The GameStop drama points to a new world and not just the investing world. Hedge funds have taken losses which may be in the billions by being targeted by an army of stimulus checks on Reddit. Derivatives are really just very complicated algorithms that make predictions about how money will move based upon various factors. We all know the most chaotic factor to calculate is human behavior.
Asimov postulates a new science called psychohistory in the Foundation series. The name psychohistory is a misnomer because it is predictive analytics and chaos theory applied to humanity, but psychohistory is the name Asimov gave it. Derivatives look a lot like what Asimov called psychohistory.
Psychohistory depends on the idea that while one cannot foresee the actions of a particular individual, algorithms applied to large groups of people could predict the general flow of future events. This is essentially what derivative equations and hedge funds are doing.
The character responsible for the science's creation, Hari Seldon, established two axioms:
1] the population whose behavior was modeled should be sufficiently large
2] the population should remain in ignorance of the results of the
application of psychohistorical analyses because if it is aware, the
group changes its behaviour.
2] the population should remain in ignorance of the results of the
application of psychohistorical analyses because if it is aware, the
group changes its behaviour.
In the books, a random individual known as the Mule throws the psychohistory predictions off-kilter. Derivatives are today's psychohistory equations. Watching the stock market these days is proof enough the Mule has arrived. The crazy markets have been making it very difficult for the investing-bots.
I postulated here on HackerNoon that Donald Trump was our Mule. I postulated that his election and presidency was so unexpected he represented the unexpected individual capable of having huge effects on the behavior of the mob. He certainly kicked the covers off some aspects of the way the world is being run by elites. Remember the second axiom of psychohistory: ...population should remain in ignorance...
Isaac Asimov WAS our Hari Seldon. He has been predicting the future for us since just after World War II. His novels and stories define the future we now live in. Asimov’s stories and ideas have certainly been a boon to the derivative industry. Hedge funds had the money to get the coders and leverage Asimov's psychohistory theories, but the "population is no longer ignorant".
Disclaimer: The opinions in this article belong to the author alone. Nothing in this article constitutes investment advice. Please conduct your own thorough research before making any investment decisions.