Predator Prey, 04/30/06
We all know about ever-changing-cycles, what wasn't clear to me until yesterday, was the implied notion of 'continuous improvement' in the cycles.
A model:
Assume a predator - prey modelWhat happens?
Assume the market is made up solely of mechanical trading systems
Assume that every day new trading systems are injected into the market and old, failing ones removed
Assume that the majority of the new trading systems are incrementally better than prior population (some are better, some worse but as a whole they are just a bit better)
At each cycle, some prey are removed from the gameWho doesn't survive?
At each cycle, some predators become prey
At each cycle, old predators continue, but as a whole w/ reduced edge vs the young predators
The fixed predator as he eventually succumbs to the continuous improvement of the new predator systemsWho does survive?
No one. But it's the wrong question.Who thrives?
to be continued...What does volatility look like under Kurzweil's law of accelerating change?
to be continued...
What is so striking about this is the extent to which the model mirrors the circle of life.