.
This million dollar presentation had completely missed the inter-linked elements, and the non-linearity of the related statistics. The presenter was proud of his work and graciously accepted the kudos of the senior managers in the vast audience. Then he made a fatal mistake: He asked if anyone had any questions. There was just one that ended the meeting: “Isn’t this a non-linear problem? And if it is so, what does this do to your analysis?”
Everyone should think about this every time they see a chart. And that really is all there is.