Complexity, Risk, and Financial Markets

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Patterns in the Dark is that rare book that offers an entirely new perspective on an issue of ongoing concern to investors: the unpredictability of financial markets. In this groundbreaking work, leading investment strategist and authority on chaos theory Edgar Peters makes accessible ways of understanding market behavior that--until now--were known only to specialists. In a lucid and engaging style, Peters explains how processes with a large number of independent agents, such as free markets, can spontaneously organize themselves into a coherent system. He draws on the work of the Austrian school of economics and complexity theory to show how free markets are by their nature continually evolving complex systems that require uncertainty to operate successfully. Using everyday examples, Peters shows how complex systems use uncertainty to adapt to changes in their environment and to absorb unexpected shocks. As proof, he cites instructive examples of how rash or heavy-handed attempts to eliminate uncertainty in markets have invariably led to disaster. Patterns in the Dark draws on a broad range of human knowledge and experience to clarify the behavior of a system that now operates on a global, 24-hour, and thoroughly interconnected basis. Peters illuminates the complex operation of the marketplace by including keen observations drawn from science, mathematics, and artistic creation as well as economics. His models include the social vision of the Austrian economists, Darwinian ideas of evolution, the laws of physics, and the creative risks of the artist. His meditations on financial markets weigh the effects of limitations vs. rules, risk vs. uncertainty, and order vs. chaos. As a guide to a world marketplace that has become increasingly complex anti uncertain, Patterns in the Dark offers the investor a rich source of insight, illumination, and wisdom.