Complex Adaptive Systems in Finance and Strategy

� Mark White, PhD

Applying complex adaptive systems theory helps businesses and economies grow faster.

My work applies complex adaptive systems theory to strategy and finance. The results include a number of unique concepts that help create high-growth Adaptive Organizations and finance their continuing growth and diffusion.

Original results include:

"Kauffman's Law" applied -- technology grows combinatorially, and population grows exponentially. Since technology creates economic niches, superimposing its explosive chain reaction on humanity's slower-but-still-impressive growth means the global economy will soon have more niches than humanity has people to fill them. Web pages and the Internet will let each specialist find all their potential clients World-Wide
"Adaptation Curves" -- are to learning curves as fitness landscapes are to local fitness peaks. Adaptive organizations climb adaptation curves by constantly seeking better practices in accord with "Holland's Law:" Improvements are always possible and, indeed, occur regularly.
"Innovator Stock Ownership Programs" -- better practices are the true source of economic growth and wealth, so corporations should compensate innovations with stock and efforts with salaries. Improvements occur regularly, and proper incentives increase their frequency and scope.
"Common Practice" -- permits what it doesn't prohibit; Roman Practice prohibits what it doesn't permit. Since innovation creates wealth, the governmental practice that permits new private practices speeds up economic and technological development dramatically -- good news for Common Law nations and organizations, bad news for Roman Law nations and organizations.
"A Finance Research Agenda" -- for earning superior returns on substantial capital investments in trading, and for reforming the markets so those superior returns -- and their associated excess volatility -- become a thing of the past.

My various publications and working papers provide details and describe applications. Look for occasional major additions.

White's Three Organization Types:

Evolving from Static or Dynamic to Adaptive

Static Organizations: Fixed practices, fixed size. Like static equations, these organizations have no variables -- time doesn't change them significantly. They persist until some new organization occupies their niche.
Dynamic Organizations: Fixed practices, variable size. Like dynamic equations, these organizations vary in size over time, even though their underlying practices don't change much. They go through a single life cycle, each growing rapidly as it occupies its niche, then declining as its competitors implement better practices that steal away its clients.
Adaptive Organizations: Variable practices, variable size. Like complex adaptive systems, these organizations vary their practices, seeking the constant improvement that launches life cycle after life cycle, creating new products, services, and processes that hold on to clients generation after generation.

Adaptive organizations will soon motivate employees to climb adaptation curves by using ISOPs to fairly share the wealth that each innovation creates. ISOPs ensure that the innovator, the predecessors, and each shareholder in the corporation benefits.

Adaptive organizations will displace dynamic and static organizations in economic competition, so that within a generation, most people will have learned to expect continual improvement in their life experience. The fact that their ancestors once worked at the same job in the same way for an entire lifetime will seem almost as incredible as the fact that people used to stay at jobs they didn't thoroughly enjoy.

Links to other sites on the Web

Santa Fe Institute: leader in complex adaptive systems theory!
Euromoney: my article on the coming crash in diamond prices.
Euromoney: David Shirreff's precis on my new foreign exchange market design.
Arizona's Economic Science Lab, where Vernon Smith leads the profession.

CAS Theory Applied

See my Adaptation Page on the complex evolving Mexican and global economies.

See my Telecom and Economic Development Page on Mexico's most important infrastructure.

See my Microfinance Page on partnering with millions of entrepreneurs.

See my Trading Page on exploiting excess volatility.

See my Market Design Page on curing excess volatility.

Check back for more CAS Theory Applied pages on the way, such as Mexican Banking, and as always, new additions in the existing pages.

Please email me if you would like to know more about my work and my clients at
White & Associates in San Luis Rio Colorado, Sonora.

Dr. Mark White        PhD (University of Arizona '92 - Finance)
                      MS  (University of Arizona '83 - Mineral Economics)
                      AB  (University of Illinois '77  - Economics)

Publications, Presentations, Working Papers, and Papers in Process

A Columnist's Columnist: My Tom Petzinger Fan Page

Visitors here at 7891 Wall Street, Geocities, North America
since January 1, 1997

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