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Alternative Market Briefing

Other Voices: Reductionism in investing and art

Friday, May 18, 2018

amb
Alex Gravish
  By Alex Gavrish, Etalon Capital Ltd, author of Story Investing.

About a year ago I read an exciting book by Professor Eric Kandel, a Nobel Prize laureate in medicine and professor at Columbia University. In the book, professor Kandel draws parallels between such seemingly disparate fields of science as brain research and modern art.

Despite different objectives, there is an important conceptual connection between the two. Scientists reduce complex processes and problems to smaller, simpler components. They do it because it makes it much easier to do the research. For example, to understand brain activity.

Modern artists implement the same principles but approach the problem from an opposite direction. They make us start with "simple" and "reduced" elements of visual representation and make us "move" towards more complex ideas. Picasso destroyed the form. Mark Rothko reduced everything to color. Jackson Pollock integrated chance and accident into painting.

Because of these "techniques" and the biological mechanisms underlying our visual perception, abstract modern art enacts a powerful influence on us: we become more creative and our imagination starts to function better.

It is not hard to draw parallels with the investment world.

Quantitative investment managers and factor-based strategies aim t......................

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