Recently I finished reading Mandelbrot’s The (mis)Behaviour of Markets for the second time. Fantastic book. I think it is a must read for people who are interested in financial markets, and especially for those who work in capital markets. While it stays away from equations and “math”, and prefers to use pictures (or cartoons) to illustrate and show concepts (a method I definitely prefer to obscure math), it does raise a lot of very interesting fundaas.
So last week I was feeling stressed out. I realized that I had worked too hard on Wednesday and Thursday hence I got stressed out on Friday. A couple of months back, I took a couple of days of medical leave because I was stressed out. I reasoned that was because I’d pushed myself too hard the earlier two weeks. And thinking about all this today, I thought the incidence of stress has gone up over the last couple of months. This, I reasoned to pushing myself excessively for over a year now. And if I were to analyze my today’s work, I could probably say that I pushed myself too hard in the afternoon and hence got stressed out in the evening.
Same pattern, you see. At different scales.You get the drift, I guess. And stress is just an example I took. If I think about how my louvvu for my wife has evolved, again same pattern. There is a “global pattern”, and that same “global pattern” repeats itself over shorter intervals over the last two years. Irrespective of the quantum of time I look at, I see that same “global pattern” stretched or compressed to the appropriate time scale. In other words, love is also a fractal.
You can see fractals all around you. You can see self-similarity everywhere. And yet, even when you have small samples. you instinctively try to model it as a normal distribution. Without realizing that the “normal” distribution in life is the Power law.