Sign of the times

Whatever history's ultimate judgement on its value and ethics, there can be no doubt that one of the most extraordinary phenomena of the late twentieth century has been dealing of shares, commodities, currencies, and futures.  The sums involved can be so mind-boggling - more profits made in a single transaction than most companies will earn in a year - that it is little wonder that the power-dressing phone-toting dealer has become one of modern life's defining icons.

It is interesting to note, then, that the whole industry resembles nothing so much as a race among extremely powerful and fast sports cars driven by a team of myopics unable to see much beyond their nose.  For it is a fact that among dealers the ability to predict the future and hence make a consistent killing by wrong-footing the opposition has been abysmal. 

To be sure, whenever a major crash - or market adjustment as it is usually called - occurs, there is always someone who happened to move their funds to the right place.  But come the next crash, it will, just as surely, be someone else.  The stockbroking and forex firms are themselves acutely aware of this failure, and invest many billions of pounds annually in a desperate attempt to find some structure in the world and its evolution.  To do this, they employ the so-called 'rocket scientists', highly-paid mathematicians whose job is to find patterns in the churning figures of the markets and indices of the world, and to extrapolate those shapes into the future.  As companies realise that any fool can buy and sell, but that it requires a genius to know when and what, so these new high-tech haruspicators are rapidly edging out the simple sales people.

But the sad fact is that for all the former's regression analyses and best fits, for all their computer modelled economies and scenarios, they are as blind and unscientific as their predecessors.  Since they have rightly realised that they cannot understand the world they work in - it is simply too complex, too 'chaotic' as the latest buzzword has it - they are reduced instead to spotting trends in the past and hoping that they might continue into the future, as any amateur gambler might. 

In their own defence they might plausibly point out that if the world is completely deterministic - and as good rocket scientists they must indeed believe this - then everything in the future is completely determined by the past.  True, the formulae governing that evolution will be too complex ever to solve, but there remains the hope that there will be parallel patterns to be discerned, simpler, correlated manifestations of the same immense equation.  Their desperate search for patterns, faint shadows of the universe's hidden machine, is the best they can do.

Theoretically they are right: if the universe is deterministic, everything is part of a whole, and is subtly but irrevocably related to everything else.  But one might with equal validity argue that commodities and markets are related to things like the tides, or the stars.  The logical conclusion of the rocket scientists' work would therefore seem to be that they should be replaced with an astrologer.

(23.12.91)

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