OODA Economics: Market Mind Hypothesis with Patrick Schotanus, PhD

Unlock the mysteries of the market's collective consciousness with 'pracademic' Patrick Skotanis, as we navigate the Market Mind Hypothesis, blending cognitive science with the rhythmic pulsations of financial markets. This episode promises a revolution in your understanding of economic agents, far from the usual depiction as emotionless automatons, and instead as components of a living, breathing organism. We bridge the gap between the pioneering ideas of John Boyd, Karl Friston, and George Soros, bringing a fresh perspective on how consciousness influences market behavior and investing decisions.

Feel the pulse of the stock market as if it were an extension of our very minds. Prices flicker not just with numerical data, but with the heartbeat of collective emotion and intelligence. We discuss how narratives—fueled by the works of Schiller and McCloskey—shape economic events and the profound implications of recognizing the market as an interconnected web of human consciousness. Patrick Schotanus eloquently weaves through the philosophical underpinnings of this view, challenging us to consider the market's moods and vibrations as more than metaphorical, but as real forces directing capital and research in the financial realm.

In this riveting episode, we don't just theorize; we examine the practical applications of treating markets as cognitive networks. Delving into the extended mind theory, we explore the symbiotic relationship between individual cognition and the market's collective intelligence, drawing parallels between neural activity and market dynamics. Patrick's insights offer a new lens through which to view not just economic phenomena but our role within the larger cognitive ecosystem. Join us for a conversation that transcends disciplinary boundaries and offers a tantalizing glimpse into the future of economic thought.

Patrick Schotanus on LinkedIn
University of Edinburgh
Market Mind Hypothesis 

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Salience...

Transcript

Speaker 1: 0:57

Today we're going to look at economics, particularly financial markets, and let's reflect back on John Boyd's history before we do that. If you look back at John Boyd's undergrad, it's in economics. Fast forward to his energy maneuverability theory, EM theory, which he co-created and that gave us what is now known as fourth generation and fifth generation fighters. So aircraft design, fighter aircraft design. He created that and we can argue that John Boyd looked back at that connection between. How did somebody with an economics background and not a deep understanding of physics come up with something that subject matter experts in the world of aeronautics should have come up with, which is the EM theory?

Speaker 1: 1:38

So Boyd went on this journey, if you will, an interdisciplinary journey, to understand people like Popper, goodall, heisenberg. He looked at neuroscience, biology, philosophy, and he ended up sketching his OODA loop about 40 years after this journey. So today our guest is a I'm going to make sure I get this right. He calls himself a pracademic, meaning he has an academic background and an academic background. He is on a similar journey, on an interdisciplinary journey to understand financial markets. Our guest today is Patrick Skotanis. Hopefully I said that correctly, patrick.

Speaker 1: 2:19

I think it's a little off and welcome to the show today. How are you?

Speaker 2: 2:24

Thank you, brian, it's a delight and thanks for inviting me. And I'm fine. And yeah, pre-academic means that my career has mostly been spent in the financial markets as an investment professional, and now I'm dedicating the rest of my career whatever is left on developing this heterodox theory.

Speaker 1: 2:46

Yeah, and you have the theory called market mind hypothesis. I have your book. I believe it was written in 2022, 2023. I have the ebook on Kindle right now. I'm still waiting on the paperback. But the overlap with what you're looking at in your hypothesis and what we have with John Boyd's background, with his Observed Orientated Side Act loop, where we are now with things like Carl Friston's free energy principle, active inference, the ability to help people understand what Bayesian inference looks like through John Boyd's OODA loop, we have Gibson's abstractions. Understanding the external environment is important. We look at the Toyota production system and see what John Boyd learned from that, which is there's many aspects of it, but control is outside and bottom up and, of course, a lot of connections with economics from John Boyd's background. Patrick, can you walk us through just the basics of, or take us through market mind hypothesis in an elevator pitch or however you want to frame it for our listeners?

Speaker 2: 3:48

Sure. So, in simple and popular terms, the market mind hypothesis particularly wants to formalize what investors have always casually referred to as the market mind or the mind of the market, and I have numerous references to that and quotes, but one that you can think of, for example, is George Soros' bestseller, the Alchemy of Finance, which he subtitles as reading the mind of the market. But in more technical terms, the market mind hypothesis observes that the market, embodying numerous human minds, extended via the technologies like Bloomberg and Reuters terminals, knowledge, say, in a Hayekian sense, but also manifest collective consciousness, and the informational signatures of that are prices. There is more big market data, of course, but primarily prices, whereas the phenomenal, immersive manifestation is what is called market mood, is what is called market mood, and that is something that is basically lacking in the current mainstream economic approach, which is and we can talk about that a primarily mechanical worldview of the economy as machine, the market as automaton and the agents as robots.

Speaker 2: 5:22

But taking you back in history, one of the most famous economists, frank Knight, who you may know as the student who wrote a dissertation in 1921, making the distinction between risk and uncertainty, also in that dissertation has what seems to economists a throwaway comment where he says that the first datum of understanding behavior and decision making is the fact of consciousness itself. But then he built on this, four years later, in two papers published in very prominent economic journals, that this issue of of that agents first and foremost are conscious, beyond or before any rationality or now, with behavioral economics, any biases and heuristics, and he points out that this is crucial and he calls that worldview of mainstream mechanistic monism. And it is more relevant now, I think, than ever. So that is a very important angle and there are many more angles where this market mind hypothesis is what we try to formalize in all of this your book.

Speaker 1: 6:29

one sentence that popped out to me is our mind is busy limiting free energy. The market's mind is limiting free lunch, and I think that makes a solid connection between what we're looking at and what you're looking at in your hypothesis. So much to unpack from what you just shared. I just want to throw out a few things and make sure I have this right. George Soros studied under Popper. Is that correct? Karl Popper, that's correct, yes. Now this is important to us because Popper is popular in the Boyd lexicon, if you will. What is Karl Popper well known for and what did Soros take away from that?

Speaker 2: 7:17

Well, he's most famous, of course, for arguing the need for falsibility of any hypothesis, etc. Right, but what is not so well known is that Popper also wrote a paper, basically on the mind-body problem, where he talks about mental causation. He talks about mental causation and that you know the mental is a second aspect, if you know what is now known as dual aspect monism, if you want to interpret it that way. And that is, for example, one of the overlapping interests that he had with Hayek. He was a very good friend of Hayek and Hayek, as you probably also know, wrote this book on a cognitive masterpiece in 1952 called the Sensory Order, which he himself, hayek, considered to be his most important academic contribution. He valued it more than his economic work. And in that he talks, for example, about practical dualism, where he says look, we haven't solved the mind-body problem, but we need to continue to investigate and research everything in every discipline, and we have to use mental terms and we have to use physical terms. As long as we realize that there may be some uniform foundation under that that we don't understand yet, we have to apply practical dualism. And that is basically the worldview that the MMH, as the market mind hypothesis, not only adopts but then adapts and says you know, in all the narratives in economic and financial markets, people use these terms all the time.

