Bacteria Behaviour Can Shed Light On How Financial Markets Work

notscientific writes "Bacteria invest in proteins in an attempt to reduce stress or increase energy intake, while humans invest in cash. In both cases, better tradeoffs pay off. The similarities in tradeoffs faced by both bacteria and humans during investment are actually quite similar. Now, using synthetic biology, a group of scientists has shown that the outcomes of investment decisions in bacteria can be precisely defined, alluding to the idea that human investment activities, such as financial markets, can be thoroughly understood as well, and even modelled."

Re:This is a surprise?

[Samantha Wright]

Economists have a history of borrowing scientific theories to explain their field, often overindulging in analogy to the point where the metaphor becomes useless. Consider the following paragraph from the article:

But when bacteria were exposed to acid, something unexpected happened: Those that invested almost nothing into managing stress, and instead favored growth at all costs, succeeded. Gudelj doesn’t yet know the actual mechanism behind this, but she suspects that it’s down to the particulars of the life cycle of the bacteria and its stressor. When taking this analogy to businesses, it appears there are certain types of difficulties for which being nimble and focusing on growth is a better strategy than facing difficulty by trying to manage it.

The author is unable to suggest what these types might be; he simply assumes that the theory is valid and that bacteria must have something to tell us. This kind of growth works for bacteria because they are able to subdivide indefinitely and aren't a monolithic organism. To stretch an already-abused metaphor, the closest example to this kind of growth is creating many similar products or entering a large number of markets to try and find something that works, both of which can be hazardous because of the paradox of choice and loss of investor confidence. Moreover, if a core market collapses, at best all that will be left is the parts of the company that entered the market that succeeded; for bacteria, it's considered "good enough" for a couple of cells to survive, but this is not generally considered acceptable for business. Bacterial survival simply isn't analogous to business success.

Behaveour fits

[dutchwhizzman]

Ruthless greed until the host is dead, short term profit and manipulation of the "hosts" to get more profit. The only thing missing in the model is HFT

Too simple

[Roger W Moore]

That's too simplistic a model. Think something like the bacteria in your gut. We need bacteria there to help our body digest food. However, if you get too many of the wrong sort (lets call these "greedy" bacteria) or they get out of your gut and into other parts of your body then they can make you really ill or even kill you. In the same way our financial markets and services are needed to make our economy work well. However get too many greedy financial people or have them start infecting other areas of our society - like, say, government - and just like our bodies our society will get very ill.

Re:This is a surprise?

[Anonymous Coward]

And both make the body they're growing in very sick, if they put growth above being social.

Re:This is a surprise?

[ATMAvatar]

Also, a large fraction of both bacteria and wall street investors are parasites that should be eradicated for the greater good of the larger organism they reside in.

Re:This is a surprise?

[Anonymous Coward]

Economists have a history of borrowing scientific theories to explain their field, often overindulging in analogy to the point where the metaphor becomes useless

I'd take it a step further and say that Economics is pure bunk, and that the subject will have to be renamed. In the future, having a dept. of Economics at a university will be like having a department of Astrology or Phrenology.

First there's the infamous, "let's assume all people are rational" aspect, made no doubt by somebody who had no mother. Then there are the perfectly straight lines to model supply and demand. Next we have questions where the "right" answer is "loan money to a foreigner". This was where I just fucking lost it in ECON 101. You gotta be kidding me. There I was at a University (UVa) founded by the author of the Declaration of Independence and I was being told that the right answer involved foreign entanglement???

I'm pretty sure I've only scratched the surface. The sad thing is people believe this crap and get into positions of power. Doctrine like Free Trade advanced because they were too foolish to realize that comparative advantage (actually not a bad theory when applied to individuals in a small town) fails horribly when you apply it to nation-states covering the entire globe. Why? Because you get fucking monopolies concentrating in certain places. The Chinese rare earth fiasco? Easily predictable to anybody with common sense who didn't drink ECON kool-aid and try to apply micro theories to macro situations. Idiots.