A fractal is a mathematical process of modeling growth and expansion. A fascinating concept because certain fractals closely resemble the accelerated expansion of our universe.
A tree and its branches can be modeled with a fractal using a simple formula, so can the roots of the tree along with the veins in its leaves. So can the capillary veins in our lungs and the renal veins in our kidney. Quite similar to the patterns of water flowing from the mountains into river deltas, we recognize as part of the hydrologic cycle.
Nature appears to use the recursive nature of a fractal in almost everything it creates. They are sometimes hard to recognize as fractals as their scale can vary greatly. How eons and exons split at a minuscule size can be modeled with a fractal, and so can the expanse of the universe with the divergence of moving stars on a super scale (relative to our tiny planet).
The Science of Nature
Play around with Calvin Metcalf’s excellent Google Maps style viewer of fractals or search for fractal images online to visualize how fractals can lead to impressive expansion patterns you may recognize from the real world.
The reason why I like fractals is not for their mathematical accuracy to nature (the other way around perhaps), but because the fundamental concepts of a fractal deliver better proxies of nature than the crude and non-recursive principles we generally use to model or presuppose the behavior of nature. And, you guessed right from the title of this article, a fractal would, therefore, lead finance as the arbitrage of innovation to trace human ingenuity and capacity much more accurately than any other published thesis thus far.
The attachment to a higher level of normalization is precisely what the process of science is all about; a never-ending race to develop a better proxy of nature we depend on for survival.
Here is why fractals are more than just neat visuals mimicking natural phenomena:
- A fractal works on the basis of expansion. In line with the accelerated expansion of our universe and everything in it.
- A fractal works on the basis of a formula as its cause, leading to expansion as its consequence. To use Einstein’s words, the thesis of the formula deciding what expanse can be discovered.
- A fractal works on the basis of simplicity leading to complexity. A simple formula can expand into a massive structure with no distinctive symmetry with its formula. A single cause leading to a multitude of consequences.
- A fractal evolves around four dimensions, the same dimensions we recognize in the real world. Employing a relativity theory known to encircle everything on our planet and our universe.
- A fractal works on the basis of an ordered state, the formula, leading to an apparent unordered state, its expansion. In that direction only. Reaffirming its irreversible nature within the spectrum of its current purview.
- A fractal is recursive, working on the basis of the renewal of its theory rather than on the basis of sustained and singular expansion. Farewell sustainability, hello renewability.
- A fractal produces a clear visual delineation between expansion and entropy. Easily identifying and separating growth patterns from the dead-end streets of atrophy.
It does not take a genius to discover our pseudo-science of economics fails to incorporate any of the natural tenets listed above.
Even as many asset managers staunchly continue to rely on the advice from economics preachers, and act surprised when their thesis filled to the brim with faulty investment allocation and distribution logic again fails to trace or expand human excellence, and worse, produces some well-documented cases of an anthropogenic cascade. And closer to home, thus leading to non-repeatable returns.
I am not suggesting to use math, from the formula in the fractal, as the basis for future investment decisions. What differentiates great investors is their unprecedented alignment of foresight with the potential of the assets in question. What I am suggesting is we stop relying on the poor extrapolations of hindsight lodged in a malformed religion of economics as the feeble attempt to produce foresight to break the norm.
The Evolution of Finance
As I explain above, the fractals of math already produce a much higher-order normalization and more relevant proxy of human evolution than any economic theory I have seen. To no surprise, as the practice of math is science itself a fractal of endless renewal designed to rapidly weed out false positives, and thus evolving along with our evolving understanding of nature.
Do not fret dear asset manager; there is no need to become a fractal expert. The imagery of a fractal can look a little spooky and surreal, not unlike the makeup of atoms. But there is a need for you to better understand the very evolution on which your asset allocation strategy depends, and the thesis of economics has failed to adopt.
I introduce nature’s tenets in my new operating system for humanity using non-mathematical principles. For an investment thesis closer to nature’s innate principles is bound to discover the kind of repeatable human ingenuity needed to sculpt our ever-evolving equilibrium with nature, and, with your concerted effort will be capable of prolonging humanity’s lifespan on earth.
Innovation in asset management is around the corner.