Speaker 2: 8:52

But it has implication in terms of, for example, causality, what you imply, right, the wealth effect. Well, if you think that that will work, then there is a whole chain of causality in that which is psychophysical rather than mechanical. Anyway, that that comes back to Popper, right? So so Soros, the not about investing, for which he would become famous later in life as one of the best hedge fund managers, no, it was about consciousness and his whole philosophy of investing, which is called reflexivity. And together with Andy Clark and Ron Chrisley and others, we wrote a paper on reflexivity and it's available on SSRN, where we interpret reflexivity along these lines, in terms that Soros himself admitted wasn't able because he got all muddled up in his philosophical reflections. And Duncan Pritchard and Andy Clark, et cetera, they helped to interpret this in this novel way which Soros was himself very happy about. But you know, that's where the link with Popper and Soros in particular lies.

Speaker 1: 10:34

That's absolutely fascinating. I did not know that until I was looking through your book there about that connection. One thing that pops up quite frequently when people talk about John Boyd's observed orient to side act loop is they use it as a linear process, and I believe that connects well to your argument as to why we don't want a mechanistic view of the economy and financial markets. Can we talk about that view, that linear approach to markets that many people take right now? What's wrong with that?

Speaker 2: 11:04

Well, let's start with. I'll give you a quote. I think I have it here somewhere. So when we talk for terminology, when, when we talk about economics, we have to remember that it includes the nested discipline of finance and a nested practice of investment management. Right and then, and that's the theoretical, and then and then, when we talk about the economic system, we have to remember that it includes the economy and the market, whereby the economy refers to the real, physical economy of markets in goods and services and the market refers to the financial, psychological economy of markets in securities.

Speaker 1: 11:49

Okay, I want to ask you a question on that. So we hear this quite often, and that is the market is not the economy. So even though today, as the market's going up, today, prices are up, inflation's up, people are struggling, debt is up. That's the economy, right. So there is a distinction between two, right?

Speaker 2: 12:08

Yes, wall Street versus Main Street, if you want to popularize it. Yes, and it is. I make that distinction, in particular, again from the angle of practicalland had to bail out pension funds in 2023. Um, uh, this is this showed kind of uh the tail wagging the dog type of dynamic right, where financial markets with prices which are supposed to only reflect fundamentals, were impacting the fundamentals, and and that is part of reflexivity.

Speaker 2: 12:58

But just to come back to your original question on the linearity, so when we talk about mainstream economics, it is also known as the new neoclassical synthesis, so it combines new classical economics with Keynesian economics. And that is where the mechanical view comes from. Because if you I quote here Nobel laureate Robert Lucas, one of its founders, particularly of neoclassical economics, he says economics is something that can be put on a computer and run. This is what I mean by the mechanics of economic development. So, for all clarity, that is his economics and that is why we and others call it mechanical economics and criticize it. Call it mechanical economics and criticize it. And the issue with the linearity is particularly this mechanistic monism view that Knight calls, because the moment you talk about you mentioned a complex adaptive system. The moment you accept the reality of of consciousness, namely because of human agents, that complexity becomes even more complex because of the non-linearity and dynamics and, uh, you know one one particularly complexity, uh, angle, that that that I like and and I I work with one of its founders, it's Scott Kelso, and it's called Coordination Dynamics, where it accepts non-linearity and it criticizes fixed point equilibrium, etc.

Speaker 2: 14:52

So, for our inaugural symposium, which was held in May 2022 in Penmure House, which, for your listeners and viewers, that's the last and only remaining residence of Adam Smith in Edinburgh, I interviewed investor Howard Marks, who is, among others, famous for his memos, but also his idea of the pendulum, and I asked him but the pendulum sounds like a mechanistic tool, right? But he clarified that that was not how we should interpret this. These swings between bullish and bearish are related to that mood which, ultimately, is this manifestation, as you mentioned, of the phenomenal aspect of of market mentality, right, that is overlaying any rationality, any biases, any heuristics, um, and I, you know, I call, I call it system three, if you want to interpret it in in danny kahneman's uh, dual process or dual system let's talk about that real fast.

Speaker 1: 15:53

So our listeners, we know. System one is that uh uh kind of unconscious or subconscious thinking. It's low energy, it's how you react to things. System two being that higher energy, slower thinking, and we do that through red teaming techniques and things like that. And system one, system two, from Kahneman's book, what is system three? What does that mean to you?

Speaker 2: 16:14

System three is basically consciousness, particularly the phenomenal aspect. So the way I try to make it as intuitive as possible for particularly investors, but possibly other people with other backgrounds as well, and remember, s1 also includes emotions and intuition, right and S2 is rationality and logic, etc.

Speaker 2: 16:37

So, um, my question is is how do you, um, know the difference, in the first instance, between system one and system two? In other words, how do you as an individual, as a subjective, uh, being, uh, uh, know this difference between s1 and s2? Well, that's simple, right? Right, because being emotional feels completely different than being rational, which means that this awareness or consciousness of these is very important to understand them. And I'm not the only one who has recognized this, others have written this as well, and I have some references in the book. But this is very and you mentioned Gödel, right? I mean, we can formalize this and make it very theoretical, because one of the things that Gödel says is a system cannot be understood from within that system, right? So, as one, how can you? Right? So you need to step out of both of them, and that is kind of the system.

Speaker 2: 17:30

Three, and just because I know that there will be viewers who are perhaps a bit skeptical on consciousness, but you have to remember what is happening in cognitive science, right, it's not just AI, but AI immediately gets to this ultimate question of consciousness itself. And, more importantly, in the last 20 years or so, this what used to be a taboo topic is now basically the hottest topic in cognitive science understanding consciousness and I like to always quote neuroscientist Christoph Koch and Giulio Tononi, who said the study of consciousness is becoming a science. And all of these I know some of them, and all of them are becoming aware also of the market mind hypothesis. Becoming aware also of the market mind hypothesis because, as a devil's advocate, I point out look, no theory of consciousness will be complete if you do not address the collective dimension. And what is the best place of a collective dimension, even on a societal level of relevance, that is, the economic system, in particular the financial markets.

Speaker 1: 18:41

Right, there's so much to unpack on that as well. You know we have. We've looked at the free energy principle. We've looked at Anil Seth's book being you. We talked about Andy Clark's experience machine. We're not really deep in the academic side of what is consciousness and, like you said, that's an ongoing debate right now. And for us, can you just kind of give us your view of what consciousness means so we can kind of frame it up for this conversation?

Speaker 2: 19:03

Yes, so in my book the market mind hypothesis is not just. It basically submits the general market mind principle, which is supported by a two-legged premise, right, the market as mind, which we talked about most of the time, but also the mind as market. And I have a number of quotes where this idea of that, actually the dynamics within your mind body, the dynamics within your mind-body, seem to reflect some kind of an economy itself A cognitive economy, are sometimes the references that even Anil uses and Andy uses. But this is the idea that your microbiome and even your system 1 and system 2, they cooperate and they collaborate. So these, let me give you another quote, because it nicely reflects what some of this thinking is.

Speaker 2: 20:06

So this is by the neuroeconomists Kammerer and Lewinstein. So they say neuroscience is shut through with familiar economic language, delegation, division of labor. But also think here of market dynamics, specifically complementary forces like supply-demand, competition-cooperation, production-consumption, risk-return right, risk, return. Um, but these they say, uh, is not, these concepts are not formalized in cognitive science. And then they say, basically what we could need is an economic model of the brain. Now, this is basically what we want to contribute to with this mind is market idea. So, um, then coming back to your your question, um, I have speculatively stated and part of this is inspired by one of our speakers at that symposium I mentioned is Emmanuel Derman. Emmanuel is known as the quant of quants in Wall Street. He used to be a managing director at Goldman Sachs, head of risk management and a very good friend of Fisher Black, and he wrote this beautiful book Models Behaving Badly and.

