Dumb Networks and Smart Capital

Wriston, Walter B.


The Network Economy: A Complex Adaptive System


It can be argued that the speed and size of these global markets today have created a difference in kind and not just in degree from markets in the past. After all it is speed alone that transforms a harmless piece of lead into a deadly bullet or a group of still pictures into a motion picture. The speed, size, and complexity of the market made possible by the convergence of computers and telecommunications has had and is having a profound effect on the world we live in. Nicholas Negroponte [3]  went even further when he opined, "Computing is not about computers any more. It is about living." And certainly markets of all kinds impact all our lives. Since markets are basically driven by information about money or stocks or commodities, the instant and almost universal availability of this information makes the modern Reuters or Bloomberg screen light up in a way that is different in kind from smaller, slower, and more primitive times.

The global market today might be described as the very model of what has become known to scientists as a complex adaptive system. The agents, or people who influence the system, range from learned central bankers to 21-year-old traders at some small merchant bank. The agents in the global market are numbered in the millions, each having his or her own agenda and interacting in ways to produce a result that cannot be predicted. When the pundits on the evening news explain why the dollar is strong or weak, or why the stock market went up or down 120 points, they advance the limits of creative writing but not necessarily our understanding.

These great complex systems are nonlinear and tend to resemble biological rather than mechanical systems. In these systems, chaos theory postulates that small events tend to have large consequences over time. The classic example is that of a butterfly moving its wings over China affecting the weather weeks later in Wisconsin. The global market exhibits some of these characteristics. Despite massive work by the Santa Fe Institute and many others, we do not know just how these complex systems work. As Mitchell Waldrop [4]  put it, "The marketplace responds to changing tastes and lifestyles, immigration, technological developments, shifts in the price of raw materials, and a host of other factors."


[3] Negroponte, N. (1995) Being Digital. New York. Alfred A. Knopf: 6.

[4] Waldrop, M. (1992) Complexity. New York: Simon & Schuster: 11.