john casti the x-center vienna, austria · collapse of complex societies (1988) arab spring...
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Human events = chance + necessity
= “random trigger” + context
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• Rare
• Surprising
• High-Impact
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• Complexity gap/mismatch • Collective beliefs about the future (the “mood” of the population)
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Tainter, J. The
Collapse of Complex Societies
(1988)
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Arab Spring
(government vs public)
2011 Japanese earthquake
(nature vs humans)
Financial Crash of 2007
(financial services vs regulators)
Eurozone/EU
(EU regulations vs global markets)
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Goal: Create a Fund that trades on the occurrence/non-occurrence of X-events, not on price movements
Tradeable Types of X-events: political and/or economic
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Choose specific type of X-event X*
Identify landscape of X*
Gather past data on drivers of X
Identify early-warning signs of change in drivers
Develop financial actions to take when early-warning signals appear
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X* = military coup in Chile
Financial Market = Copper futures exchange
Drivers of change (1) = gap between complexity of military and civilian power
Drivers of change (2) = increasing negative social mood in population
Early-warning signal(s) = gap increasing too rapidly; mood declining rapidly
Financial action = buy copper futures
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• Complexity kills
• Human events cannot be “forecast”
• Mood biases events
• X-events are necessary for rebirth