Speaker 2: 21:19

I know Emmanuel a little bit, but in that book he links Spinoza with derivative theory, because he basically says it's about contingent claims and this is the angle that I basically take. Also, on the free energy, it's not going to be in the paper with Carl, but there was somebody. There is already a paper out there on the Black-Scholes model in this context and, as you know, actually the free energy principle has been used in economics for decades, right down just a little bit, because you're throwing out these big, so black shoals.

Speaker 1: 21:56

Spinoza, I'm gonna make sure I have this right. Spinoza, I believe, does a lot of work. I think you wrote the book entangled brain, or, or which, which well, this is the one that's now.

Speaker 1: 22:04

Relevant is his ethics, that's okay uh, so we've had, uh, um, I was trying to think her name real fast. Uh, she works with, uh, worked with, carl friston. She's in australia now. Uh, can't believe, but I just went blank on that. I'll come back to that. That's okay. Yeah, but black Shoals model Uh, I don't think all our listeners understand that, but that connects back to options and you know the option market. So they I can't remember they win a Nobel prize for that. Is that right? Okay?

Speaker 1: 22:34

theta, it's a model it's a model of how we price options, um, and that's what that is. So the connect for for those listeners that don't know that, that's what we're talking about. And I said can you, can you make that connection? Again, there's a connection to what spinoza wrote. Is that right? Or say again patrick, okay so.

Speaker 2: 22:51

So the connection was um is is made by by Emmanuel, and then he basically then interprets Spinoza's theory and he has this diagram in the book, but it's not further formalized. So that is part of what you know. When Kammerer and Loewenstein say an economic model of the brain or, as I prefer it, the mind, then I think that is the path we need to go to. And the particular angle is that when you talk about contingency claims, this all starts with Arrow and Debreu securities. Right, they're known as state securities, with state prices, and basically these are the most elemental securities. They're theoretical, they're elemental securities you can think of, namely under certain states of the world, they pay out a unit of one or zero and you can then build very complex derivative structures with this, and that's where you need to ultimately go back to.

Speaker 2: 23:51

But this is how the Black shawls model started. And then, for example, most people forget that robert murden, another nobel laureate, contributed to the black shawls model. Um and and and. Uh, fisher black, of course, never got got to the nobel prize because he passed away before. But murden, for example, introduced the ethos lemma into modern finance, which gets you into pd is partial differential equation.

Speaker 2: 24:17

Anyway, this goes way too much complexity, but the point is that, just like derivatives derive their value from the underlying substracts, this is, I believe, what consciousness does.

Speaker 2: 24:32

Okay, right, so the consciousness is derived from the physical, so the consciousness is derived from the physical, but, as Warren Buffett famously stated, in financial markets, derivatives can be weapons of mass destruction and, as we saw in the GFC this is what I meant with the tail wagging the dog that the financial, the securities markets, including derivatives, can have an impact back on the physical. And this is where the whole mental causality element comes in. And therefore, particularly in a collective setting and this is what my message is to my cognitive friends is that you, it is very easy to think of consciousness as ap phenomenal, right, but I don't think that's right, because, particularly in a collective setting, this intersubjectivity that we, that we about mood, et cetera, it can completely swamp anything. In fact, it can swamp your individual mood and my individual mood. Right in the market, you can be bullish or bearish, but if the GFC, the financial crisis, happens, we all become, you know, instead of a bull or a bear, we become rabbits caught in the headlines of the events. Let me stop there again.

Speaker 1: 25:37

Yeah, what is the connection? Okay, so derivatives, what is that connection to the mind? What would that be? I'm just trying to figure that out. If derivatives are going to be the weapons of math destruction for the markets, what is that derivative for our mind? I'm just trying to figure it out.

Speaker 2: 25:54

So all I'm saying is that I believe and this is a totally different path that we can discuss later but I believe there is a reason why the mind-body problem exists and why it is so stubborn. But we do need some kind of formalization to connect the market as mind and the mind as market. And when I look at and I always say this in my presentations like two weeks ago I was at the University of Sussex, where Anil and Andy and Ron Chrisley are, and in my talk I said look, when I look at cognitive science literature, particularly technical papers, I see all kinds of utility function equations and portfolio optimization formulae and so on. And these equations from the Black-Scholes model fit into this. And that helps us, because a lot of the mentality that is described in these papers are about contingency claims. So then, at the very elemental level, you get to arrow and brew securities and derivatives Because think of it right, everything is ultimately referring to a value Vision, visual sensations, auditory sensation, et cetera. It is a relative change in some kind of a value right.

Speaker 2: 27:26

Which is often reflected in some kind of an exchange, like you and me are now doing. But there is a change there, and then that that, that personal valuation, whether you like it or not, right, this subjectivity of experiencing this is, is that internal market that is happening within your mind, body. And then there is all the physical stuff and the unconscious. So that is why, oh, to some extent, I think we can formalize this. We don't have to reinvent the wheel. But Emmanuel is, I think, very right. But we need to take next steps to apply this not only at Spinoza, but more broadly in cognitive studies.

Speaker 1: 28:06

Okay, we have a lot to unpack on this. I do want to talk about the connection between what you brought up about how the brain kind of infers what's going on with information coming in. We'll talk about that here in a moment. I do want to make a connection for our listeners. It goes back to the point about Goodall's incompleteness theorem and that comes from John Boyd in the Strategic Game. He writes this and he says according to Goodall's incompleteness theorem, heisenberg's uncertainty principle and the second law of thermodynamics, one cannot determine the character or nature of a system within itself. Moreover, attempts to do so lead to confusion and disorder. So there's a very strong connection from what boyd looked at between uh he called that as um uh, I think it's called the triad. I may have that wrong heisenberg, goodell and the second law, um and then uh, what you brought up there with that. We can't look at this from within the system to do that.

Speaker 1: 28:59

The next thing is price. I have to ask you this. I want to go back to price in the market. You said it's kind of like a collective consciousness. So you have these fractal we'll call them fractal OODA loops going on at the individual level, at the hedge fund level all over the place and that's determining the price in the market. Can you talk a little bit more about that and just kind of say how the prices are generated from that fractal approach, if it does exist?

Speaker 2: 29:30

Right. So a few things. So, in order to support this idea of the mind as market and the market as mind, to make that connection, I also use other quotes of people who hinted but then didn't work it out. So Beinhocker, for example, in a paper I can find it somewhere, but he points out. Coming back to Arrow and the Brew, they already pointed out that the securities act like the neurons in the economy by giving price signals on demand and supply, like the neurons in the economy by giving price signals on demand and supply. And this is a very important point, because most of the agency-based models and neural networks models used in economics use the robots to trigger the signals, but it's actually the securities. And the reason why that is so important and why that needs to be the case is because when Andy and Dave Chalmers, in their seminal 98 papers on the extended mind, talk about active externalism, it means that in order to create this extended mind and, in particular, to have some kind of collective or extended cognition, let alone consciousness, what it has, the the um, physical, uh, scaffolding or whatever you want to call it has to be outside of the individual minds, right, otherwise you fall back into the trap of internalism and so on, and therefore it's the securities who signal the prices.

