Mark Buchanan, physicist and former editor of the magazines Nature and New Scientist, presents in his book 'The Social Atom' (published by Em Oved, translated by Ward Ill-Saldinger) a competing approach to the accepted concepts of economics and social sciences
The 'monkey' is the regular gimmick of many economic supplements. Place a number of expert economists from leading investment houses, give them an imaginary sum of money and let them compete against each other in obtaining returns. Another competitor is the 'monkey': an investor who acts completely randomly.
But the monkey, for all his stupidity, almost always ends up in respectable places in these competitions. Sometimes he even wins. why?
Mark Buchanan, physicist and former editor of the magazines Nature and New Scientist, presents in his book 'The Social Atom' (published by Am Oved, translated by Ward Ill-Saldinger) a competing approach to the accepted concepts of economics and social sciences.
The classical economists assume in their predictions that humans are logical and selfish creatures: an investor will always buy at the cheapest price, sell at the highest price and act out of narrow interest (in other words, greed). Society researchers, on the other hand, assume that humans are actually irrational creatures: so unpredictable that any attempt to explain large-scale social phenomena is doomed to failure.
The 'social atom' is part of a growing trend of changing this perception. Buchanan claims that both the economists and the social researchers of the previous generations miss a big deal: humans are not rational and selfish on the one hand, nor are they unpredictable on the other hand. If we assume that humans behave according to a set of simple rules, it is possible to understand phenomena that we once believed to be completely random and incomprehensible. This new premise could also explain why the monkey beats the experts time and time again.
Sound weird? Here is an example. Every year in Jerusalem the prayer "Blessing of the Priests" is held. The alleys of the old city are crowded with people coming and going to the Western Wall, and especially at the gates of the walls. The marching crowd divides into clear 'flows': a flow of people entering and a flow of people leaving. The division is so clear that it seems as if someone has placed fences and directed the audience accordingly - but in truth the currents are created completely spontaneously.
If it is assumed that each person walks randomly, it is impossible to understand the phenomenon of the formation of currents in the crowd - but if we start from the assumption that each person strives for a minimum of friction with his neighbors, the answer jumps out immediately. In a stream of people moving in the same direction, friction is minimal. All who walk the path find themselves naturally drawn to an existing current, as any other path will only increase the difficulty of the walk. Hence, even a weak and random flow of people will increase and strengthen naturally, thanks to one simple behavioral rule.
In 'The Social Atom', Mark Buchanan reviews a long series of examples and cases from the field of economics and sociology that classical science is powerless to face, such as the inability to predict the behavior of the stock market, and offers them alternative explanations based on simple laws such as the 'Law of Friction'. If it is assumed, for example, that humans make economic decisions based on a combination of irrational gut feelings and learning the lessons of the past - computer simulations can be created that demonstrate how any attempt by an economic expert to predict the stock market is doomed to achieve the same results on average that the monkey achieves.
A well-known joke about physicists tells of a physicist who is asked to predict which horse will win a future race. After months of work, the physicist happily informs his employer that he managed to solve the problem - a tent for a spherical horse. This abstraction is also the approach taken by Mark Buchanan, as the name of the book suggests. He peels back layers of irrelevant and confusing details from complicated problems, and reveals beneath them simple mechanisms in human behavior, mechanisms that were designed through evolution back when we were hunter-gatherers. These mechanisms, despite their simplicity, shape social human behavior. 'The Social Atom' joins a series of books (such as, for example, 'Irrational and not accidental' by Dan Arieli and dozens of books on game theory) that try to change our classic worldviews in matters of economy and society by deviating from conservative and old assumptions.
'The Social Atom' is an excellent book, one of the best I've read in recent years. It is wonderfully written, the explanations are at eye level and most importantly - it is thought-provoking. You will most likely find yourself pondering the ideas put forth in it days and months after you put it down.
If I have complaints against the author and the publishing of the books, they are actually the opposite. The attempt to make the book more 'physical' by comparing humans to atoms, molecules, etc. does not contribute too much to establishing the strong claims made by the author - but it is likely that readers who are not fans of 'hard' science will be deterred, and not justifiably so. Moreover, 'The Social Atom' is a relatively short book - about sixty thousand words or less, in my estimation. In a reality where people are also influenced in their buying decisions by the external shape of the book, I think it would have been better to choose a thicker cover and add illustrations to the book. True, it's a form of cheating...but when the book is so good, it's a shame that readers will skip it in favor of a less good book that seems like it gives better value for every shekel.
The bottom line: 'The Social Atom' is a book that you will want to let your friends read after you finish it, but you will have a hard time convincing them to accept it... a highly recommended book, one of the best you will see on the shelves this year.
[Ran Levy is a science writer andBroadcast podcasts. His book 'Perpetum Mobila - about eternal machines, charlatans, physicists and everything in between' was published in 2007]
5 תגובות
Definitely an excellent book.
On the subject of the monkey:
Most of the money in the market is managed by the pension funds and mutual funds which are managed by investment managers.
The monkey overall achieves an average return to the market.
It is likely in this case that the median is close to the average or maybe smaller than it.
That's why most investors (or most money) achieves a lower return than the monkey's return.
In my opinion, there is a study that claims that 80% of fund managers in the United States do not achieve an excess return.
Considering additional costs such as management fees and commissions, the monkey is probably better.
Excellent book! Highly recommend, opens the mind and awareness...
When a monkey buys an index, it buys a group of stocks selected according to criteria. Stocks that do not meet the criteria are removed from the index.
Therefore, a monkey who invests in indices does not invest without reason.
There are monkeys that the calculation of the portfolio (simulation) is done retrospectively, and shares that were deleted from trading retrospectively or transferred to pink-sheets are not included in the selection options and thus there is a positive bias in the results.
And finally, I am not personally aware of any serious research that proves that a transparent person is better than a good investment manager, the studies only show that one transparent person is not better than another monkey
I definitely agree with you, a great book, unfolding even though the beginning is a bit too business-like for my taste (I understand that the business world is the best stage for testing people's behavior and patterns)
…. Something unrelated - I noticed that in all the opinion books (philosophy, sociology, etc.) that have come out recently,
There are no more original thoughts but only quotes from people of the past and examples and summaries of information.
Is it just me or is it like that?
The idea appeared in an old Asimov book!
An amazing series of books, starting with the (assigned) mathematician Harry Seldon developing (largely) theories for predicting long-term social processes according to economic models... An amazing series of books with terribly interesting developments. Recommended!