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 model

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)
What happens?
At each cycle, some prey are removed from the game

At each cycle, some predators become prey

At each cycle, old predators continue, but as a whole w/ reduced edge vs the young predators
Who doesn't survive?
The fixed predator as he eventually succumbs to the continuous improvement of the new predator systems
Who 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.

Henry Carstens
Vertical Solutions