Speaker 2: 31:17

Okay, and on those prices, I mean it's becoming trivial to say that prices reflect information. Right, it's the production of prices, in the sense that some news events triggers a change in price, and that is the production of information to other people who then pick it up. But in a way it is also the consumption of information, because, as a portfolio manager, if those prices change, not because I'm trading, but because it basically happens, it's produced by others I am consuming that information, sometimes in a very painful way, because my, my portfolio goes down 25 with a drawdown. Yeah, right, and and but. But again, this is this is linked to this phenomenal aspect. So, um, when your portfolio, um, when you and your portfolio, you should see a drawdown of 25%, which is purely quantitative.

Speaker 2: 32:22

It is accompanied by the quality of hurt, which is the phenomenal aspect. So prices have both these aspects. And this then links back to what Dave Chalmers says in his book in 1996, where he says information of consciousness is the dual realization of consciousness is the dual realization of information. It has a physical and a phenomenal aspect, and this is my argument. This is what prices he talks about constructs that we need to bridge these markets and that embody this as conductors, this dual realization of information as a production and a consumption of information. And the final point I want to say is that you know how the efficient market hypothesis basically state P is V, so price is value right.

Speaker 2: 33:17

So in Gödel terms, this becomes the liar's thesis. Right? What is it again he says in the most famous contradiction?

Speaker 1: 33:34

Now it escapes me, but it's the liar's paradox.

Speaker 2: 33:36

Right now it escapes me, but it's a liar's paradox, right, but in this case the liar's paradox in finance is the question P is not equal to V. So anyway, in my book I go into more detail. But that's how, in all this setting, you should think about prices and the information, whether it is in an efficient market setting or in a mentality setting, of related to consciousness, or even in a girdle setting, how you should see price, p versus v, as so-called this intrinsic or this intrinsic value, which is a problem because value is in the eye of the beholder, right.

Speaker 2: 34:22

So I prefer fair value in the sense that it is arbitraged away. There is no free lunch.

Speaker 1: 34:30

Yeah, so on the podcast we've had guests come on to talk about boundaries and we put statistical boundaries around things to understand what's on the internal and external. So think about the free energy principle, active inference. We know that we're learning and we heard guests come on and say that everything's connected. There are no boundaries between the two of us right now. We know that from many, many disciplines actually, or we believe that to be true. So collectively, we may be creating some type of vibration. I believe we had one guest come on and talk about humans have a vibration. We vibrate at a certain frequency. When we meditate with a candle, it vibrates at 10 hertz. So we're learning about these things. Is it possible that everything I just shared with you, with the boundaries and all that, that all of oneness, we're all connected that the market's reflecting potentially some type of frequency or vibration or something like that? Is that possible?

Speaker 2: 35:29

well, I'd like to take it one step at a time. Um and um. As, as you know, um, economics is is called the dismal science for a reason, but it also happens to be the most powerful science. Right because, why? Because it determines ultimately where the capital is allocated. Right even, as I say to my academic friends, even to your research grants. And it means that there are many vested interests. I like to quote Charlie Munger, who passed away recently, who was the partner of Warren Buffett, right Berkley Hathaway, who says show me the incentives and I'll tell you the outcome. So we need to take this one step at a time, and I think the challenge already, the MMH.

Speaker 2: 36:17

Making the claim that we should view the market as mind in a 4E cognition is already, you know, quite radical and it is, you know wherever that leads to. We will see, as we do empirical and theoretical work to further strengthen the bones of the MMH and put empirical meat to those bones. But I can quote you to make very clear what we're talking about and perhaps this partly answers your question. This partly answers your question Kiershoff and Kaivstein, julian Kaivstein. They wrote a book on extended consciousness and here it goes.

Speaker 2: 37:04

The position we defend here is that the mind has no fixed boundary. The locus of conscious experience can smoothly shift from on occasions being inside of the head of the individual to on other occasions forming out of the nexus of interactions between brain, body and environment. End of quote. So it becomes, just to be clear, becomes intersubjective, once their environment consists of or includes other human minds, right, right, and how then those? How then that intersubjectivity via exchanges is, is what that consists of, et cetera. We need to, we need to further investigate, but but that is. That is basically what all this is about, and it is very radical versus the mechanical worldview.

Speaker 1: 37:57

So let's break down. You brought it before. You talked about extended mind there. Briefly, can we walk through these and just make some connections as we go? It's embodied, embedded, enacted and extended. Is that correct? That's correct. Embodied, that includes the medium, is that right? Like it includes the buildings, and extended Is that correct? That's correct. Yeah, embodied, that includes the medium, is that right? It includes the buildings and computers.

Speaker 2: 38:17

Exactly. And the Bloomberg terminals, the Rogers terminals, the technology, yes, that's embodiment.

Speaker 1: 38:24

Embodiment, all right, and embedded, how about?

Speaker 2: 38:27

that that's more the institutionalization and the culture, for example, and the rules and all of that. So you know there are certain ways of behaving and certain rules. You're not allowed to trade on inside information, and all of that Unless you're in Congress right now, so that's good Sorry. I thought we should talk about it. We're not going to go there.

Speaker 1: 38:56

It's pretty amazing how well they're doing. We have embedded being the environment. I think you have culture in there. Did you say that?

Speaker 2: 39:03

Yes, then enactment is something that Mises, for example, has talked about, not specifically but in terms of basically it starts with the Industrial Revolution. Right, it is that. And let me immediately translate this to active inference or the free energy. It's not just the perception which then helps with the generative model, etc. There's also action. We want to shape the world, as it were, in order to make our predictions come true. Right, and Mies has called this purposeful action. But from the Industrial Revolution we've shaped our world according to our wishes and hopes and desires, etc.

Speaker 2: 39:55

And some of these four E's overlap and that is what inactivism is about that in a way, with allocation of capital via the financial markets we allocate to resources which then help to create the world that best fits us, etc. And then the fourth E is the most important one for the MMH, that is the extension that starts. Well, there are other sources, but it's really popularized by Andy and Dave in 1998. And that is the extension of our minds via other minds, but again also via the Bloomberg terminals and Reuters terminals and Karen Knorr-Satina and her colleague Brugger.

Speaker 2: 40:45

They talked about markets being as epistemic things being as epistemic things and it has to do with, in their angle, not only cognition, but they talk about intersubjectivity of the market. And then I use in my book all these quotes of traders right who say that it's very important, not just the quantitative, but to get into this zone, or to get into the rhythm of the market and leave your ego, and then you get into this zone, or to get into the rhythm of the market and leave your ego, and then you get into the whole mindfulness aspect where you know, at an individual level, the mind-body problem.

Speaker 2: 41:23

We try to improve our mind-body interaction via yoga or Tai chi, etc. But in a larger setting, um, the mind-body problem, uh, this is again an argument of the mmh. It's not only the traditional theoretical explanatory gap, uh, the mind-body, it is actual trying to improve mind-matter interaction, right, uh, to improve our system. And this is what what economics, the whole markets, the whole economic system is about. And therefore that is the practical angle. The mind-body problem extends into the economic system and shows any cognitive scientist that any theory of consciousness is not complete unless you address this collective yeah, so on the extended mind, as I was reading through this, you brought up Carhart-Ht Harris's work in psychedelics.

