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Bacteria Behaviour Can Shed Light On How Financial Markets Work
notscientific writes "Bacteria invest in proteins in an attempt to reduce stress or increase energy intake, while humans invest in cash. In both cases, better tradeoffs pay off. The similarities in tradeoffs faced by both bacteria and humans during investment are actually quite similar. Now, using synthetic biology, a group of scientists has shown that the outcomes of investment decisions in bacteria can be precisely defined, alluding to the idea that human investment activities, such as financial markets, can be thoroughly understood as well, and even modelled."
It makes perfect sense. Both activities involve the same types of selective process that guides evolution in general, be it biological evolution or financial.
"Human" nature isn't all that human...
“He’s not deformed, he’s just drunk!”
or is that called cancer?
What's insightful about realizing that one can use disease-causing parasites to model disease-causing parasites?
...and modeled badly (e.g., anything quants have done in the last, well, ever). Even Oracle of Omaha has an implicit model when buying conservative stock that society needs (e.g., toothpaste). Models are everywhere... What an odd thing to assert about financial markets from interesting article on bacterial protein synthesis.
The last time the wonks tried going organic was was how leaf structure shows best networking. Problem with all this is that markets and networks are as far away from organic driven as they could be, so I don't see anything about this effort that bears interest, sorry.
High finance assholes see the rest of us as bacteria. Imagine that.
...that investment bankers and stockbrokers are a form of infectious disease?
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Wait, wait, work through this with me. Are you saying you're the only fountain of abuse on Slashdot? It was just you the whole time? This changes everything.
Bio questions? Ask me to start a Q&A journal. Computer analogies available for most topics!
And I run out of mod points!
Not the wisdom of crowds but the wisdom of crud.
Seven puppies were harmed during the making of this post.
> boom and bust cycles
and
> It explains why a single-celled, fat cat investor or Darwinian demon (a hypothetical organism) didn’t win out long ago.
We know why already -- these, along with predator-prey relationships, are all subsets of supply and demand. Differential equation modelling of predator-prey showed stability was, in fact, not possible. Like a breeze across the water, the relative ratios distort a bit, say, the prey become more numerous. The predators increase because the supply of food increases, and they overshoot, causing it to crash. This in turn causes predator populations to crash, allowing the prey to rebound.
The important thing was this cyclic up and down was the norm, not the exception. Any steady state immediately begins destabilizing .
The same for economic cycles, as born out by people putting housing or car purchases on hold.
And now the observation that investors getting the crap scared out of them by talk of huge tax increases doesn't seem so unlikely anymore, does it?
(Insert picture of Morhpeus here) What if I told you this outweighed government investment to spend out of a recession by an order of magnitude?
(-1: Post disagrees with my already-settled worldview) is not a valid mod option.
Every stock market model that I read about was successful right after a catastrophic event, when everyone in the stock market started to panic. You can model the stock market based on statistical algorithms if everyone in the market behaves rationally. Then a bubble starts to bubble up, then a crash happen, and then everyone panics.
I think the last one was the Black–Scholes–Merton model but there could be more recent ones.
http://www.mueller-public.de - My site http://www.anr-institute.com/ - Advanced Natural Research Institute
Ruthless greed until the host is dead, short term profit and manipulation of the "hosts" to get more profit. The only thing missing in the model is HFT
I was promised a flying car. Where is my flying car?
Actually, high frequency trading is a cancer on the economy.
"Understanding how populations and communities respond to competition is a central concern of ecology. A seminal theoretical solution first formalised by Levins (and re-derived in multiple fields) showed that, in theory, the form of a trade-off should determine the outcome of competition. While this has become a central postulate in ecology it has evaded experimental verification, not least because of substantial technical obstacles. We here solve the experimental problems by employing synthetic ecology. We engineer strains of Escherichia coli with fixed resource allocations enabling accurate measurement of trade-off shapes between bacterial survival and multiplication in multiple environments. A mathematical chemostat model predicts different, and experimentally verified, trajectories of gene frequency changes as a function of condition-specific trade-offs. The results support Levins' postulate and demonstrates that otherwise paradoxical alternative outcomes witnessed in subtly different conditions are predictable."
YES both biological and financial systems involve trade-off and evolutionary dynamics. NO those are still not necessarily good analogues for one another......
That's too simplistic a model. Think something like the bacteria in your gut. We need bacteria there to help our body digest food. However, if you get too many of the wrong sort (lets call these "greedy" bacteria) or they get out of your gut and into other parts of your body then they can make you really ill or even kill you. In the same way our financial markets and services are needed to make our economy work well. However get too many greedy financial people or have them start infecting other areas of our society - like, say, government - and just like our bodies our society will get very ill.
Both growing and multiplying even if they should know that their host cannot withstand that onslaught and that it will eventually kill off the very thing that feeds them... yes, the parallel is apt.
We used to have a Bill of Rights. Now, with the rights gone, all we have left is the bill.
Who ever would have thought it!
With this information, I'm going to develop some software that will beat those old fashoined super rich finance institutions with their stone age distrust of technology and make myself super rich!
Im not taking any chances. I'm going to Walk Street with a case of Lysol.
Any insufficiently advanced magic is indistinguishable from technology.
Since those that control the financial markets are on a moral par with pond scum.
... investment bankers and stock brokers have the morality and intelligence of bacteria.
If there is something that could model the stock market, then everybody would be rich. Since that's not possible, a few people could get rich using an accurate model, but that only works as long as the model isn't used by everybody -- eventually it will fail and many will get hurt.
You can make your model as complicated as you like, using as many variables as you like. If someone else knows you're using it, they can scam you out of your money.
Can bacteria make irrational decisions?
How appropriate...
Investment bankers are slime, a large enough population of bacteria forms a slime, so slime (bacteria) as a model predictor for investment bankers should make perfect sense.
"Everyone is entitled to their own opinion, but not their own facts." ~The Honorable Daniel Patrick Moynihan
In the end, this line of thinking will lead to synthetic bacteria that are (the other way around) modeled on activities of financial actors (if people find the link between these two fields to be worth strengthening.) no, thanks.
So the financial markets are the pond scum of humanity after all.
lost me at
The similarities...are actually quite similar
You can model this behavior because the participants are not self aware.
With humans, if behavior can be modeled then one or more of the participants can discern that model, and take actions to disrupt it (for profit).
So from the outside a real market with humans in involved is pretty much always going to be an unpredictable chaotic system.
"There is more worth loving than we have strength to love." - Brian Jay Stanley
Now I've just got to figure out how to hook a bacteria up to a day-trading system to make me money.
Two points
First slashdot summary tells about financial markets, TFA talks about businesses. I understand that businesses are dwarfs in financial markets, that vast majority of transactions being financial products non based on real economy.
Second, financial markets are more like lemmings than bacterias. They have nasty group behavior that cause all actors to jump into the sea at the same time. Surprisingly, bacterias look to fit neoclassic economy models better than humans, as their decisions seem more rationals.
Can bacteria engage is criminal fraud and scam people across the planet with CDOs?
I didn't think so.
This is bullshit science
I do not believe in karma. "Funny"=-6. Do good and forbid evil. Yours, Oft-Offtopic Flamebaiting Troll.
hasn't taken a course in it. There are many relations between variables which DO have predictive power. From first semester macroeconomics come the graphs illustrating the relations between interest rate, money supply, and foreign exchange rate....
Above dowmodded due to its excessive truthfulness.
... but I had no idea they were single-celled orginisms trapped in a human body!
THINK! It's patriotic
Wait, aren't financial markets NP Hard?