When writing these articles, I try to abide by the principle of markets as complex adaptive systems (or living systems). Many people treat markets as mechanical systems, which denies the involvement of people in market interactions.

Living systems have a couple of unique characteristics that separate them from mechanical systems. They are self-referencing and self-organizing.

Self-referencing systems have the capability of observing their own behavior. Based on the observations of their behavior and the results that behavior creates, living systems can self-organize, which simply means they can adjust or change behavior.

You see these capabilities in all living systems. Plants exhibit these characteristics. The plants grow toward the sun; roots grow toward the earth. Animals change migrating patterns or hunting strategies based on changes in their environment.

Human systems make up a unique type of living system. They learn in ways not available to animals. They transmit their learning to succeeding generations—a process Alfred Korsybski called “time-binding.”

Because markets are human systems, researchers cannot run repeated tests on their behavior, a fact that calls all market statistics into question. Theories about markets can only be derived through reason.

In commenting on the behavior of markets, I keep my comments to those I can justify through reasoned theories.

Fully describing living systems would require a book. I attempt to keep in mind the primary ideas that I must view statistical data with great care and that markets always consist of networks of individuals.