Speaker 1: 42:13

We've had a lot of folks on here talk about psychedelics. Of course, we talk about flow quite a bit on here or being in the zone. We also look at John Boyd's OODA loop. When you put a boundary around it, it's an easy way to explain a flow system and we've, of course, we had Adrian Bajon, who came up with the constructal Law, on the show to talk about that. So there's a huge connection here and in the book.

Speaker 1: 42:34

I think you looked at some research from John Coates I've read this in the Extended Mind Sorry the author's name escapes me, but the book's right behind me where they look at that interoceptive capability, or what we call from John Boyd's finger spits, that fingertip feel about the market. Are you connected to the market? And and I believe coats looked at this as well and identified the hour between dog and wolf right, there you go. That's yeah, that's it, that's it. Is that what you're saying here? Is that connectedness with the market? And I think you even talk about George Soros having back pain or somebody like that. You're listening to your body because it's connected, so maybe you're going after that sixth sense. Is that what you're talking about with this type of thinking?

Speaker 2: 43:21

Roughly and a lot of research is going on in that area, as you probably know. I mean also neuroscientific research and is now, you know and that is where scott kelso has also involved social neuroscience, where the whole idea of that we are, the fact that we are social animals, is so important. Um, and you, you now open a can of worms, brian, because, um, you know, this goes very, very at a very fundamental level. So one of my mentors was the late Willis Harmon and I was a 20-something when I did my internship with him. I'll try to keep this short, but it's important. Willis was a pioneer in cognitive science and one of the first futurists. But just to make the link with Carrard Harris, everybody in the 60s and 70s knows about Timothy Leary, right with LSD and turn on and tune on and that's all that. But Willis did research and I only found that out later. He never talked about it with me, but he did, at Stanford Research Institute, a lot of research on psychedelics.

Speaker 2: 45:11

No-transcript to this that this is also the central point in the seminal paper of Clark and Chalmers, which starts with that now famous question where does the mind stop and the rest of the world begin? Which basically means tell me where the cutoff is, because there is no cutoff. And now, coming back to your point on this, is where this, this so important of these traders to become one with the market, because there is no separation anymore. Right, the boundaries become negotiated, as kyferstein and and kirschoff say in their book on extended consciousness.

Speaker 2: 45:47

Um, and this is a part of you know, interdisciplinary research is always difficult, and I mean, if you really go, I'm not talking about interdisciplinary as in a neuroscientist with a philosopher, that's still in cognitive science but bringing economics in and bringing other disciplines, that's really hard. And one of the problems I have with the Markov blankets, for example, is that I find it very hard to. I think the boundaries are not very flexible in the way that real complexity, psychophysical complexity, in the type of complex adaptive system we talk about, is manifested. But you know I'm not an expert on it. I'm just saying that, um, this point that you raise where is the boundaries is very important on this, but it's a, it's a can of worms within pandora's box, basically so there's a, there's an opportunity here to talk about the, that strong connection to boyd's oodle loop in this and that is uh.

Speaker 1: 46:50

In the book you look at cybernetics, you have a. You look at many topics that John Boyd looked at, even Bayesian inference, if you will. So if we look at how let's just kind of walk through this right now on my understanding, your understanding of how we experience the outside world, and I want you to connect that to the market if you don't mind so you and I know that information comes in through our sensory organs as a sensory signal some type of currency that goes to a place, doesn't matter where a black box and it generates a hypothesis. And that hypothesis basically is a prediction about what's on the outside, what we're looking at or experiencing from the outside world. And that is where we get the idea of free energy principle or, in John Boyd's term, mismatches or that new information coming in. And that is where we get the idea of a free energy principle or uh, and then John Boyd's term, mismatches or that new information coming in.

Speaker 1: 47:36

We only and I think the idea goes like this the only information that's coming in, because our brains are burning so much energy, is that new information? Uh, that surprise, if you will, right. So, um, we know that kind of basics and if you want to build on that, please do. But can you make a connection between that and how the market works? What's kind of going on there? And that's, by the way, we didn't touch on everything. We just touched on the basic prediction side, predictive processing side of our mind or our cells and our neurons. So how does that look like in the market? If you don't mind sharing that with us?

Speaker 2: 48:08

Well, we should start and you've read this but we should start with the statement of of soros right, where he basically says the market is a laboratory of hypothesis testing and that's what I'm doing all the time and and it isn't and it's not a real laboratory, but about you know some experiment, but it is about you know, ultimately making money, et cetera. But this is where the link I make in the book with predictive processing and in terms of surprise and surprisal and all of that, one of the things that we do agree on, what will be the focus of that paper with Carl and Julian and Adam DeWaar, my other co-author, is the importance of discovery, and in a way, this comes also back to being in the flow state or in the zone. And all of that Because when economics talks about utility, it talks about instrumental or functional utility, but in cognitive science, we increasingly realize that there is what is known as epistemic utility, right when the information itself, regardless of its functional utility, is valued, and the one information that is most valuable is the thing that adds to our knowledge, in other words, where we discover a gem that before we didn't know. And it is all about discovery, yes, and price. Discovery, therefore, is the central dynamic in the market where people try to estimate value by, for example, visualizing how a product or a service may evolve and benefit society and then, right, via discounted cash flows, brings it back to the price and all of that.

Speaker 2: 50:10

But what is often forgotten here, and this comes back to the price and all of that, um, but what is often forgotten here, and this comes back to the phenomenal experience when, suppose you're a your scientist, or even in your own career, whatever, when you do a discovery, something very significant, right, that that is not immediately translated in some kind of a quantitative value, as in hey I, I could make money with this. No, what characterizes this is this aha experience, right, this sudden insight you have which adds to whatever you know now, and that is this epistemic central to this epistemic utility of information as an insight, when sometimes not all discoveries are pleasant. Right, I mean, I make the distinction between the aha experience and the oh no, shock, right? So I call the GFC and all these systemic crises basically reality checks, because whatever we knew before it suddenly became not just systemic but existential. I mean, the GFC could have turned out in such a way that you and me would not have this conversation right now. So that is the oh no.

Speaker 2: 51:31

That's a reality check and an excessive, oh no shock.

Speaker 2: 51:36

And so markets, the role of price discovery is central to make sure that we don't have a perfect but a fairly optimal allocation of capital in the real economy so that society benefits. And this then comes back to, for example, a big discussion, a growing discussion in financial markets between passive investing and active investing, or, as I prefer to call it, the complete baganization of the investment process, where everything is captured in an algorithm, often only backward looking, versus discretionary investing, where people, humans, anticipate, even if imperfect, try to understand what a new service or a new good could mean for society and then value it, or a new good could mean for society and then value it. And John Bogle, who was the founder of Vanguard, one of the biggest index tracking passive investing firms in the world, was asked about this. I think it was during I have it in the book it was during Berkshire Hathaway. He was a guest at Berkshire Hathaway, one of their tambourines right, and he said if everybody would be indexing it would be a complete economic disaster.

Speaker 2: 52:53

Yeah yeah, so right. So that's a long-winded answer to your point of hopefully connecting all this.

Speaker 1: 53:02

So there's other things we can look at. There's so much more we can dive into. I've got to ask a couple questions about cycles, so I'm going to reference. I don't know if you're familiar with the, the fourth turning or not, or or uh, I can't remember what they're called I've heard about it.

