Executive Abstract

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Executive Abstract

• Logistic dynamics has been recognized since 200
  years to govern a wide range of social, economic,
  biological and cognitive systems.
• In the past the predictions of the logistic
  equation have been invalidated almost
  systematically in many occasions.
• In particular they predicted often falsely the
  decay of the dynamics in adverse conditions.
• We show that the correct accounting for the
  discrete character of the elementary components
  of the system leads to dramatically different
  predictions
• In particular the emergence of adaptive
  collective objects that insure survival and
  development in conditions in which the naïve
  continuous/ global treatment would predict
  complete and uniform decay.
• The emergence of stable Pareto-Zipf power laws
  even in very non-stationary conditions.
• We review a series of applications, predictions
  and their validation.

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Complexity
Sorin Solomon, Racah Institute of Physics HUJ
Israel Director, Complex Multi-Agent Systems
Division, ISI Turin
Director, Lagrange Interdisciplinary Lab for
Excellence In Complexity
MORE IS DIFFERENT (Anderson 72)(more is more
than more) Complex Macroscopic properties are
often the collective effect of many simple
microscopic components (and independent on
their details)

• Phil Anderson Real world is controlled
• by the exceptional, not the mean
• by the catastrophe, not the steady drip
• by the very rich, not the middle class.
  we need to free ourselves from
  average thinking.

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Misfit was always assigned to the neglect of
specific details.We show it was rather due to
the neglect of the discreteness. Once taken in
account gt complex adaptive collective objects.
emerge
even in the worse conditions
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MORE IS DIFFERENT Complex Systems Paradigm
MICRO - the relevant elementary
agents         INTER - their basic, simple
interactions         MACRO - the emerging
collective objects

• Intrinsically (3x) interdisciplinary
• MICRO belongs to one science
• MACRO to another science
• Mechanisms a third science

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Simplest Example of a More is Different
Transition
Water level vs. temperature
1cm
1Kg
950C
BOILING PHASE
TRANSITIONMore is different a single molecule
does not boil at 100C0
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Example of MORE IS DIFFERENT transition in
Finance Instead of Water Level -economic
index(Dow-Jones etc)
Crash result of collective behavior of
individual traders
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Meaning
Cells,life
Social groups
Words
people
Chemicals
Markets
WWW
Customers
E-pages
Anderson abstractization
Herds, Crashes
Cognition, perception
Traders
Neurons
Statistical Mechanics Phase Transition
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Instead of temperature (energy /
matter) Exchange rate/interest rate Value At
Risk / liquid funds Equity Price /
Dividends Equity Price / fundamental
value Taxation (without representation)/ Tea
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Product Propagation
Bass extrapolation formula vs microscopic
representation
VCR
Actual sales
Extrapolation
CARS in USA 1895-1930
DVD
Reality curves
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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Microscopic view of a water drop a network of
linked water molecules
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The water drop becomes vapors the network splits
in small clusters
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The water drop becomes vapors the network splits
in small clusters
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The water drop becomes vapors the network splits
in small clusters
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The water drop becomes vapors the network splits
in small clusters
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The water drop becomes vapors the network splits
in small clusters
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Boiling is not a physical property of particular
molecules but a generic property
of the cluster geometry
To understand, one does not need the details of
the interactions.
Rather one can prove theorems on what is the
density of links that ensures
the emergence or
disintegration of clusters
Phase Transition
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Product Propagation
Bass extrapolation formula vs microscopic
representation
VCR
VCR
Actual sales
SALES
Extrapolation
BASS
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Product Propagation
Bass extrapolation formula vs microscopic
representation
VCR
VCR
Actual sales
SALES
Extrapolation
BASS
Also Belief Propagation
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Product Propagation
Bass extrapolation formula vs microscopic
representation
VCR
Actual sales
Extrapolation
Also Belief Propagation
CARS in USA 1895-1930
DVD
Reality curves
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Propagation effects - product propagation -
spread of ideas - epidemics - Internet
viruses - Social ills drugs, violence,
terror - Credit networks and bankruptcy
avalanches - production / trade practices -
real estate valuation - tax paying habits
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The Square Lattice is just for clarityThe
effects demonstrated are much more general
PotentialAdopters
Rejectors
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Density of potential adopters 26/48gt50
What Percent will actually
adopt?
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The Buyers are split in small clusters
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The epidemics, bankruptcy avalanche, idea,
product spread is limited to one cluster
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Density of potential adopters
26/48gt50 What Percent will actually adopt? 7/48
lt 15
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Density of potential adopters
26/48gt50 What Percent will actually adopt? 7/48
lt 15
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Only 15 will actually adopt! But what if add
one more potential adopter?
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If adds one more potential adopter 22 out of 27
potential adopters adopt 22/4846
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This is not just a fortuitous case for larger
systems the effect is even more dramatic
Adopters Density 55
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55
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If lowering the price , or increasing quality,
or decreasing taxes or subsidizing adopters
(or affecting credit rate) etcone gains 5 more
potential adopters Thendensity of potential
adopters 60 How much will this increase the
actual adoption?
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60
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60
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60
55
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60 potential adopters
55 potential adopters
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60 potential adopters
Theorem
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55 potential adopters
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59.3
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Fractal Sales Prediction Tool for product
success (15/17)
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55density
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fractal space distribution
Prediction of campaign success (15/17)
Goldenberg
Air-view of a sub-urban neighborhood crosses on
the roofs indicate air-conditioner purchase
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Market 'spikes' are seen by traders as freak
events.Physicists expect them
Small changes in product quality, price,
external conditions can produce large
effects(e.g. large market fluctuations) Small
deterioration in credit market can trigger large
waves of bankruptcies
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Market 'spikes' are seen by traders as freak
events.Physicists expect them
Lev Muchnik Phys. Scripta
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Levy, Solomon and Levy's Microscopic Simulation
of Financial Markets points us towards the
future of financial economics. If we restrict
ourselves to models which can be solved
analytically, we will be modeling for our mutual
entertainment, not to maximize explanatory or
predictive power."--HARRY M. MARKOWITZ, Nobel
Laureate in Economics
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-emergence of High-Tech communities-start-ups
connections to previous businesses-entrepreneurs
emerging from old businesses-partners having
previous common institutions
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-emergence of High-Tech communities-start-ups
connections to previous businesses-entrepreneurs
emerging from old businesses-partners having
previous common institutions
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Objective Algorithm to Evaluate Interdisciplinary
researchers relevance
- map the interdisciplinary cooperation
network(- people are nodes - cooperations
andcommon papers, are links).
Discipline3
Discipline 1
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• nphys177-s1.mov

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• nphys177-s2.avi

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This was a Particular case of Logistics dynamics
(with Corrections!!) Other technological
change innovations diffusion (Rogers) new
product diffusion / market penetration
(Bass) social change diffusion

dX/dt X(N X )
X number of people that have already adopted
the change and N -X number of remaining
customers
Logarithmic scale
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Naïve logistic
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