Mother Nature's Way

Here is a re-post of a blog I published back in October 2013 that perfectly describes what's going on right now.

So I went to a conference last week in Dallas where financial advisors from around the region gathered to discuss strategies for "High Performing Firms".  I was NOT enthusiastic about being there until Ren Cheng, PhD gave a kooky professor presentation on Systemic Risk.

I LOVED the guy.  We had a chance to talk one on one for several hours about what the implications are of his observations.  At one point this older Asian guy literally hugged me and closed out our conversation by saying, "I'm so glad other people are thinking about this stuff."

Basically, he is suggesting that since the year 2000 markets have become interconnected and therefore "normal" distributions of returns are unlikely going forward.  Watch the videos attached.  

The metronomes demonstrate what happens to "independent" non-human systems when they become connected:

Metronomes

The Millennium Bridge demonstrates human behavior when they become connected:   

London Millennium Bridge

Dr. Cheng is a math guy who says the geometry is the same for ALL large systems - Credit, Airlines, Internet, Cosmos, Energy, Food, S&P 500 Supply Chain... 

"Synchronization is mother nature's way."  

The question we are left with is: "How do we reduce interconnectedness?"  

That, my friends, will likely involve an entirely different set of skills - and the rest of my life!

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