Speaker 1: 53:16

Yeah, yeah, so about every roughly every 80 years, we're going through a cycle or a bigger cycle, and and that's kind of where we are right now. Uh, how do you feel about cycles in the market? Do they exist, or or even even even even in the brain, do they exist?

Speaker 2: 53:29

yes, yes, okay, we have brain waves. You know it's semantics how you term them, but it's whether waves or cycles, and in economics, you know we have the Kondratyev and some other cycles and it is mixed, of course, with, you know, noise.

Speaker 2: 53:52

Yes, it is mixed, of course, with noise. We have noise in price data and, as my first collaborator, neuroscientist Aaron Sugar, and I wrote in a paper, there's also noise in the brain, neuronal noise, and in that paper, for example, we connected and it was just a superficial introductory paper we made the connection between excess volatility, which is a reflection of price noise, and the readiness potential of Libet, etc. Yeah, so these two weather noise wave cycles, they happen in, of course, in various gradations and frequencies and manifestation, but they happen in the economic system and in any mines, and this is why mines and markets are the mechanical worldview and towards exploring this in what I say, away from the mechanical worldview to the psychophysical worldview, and initially, yes, that is a bit dualist, but that's what we have right now and perhaps eventually, by doing this, we better understand the mind-body problem as well no-transcript uh, no, I well, I mean mandelbrot did did his initial work on commodity prices.

Speaker 2: 55:32

As I understand it, yeah yeah, and that's where it comes. I um, I'm not familiar, I don't know how it.

Speaker 1: 55:39

He must have done more on complexity, complexity yeah, and I think, uh, the term brownian motion comes up and I think it connects well with the noise. So there's, there's noise in the market. There's no, you said there's noise in our, in the neurons, and all that yeah.

Speaker 1: 55:51

Yeah, so. So I mean, it exists right, and that is let's talk about. You talk about algorithm, mechanical trading, let's talk a little bit more about the trading side of things and the use of moving averages, and to me that's a linear lagging indicator. Can you talk a little bit about trend following and what works, what doesn't work, or is it all pseudoscience? Where are you on this? Based off of HH excuse me, mmh.

Speaker 2: 56:33

Well, I'm no longer an active, in that sense an investment professional. I follow the markets from a distance now because, again, my focus is on the MMH and that takes all my time. But I used to be. I was a founder of a technical analysis desk, so, and I know about Elliott wave and Gann theory and all of that stuff. Um, and if, if you don't, you know, believe me, you can believe Jim Simmons. I saw he who who just died earlier last week, right, he was the founder of Renaissance and in an interview he's. You know he doesn't reveal too much, but he says there are trends in markets and it's not purely random, as the efficient market hypothesis or the random walk on Wall Street is many more advanced approaches to the moving averages ones which.

Speaker 2: 57:29

I also used, and whether those become superior and crowd out any traditional approaches or if it's a cross-razor, that it's simplified approaches, that we'll see.

Speaker 2: 57:49

The issue I have and this comes back to this passive versus active is that mechanization begets mechanization.

Speaker 2: 57:59

Right, and the concern I have is that consciousness, as in playing the role of assessing an early, forward-looking view, interpreting it in human values, whatever is happening being crowded out by machines. Who, as Heidegger in particular basically points out, as Heidegger in particular basically points out, right? I mean, machines and humans differ simply because we are not machines and the reason is because machines we care and machines don't care and we need to be a bit careful, I think there. And whether there is a bit careful, I think there, and whether there is a turning point, for example, where algorithms, particularly passive investing, are now responsible for so many assets under management that the active investor can no longer do price discovery in the sense of being the marginal investor. That's a long discussion. I know that some people, very clever people, some people I know hedge fund managers are looking into that. Whether there's a tipping point somewhere, I think it's very hard to assess, but I do think it is valuable and realistic to investigate and consider this.

Speaker 1: 59:26

So I want to highlight something you brought up there Humans are not machines, we're not data processors, and Dave Snowden, creator of the Kinevin Framework, is one of our advisors here. He's been on the show. We talk to him quite often about these things. We know that humans change intent, identity, intelligence throughout the day. We've had a guest on that said we're actually changing every 40 seconds. So you're right, we're not machines. And I think when you start bringing in devices, capabilities, software, like Robinhood let's talk about that for a moment A lot of retail investors are on Robinhood, just like the same folks are on Facebook. The same folks are doing things online. The problem with that is they are not the customer, correct. There's another customer that the platform's designed for. Can you talk a little bit about payment for order flow in the market and if there is an impact to this type of theory that you're suggesting?

Speaker 2: 1:00:29

Yes, when you talk about mechanized, where are the manifestations of that? The economic system becomes more and more mechanized. Let's look at it in a broader context and then include high-frequency trading, which basically these are the firms. So there are a few. So there are macro manifestations and they include central planning and social engineering right, engineering, right and um that you can include fiscal and monetary policies right, where we're basically um, central bankers in particular.

Speaker 2: 1:01:14

They like to think of the economy as a machine and even if it was perhaps medically justified, during covid they pulled the handle, the economy was switched off, then they, we pulled back the handle on and the economy was supposed to switch off, and then we were all shocked to realize that mental health issues, for example, had gone through the roof. Right, basically reflecting that the agents in this system are not robots but they're human beings with consciousness and have mental aspects. Then there is corporatocracy and regulatory capture right, and harvard shusanaoff, for example, has written about this and she basically calls this surveillance capitalism, right, and then there is automation itself that we talked about and that is what she also calls about. But corporatocracy and regulatory capture also is particularly actually on this concentration into almost every sector of the, the big three and everything I call it right the big three in asset management, the big three in technology, and it might be four or five, but you get the point it's growing concentration.

Speaker 2: 1:02:19

but then we go to manifestations in, in, in, in in markets right, economic practices. You have quantitative analysis right, which is basically developing and applying financial models from including DSGE models but also the CAPM and so on. And you have financial and monetary engineering, which is designing and applying complex products including derivatives, but also monetary policies like inflation targeting and yield curve control and quantitative easing. And then the last part that we started off with mechanizing the investment process. And you have passive tracking. You have high frequency trading, liability driven investing. You have high-frequency trading, liability-driven investing and Robin Hood I actually wrote a paper on this with a colleague of mine, james Clooney, in the context also of the meme stocks right that is just this week come up again and there is the issue of, yes, efficiency to some extent is lowering the cost of trading right, because the ideal situation in the CAPM, for example, the capital as a pricing model, is also the assumptions that there are no costs, no taxes, no costs, etc.

Speaker 2: 1:03:42

So in a way, some of these it started with low commission trading, like E-Trade and so on during the internet boom, right, and now you have Robinhood. But there is something linking this back to the economic system and the financial system and how the latter needs to make sure that the capital is sufficiently allocated is that it's not only the lowering of the costs that is important here. The transition is about how the external data of the economy is translated and interpreted in the financial. So the fundamentals, in other words, how are they reflected ultimately in prices? But if the mechanisms, the algorithms that set the prices, for example, by high frequency trading, but also passive investing only use the internal data yes, bid-ask, spread momentum, price returns they don't care about the fundamentals then we have a problem. And this is, I think, where Robinhood, while trying to lower the cost and make it zero, commission trades for retailers by passing it on to high-frequency, who only care about the internal market data, particularly bid-ask, et cetera, where we have a problem. Okay, does that make?

