Doyne Farmer born 22 June is an American complex systems scientist and entrepreneur with interests in chaos theory , complexity and econophysics. He is a Professor of Mathematics at Oxford University , where he is Director of the Complexity Economics at the Institute for New Economic Thinking at the Oxford Martin School , and is also an external professor at the Santa Fe Institute.

His current research is on complexity economics , focusing on systemic risk in financial markets and technological progress. During his career he has made important contributions to complex systems , chaos , artificial life , theoretical biology , time series forecasting and econophysics.

He co-founded Prediction Company , one of the first companies to do fully automated quantitative trading. While a graduate student he led a group that called itself Eudaemonic Enterprises and built the first wearable digital computer, which was used to beat the game of roulette. Though born in Houston, Texas, Farmer grew up in Silver City, New Mexico. He was strongly influenced by Tom Ingerson, a young physicist and Boy Scout leader who inspired his interest in science and adventure.

While still in graduate school, Farmer and his childhood friend Norman Packard formed a group called Eudaemonic Enterprises. They bought a roulette wheel and did an extensive experimental and theoretical study of its physics. To execute their system, they built the first wearable digital computer, at roughly the same time as the first Apple desktop computer.

Farmer hand-coded the three-kilobyte program for the computer in machine language. The program included a floating-point package, a sequencer to perform the calculation, and an operating system that functioned with toe inputs and vibrating outputs. The earliest version of the computer was hidden under the armpits, but a later version was concealed in a shoe. Their scheme took advantage of the fact that typically more than ten seconds elapse from the time the croupier releases the ball until bets are closed.

During this time one person measured the position and velocity of the ball and rotor using his big toe to click a switch in his shoe.

The computer used this information to predict the likely landing position of the ball. A signal was relayed to a second person, who quickly placed the bets.

Santa Fe Artificial Stock Market – Wikipedia

This combined with their fear of violence at the hands of the casinos, so that they never played for high stakes and failed to realize the large sums they originally dreamed of. After the roulette project Farmer switched his dissertation topic to chaotic dynamics and joined together with James P.

Crutchfield , Norman Packard , and Robert Shaw to found the Dynamical Systems Collective subsequently known by others as the Chaos Cabal. Although they had the blessing of faculty members William L. Burke and Ralph Abraham , they essentially co-advised each other's PhD theses. This has now been used to identify chaotic attractors and study their properties in a wide variety of physical systems.

He later developed a method for nonlinear time series forecasting that has been used for exploiting low dimensional chaos to make better short term forecasts. After finishing his doctorate in , Farmer took a post-doctoral appointment at the Center for Nonlinear Studies at Los Alamos National Laboratory and received an Oppenheimer Fellowship in He developed an interest in what is now called complex systems and co-organized several seminal conferences in this area. Farmer and Norman Packard developed the concept of metadynamics , i.

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For example, the nodes of the network might represent chemical species and the edges their possible reactions, whose kinetics give rise to a system of differential equations. As new species are produced the set of reactions changes and the kinetics are in turn altered.

This concept was used to model the immune system and the origin of life. In Farmer gave up his position at Los Alamos, reunited with Norman Packard and graduate school classmate James McGill, and co-founded the Prediction Company. The prevailing view at the time was that markets were perfectly efficient, so that it was not possible to make consistent profits without inside information.

The trading strategy that was developed was an early version of statistical arbitrage, and made use of a variety of different signals derived from processing essentially all quantitative inputs related to the US stock market.

It also included a high frequency forecasting model as an overlay to reduce transaction costs. From onward trading was completely automated.

Building the Santa Fe Artificial Stock Market - Semantic Scholar

Farmer was one of the chief architects of the trading system as it existed in Prediction Company was sold to UBS in and in was re-sold to Millenium Management, where it is their second largest fund. Farmer left Prediction Company in for the Santa Fe Institute, where he did interdisciplinary research at the interface of economics and complex systems, developed a theory of market ecology and was one of the founders of econophysics.

Market ecology is based on the observation that financial firms engage in specialized strategies and can be sorted into groups, analogous to species in biology. Farmer showed how to a construct a market food web, that describes the way in which trading strategies influence each other's profits and size.

The market food web is supported by fundamental economic activities, such as demand for liquidity, lending to the real economy and risk diversification. These create patterns in prices that are exploited by trading firms, who are analogous to predators in biology. Some strategies are stabilizing while others are destabilizing, and shifts in the market ecology can give rise to financial instabilities, e. These ideas had an important influence on the adaptive markets hypothesis.

Farmer is consideres one of the founders of the field of "econophysics". Together with Michael Dempster of Cambridge, Farmer started a new journal called Quantitative Finance and served as the co-editor-in-chief for several years. His contributions to market microstructure include the identification of several striking empirical regularities in financial markets, such as the extraordinary persistence of order flow.

Fabrizio Lillo and Farmer observed that there are long periods where the orders flowing into the market are much more likely to be to buy than to sell, and vice versa, with correlations decaying very slowly as a power law. This law is remarkable as it is universal, in the sense that the functional form of market impact remains the same as long as markets are operating under "normal" conditions. The crisis of is widely believed to have been an example of a leverage cycle, in which lending first becomes too loose and then becomes too tight.

Although innovation might seem by its very nature to be unpredictable, in fact there are several empirical regularities that suggest the opposite. Together with several colleagues Farmer developed a theory for explaining Wright's law, which states that costs drop as a power law function of cumulative production. Farmer has written about science and adventure and is an avid sailor and backpacker.

Doyne is listed as member of BMLL Technologies Ltd, a Cambridge University spin-off working in the field of limit order book data and analytics. He continues his entrepreneurial activities as Executive Chairman of Scientific Investments. Farmer and Packard's work on roulette, along with their adventures in the casinos of Nevada, has been featured in the Breaking Vegas documentary series, " Beat the Wheel ". From Wikipedia, the free encyclopedia.

How a Child Becomes a Scientist. Knopf Doubleday Publishing Group. Who Got Einstein's Office? Eccentricity and Genius at the Institute for Advanced Study. Retrieved 9 March North Holland Physics Publishing. Models for Adaptation in Machines and Nature". The Emerging Science at the Edge of Order and Chaos. Santa Fe Institute Studies in the Sciences of Complexity: How a Band of Maverick Physicists Used Chaos Theory to Trade Their Way to a Fortune on Wall Street.

Industrial and Corporate Change. Evolution and Efficient Markets" PDF. NBER Macroeconomics Annual University of Chicago Press. Doyne; Geanakoplos, John Doyne; Tan, Vincent Journal of Financial Stability.

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