Speaker 1: 1:05:11

sense. Oh, absolutely, you're opening up more questions for me and hopefully we can continue. I want to go into portfolioism in a moment, but I do want to ask a question about the market going open 24 hours a day and I want to give you some context. First, we know that a flow cycle you got to go through struggle, release, flow and then recovery. Recovery To me, when the market closes, you have aftermarket and it closes and markets around the world open up and they kind of feed off each other. You can see the money flow throughout the night 24-hour cycle. What happens if the market goes 24-7? What if we get options 24-7? What's this going to look like?

Speaker 2: 1:05:54

Well, that's where part of my argument, that and again I write about this in the book where the economic system and particularly the market as the mind is reflective of the brain, that just like we sometimes go to sleep, the market also goes to sleep and, in our case, linking it back. We need this time off to reflect on things, and this is what I mean with thinking of visualizing the future. What would it all mean? And we can, and I can go to, we can go to bed at our, in our time zones, and then other people will pick it up, but the problem is then right. So so some of them denmark argument becomes a bit weak in terms of the comparison goes, goes to some extent away.

Speaker 2: 1:06:42

Where you need time, uh to reflect at least. Uh for the, for the conscious part of the market mind. But this is exactly what would happen if mechanization begets mechanization, where you get to the point where algorithms allow continuous trading and while some human market participants in some areas of the world are asleep and are not connected, others will go on. It still leads to prices moving all the time, and I think it's just another issue related to mechanization begets mechanization and uh for policymakers. It must be a nightmare because as we as we know, often during weekends they got into action to um and some interference is not. I'm not for all interference, but uh, you know, sometimes it could be good to allow policymakers also to um, reflect and coordinate across the world, and that would then kind of become challenged.

Speaker 1: 1:07:52

Yeah, I'm all about the recovery period, right. That's where we learn, that's where we reflect, that's where we uh prepare for the next. We can't be in flow the whole time. That's the idea of it is. The whole system can't do that in fact.

Speaker 2: 1:08:02

I mean, it turns out that that sleep is crucial for the brain. Yeah, you don't have enough sleep.

Speaker 1: 1:08:09

Yeah, yeah so, yeah, so the idea of having a 24-7 market is like staying awake 24-7. You can't function. So in my view, it would invite some type of failure, some type of risk that we can't even imagine right now. Yeah, okay, a couple other things there. Let's see portfolioism. You bring that up in the book. Can you walk me through what that means to you? Uh, what? Yes, yeah, so.

Speaker 2: 1:08:35

so, um, it has two, uh, main cues basically to start off with that. That is first, as I mentioned, mentioned, hayek's practical dualism, which we adopt and adapt. So it basically says our reality consists of, as we perceive it, at least, as consisting of the physical and the psychological, or the material and the mental, and they form a portfolio at every level. And you know, it can be at a very low level, it can be and I then translate it as all being assets and liabilities, a liability being a negative asset, for example an dualist portfolios across all levels, individual, collective, at the atomic level to the larger level. This is my way of connecting the economics with the cognitive, because portfolioism then allows the mind as market to be formalized. Remember what I said, that you get to arrow and the brew and you can then apply it to the cognitive, to translate all these cognitive concepts and manifestations in portfolio terms, which consist then of securities or assets, if you will. So that's how it… it's just basically the metaphysical worldview of the market mind hypothesis.

Speaker 2: 1:10:23

Whereas mainstream economics has the metaphysical worldview of mechanistic monism, whereas mainstream economics has the metaphysical worldview of mechanistic monism and others have the mechanistic metaphysical worldview of psychism and so on.

Speaker 1: 1:10:36

Yeah, no, I bring that up because of one I saw in your book and with the flow system, with my co-creators on that. We were talking about portfolios this past week, so the timing was perfect. A couple more questions for you and then I want to turn it over to you. Uh, the importance of narrative in the market and and I think this goes back to narrative economics and schiller, if you start looking at uh, uh, bitcoin or digital assets as um, uh, how they're connected to to narrative, can you share a little bit of insights on how important or not important narrative is in the mmh?

Speaker 2: 1:11:11

yes, it's, it's, it's very, uh, important in the sense that um and and whether it is memes or or other narratives, as in a theory, is to some extent a narrative, right, right, but first it actually goes back further. An angle I take, at least, is, for example, deirdre McCloskey wrote a seminal paper in 1983 called the Rhetoric of Economics, and she talks about rhetoric and stories and narratives etc. I'll bite a little bit from a different angle, but I think that is where Schiller's narrative economics kind of builds on. So it goes back further and I think that Wittgenstein, for example, because it is to do with language etc, has a lot to say about this. Although people not always make that connection. There are a few um involved in what is called um, humanomics, which is another um, let's say discipline emerging which wants to bring the, the human, back into economics. That's why it's called humanemic. They are looking into this. But the the important thing is narratives have to do with mental causation.

Speaker 2: 1:12:27

Ultimately, right, and we talked about that earlier and I think, when Schiller wrote his book Animal Spirits with George Akaloff in 2009, called Animal Spirits. They have this quote on page one, where they say we will not understand economic events unless we realize that, uh, they are basically mentally caused, and that's how he built on this with his, his, his narratives. But but the core, uh, insight indeed, indeed, is again coming back to this psychophysical, that that there is a mental causation and narratives help us to make things happen, to convince people. For example, deirdre calls it a sweet talk, where people have a story and they suddenly they're convinced and some of the meme stocks. I think the story is important there and, you know, bitcoin has its own story with Sakamoto and all of that.

Speaker 1: 1:13:32

Yeah, that's a fantastic conversation. So your book is well-researched. I've been through it. I'd have to read it. I'd have to spend more time on it, because you reference a lot of things that go back for me about 20, 30 years when I was, you know, doing my economic studies. But there's a great, you know, I just took a lot of notes here. You have Von Mises, Keynes, Schiller that we just talked about, Hayek. You bring up Carl Friston Kelso.

Speaker 2: 1:14:02

David Eagleman's in there. We like talking about his lot of work on the brain Seth Carhart-Harris.

Speaker 1: 1:14:05

Frank Knight, frank Knight, oh, frank Knight Heisenberg, you bring up cybernetics. So this is definitely something I want the community to look at, because it's not, even though it's just a sketch, and you dive deeper into what he looked at. He's referencing very you know, uh, quite a few things that you are as well saying that, um, we have this nonlinear approach to wait, the way we experienced the outside world, uh, and today's uh, you know, friston, um Carhartt, harris, eagleman and uh, clark, you know they're, they're looking at that as well, saying, hey, this is what we're learning from neuroscience, from fMRIs. That's why we're talking to folks in the psychedelic space, to psychedelic therapy. Uh, we're looking at everything to say, okay, what, what do we get out of this thing and why is it important?

Speaker 1: 1:15:00

And, more importantly, in my view, why is it bringing you know Patrick, guys like Patrick, guys like me, guys like you know Patrick, guys like Patrick, guys like me, guys like you know, ladies like um, in a simple leader together to have these conversations? Um, and that's what it is. There's something going on in the world that that's really bringing us together. Uh, and I, I just want to make sure our listeners know that your book, uh, the market mind hypothesis is out there. Uh, it's well-researched and I want to uh, check in with you. Where are you getting pushback on this who's?

Speaker 2: 1:15:32

pushing back on this type of thinking. Overall, I'm very happy with the responses I get invites to give talks and so on but there is pushback. I like to categorize them in three ways, although they are in a way connected. Them in three ways, although they are in a way connected. There are those who read my primer, for example, which is an introduction to cognitive economics and the MMH. It's just a paper, or they read the book and it's clear that their attitude is they skip through it. Oh, I see, yeah, I see, I see. And then they, I get it. And then you dig a little bit deeper and it's obviously that they didn't really read it properly.

Speaker 2: 1:16:25

And I even had economists who read the book, but it became clear, for example, that they hadn't read Appendix 1, which, as you know, is very important because it explains the terminology of cognitive science and economics. So for both cognitive scientists and people with an economic background, appendix 1 is where you should start. The second group is the ones that are the obvious, the usual suspects, those who prefer to keep the status quo, who do understand the MMH, understand the implications if it gets accepted and I'll give you one implication which I mentioned in the book If the MMH is right, then what it says, among others, is that what economics is missing is its own Hippocratic Oath, which we would then translate for our purposes as the original is first do no harm right to the human mind body. It would translate that first do no harm to the economic system, and it would have massive regulatory, legal and all the practical implications. So that is the second group. The third group is perhaps surprising.

Speaker 2: 1:17:33

These are people who also search for new economic thinking, or our, our preferred. The way we think of what we do is new economic enlightenment. They want new, but they see the mmh as a big threat. They want to have a monopoly on it, a claim that they are the ones who only represent new economic thinking. And that's the criticism you also get and that's why I said they overlap to some extent. But those are the three type of critic casters, so to speak.

Speaker 1: 1:18:06

Yeah, know, I laughed at your second point because we, you know, here in the us we have a k-shaped recovery, uh, which means that a lot of people are absolutely being crushed by what's going on in the economy and, at the same time, there's a lot of folks that are benefiting from this. Uh, I think today we're at all times high, all-time high in the markets, at least in sp, and maybe even I don't know where I don't see the Dow in front of me right now. We just came out of another meme stock week with GameStop, and then I forgot what else popped out of there last week. We saw that four or five years ago as well. So there's again the reason I'm laughing at that.

Speaker 1: 1:18:43

Second point is do no harm, I think there's a lot of folks that don't understand basic finance, personal finance We've talked about that in the past is, you know, most people in America I think it's around 70% can't explain how a credit card works. Here we are talking about black shoals on this show and consciousness, and we're again, not everybody's going to be able to gronk these concepts right. The black shoals, optionality you know that options are bad in the US because they're really, really dangerous. That's the prevailing thought anyway. You know that's not necessarily true. They can be, but they're also a great way to hedge in a market as well, if you learn how to use them. So again, do no harm. Hopefully leaders in our world are listening to this and saying hey.

Speaker 1: 1:19:31

I think you're talking about them right. Do no harm.

Speaker 2: 1:19:34

Just to add one more point. Part of our research and education program is to improve economic and finance education, even at primary or high school level.

Speaker 2: 1:19:46

We need to start much earlier with this. But again, not to sound cynical, for some parties it's in the interest that economic education is not properly done. And Russell Napier, who you may have heard, he's a very well-known investment strategist. I call him my brother in arms for New Economic Enlightenment. He started the Library of Mistakes in Edinburgh. He has other locations as well. You may look it up, your viewers too, but part of his foundation is Didasco is all about improving education on this economic education at a very early level, on this economic education at a very early level. Um, and, and for some reason it's, it's a struggle. Why? Why policymakers and and governments don't pick this up and don't see this and and you have to be cynical to say, well, it's not in their interest. But you know why, decades and and after all these crises and and the growing inequality, I mean it all kind of, yeah, it almost looks like a conspiracy.

Speaker 1: 1:20:52

It does. But there is you know we had this conversation with other guests where there is no centrally planned approach to this. There can't be. I mean, there is no evil group out there planning everything, because if they were, we would absolutely know about it. It is an emergent property of the system. So, going back to your point earlier that you know, you kind of pointed out that the systems drive behaviors. I forgot who you connected that to, if it was Soros or somebody else.

Speaker 1: 1:21:17

But the idea is, you know, the system will act in the way that it does based off the way the system's designed. So they're you know, and it's it's that that's important, not just here in economic theory, but when we work with organizations, when we look at their work. You know how their systems, their reward systems, drive behaviors. Uh, the promotion systems, things like that. It's the same thing. It's, it's that system will drive your behaviors in your system as well, the this uh system, the way it's designed in, uh, the economy and the market that that will drive the behavior right. So that's how we end up with robin hood. That's how we end up with the payment forwarder flow. That's how we end up with, uh, facebook, uh, being uh, you know, you're not the customer, you're the product of something like that.

Speaker 2: 1:22:01

So where the theory is not an innocent bystander, absolutely. I mean. In a way it's self-explanatory why we are not teaching economics in the new enlightenment context but make it so complicated that it is exclusive to a group and it doesn't get educated properly at primary level level, primary school.

Speaker 1: 1:22:30

Um, the theory is part of the problem no, I, I'm with you, my, you know, when my kids come on from school and they, they tell me what's going on there, I'm like I can't believe you're actually experiencing that. And then, anyway, that we're not going to go into that space today, I do want to point out a few things to you. I'm going to to send you the Grant Hammond's overview of the. I'll show you what it is right now it's in my hand. Actually, it's called a discourse on winning and losing. I'm just going to send you the PDF.

Speaker 1: 1:22:56

This contains a lot of the updated briefs from John Boyd, and remember, it's not just the briefs that that matter, it's everything that's behind that that matter. It's everything that's behind that that really matter, um. In it it explains why we have the podcast name, the way. It is no way out. Basically, we're looking at all the features of the world that are out there uh, numerical and precision, mutations, uncertainty, novelty plus, plus, plus plus, entropy, um. And then that there is no way out. We can't eliminate them. We have to go through a new reorientation and that's what you're providing us with. The're looking at this out of curiosity. What does this space look like? Based off of what I experienced in the past. What does this look like? What does philosophy look like? What does biology look like?

Speaker 2: 1:23:57

Anthropology, and that's exactly what John Boyd did so I'll send you that PDF.

Speaker 1: 1:24:03

It's not by us, but any questions from you, or do you want to share with our listeners what's next for you as far as conferences or articles, books, anything like that?

Speaker 2: 1:24:16

Yeah, very briefly, two papers are. One is resubmitted, so it's the revised version. The other we're working on um, and we hope to open the market mind center in the edinburgh futures institute, which is a new institute part of the university of edinburgh. That's where we will be based, where we will be teaching the course on the book and do our research and perhaps at some point, some consultancy, um, and that's how we're uh, you growing critical minority of people collaborators, funders, policymakers to slowly change this. So I don't think I will retire. That's the rest of my life.

Speaker 1: 1:25:01

It's a passion. I can see that. Patrick Skotanis, thank you for being here today. Really really appreciate these insights. Love to have you back. I know Mark's going to be upset that he had to miss today's recording. Apologize for that, but Mark's background is a little bit more deeper than mine in economics and on financial markets. But we'll definitely have you back and thanks again for everything.

Speaker 2: 1:25:25

Thank you, brian, it was a delight and thanks for having me. Thank you, brian, it was a delight and uh, thanks for having me and uh, yeah, good luck with your, uh, with your podcast, all right, thank you.