Embracing complexity economics to better understand how markets really work

Thinking Differently about Markets is a subscription service that enables a deeper and more realistic understanding of economic and financial dynamics, empowering greater clarity and agility in portfolio construction.

Understanding the secular, structural and cyclical drivers of economies and financial markets is critical for portfolio construction. Yet conventional theories of economies and financial markets grossly oversimplify the real world in which Volatility, Uncertainty, Complexity and Ambiguity (VUCA) are becoming more acute. For the past 30 years, a revolution has been underway in how markets and economies should be viewed and understood. Thinking Differently About Markets embraces this revolution - complexity economics - in which the economy is more akin to an ecosystem, the brain, or the internet than to the mechanistic models of traditional theory.

Thinking Differently About Markets will help you create robust portfolios by deepening your understanding of how economies and markets really work.

Subscribers
Subscriber resources

Not yet a subscriber?
What is complexity economics?
Backgrounder: Thinking Differently About Markets - earn 1.50 CE hours by reading this introduction to the key elements of complexity economics and the implications for understanding market behaviour and constructing portfolios
Who is behind Thinking Differently About Markets?
Who does Thinking Differently about Markets suit?
What makes Thinking Differently About Markets different?
What does a Thinking Differently About Markets subscription include?
Subscribe now!
Email us for more info

Complexity economics is the application of complexity science to the problems of economics. It relaxes several common assumptions in economics, including general equilibrium theory.

A growing number of economists and social scientists view the economy as a ‘complex adaptive system’ - a distributed network of dynamically interacting, heterogeneous agents, whose behaviours, strategies and relationships evolve over time. Under such a view the economy is more akin to an ecosystem, the brain, or the internet than to the mechanistic models of traditional theory.
- Institute for New Economic Thinking, Oxford Martin School, University of Oxford - Find out more

Complexity economics builds from the proposition that the economy is not necessarily in equilibrium - economic agents (firms, consumers, investors) constantly change their actions and strategies in response to the outcome they mutually create. This further changes the outcome, which requires them to adjust afresh. Complexity economics sees the economy as in motion, perpetually constructing itself anew. Where equilibrium economics emphasizes order, determinacy, deduction, and stasis, complexity economics emphasises contingency, indeterminacy, sense-making, and openness to change.
- W. Arthur, “Complexity Economics: A Different Framework for Economic Thought”, Sante Fe Institute - Read the paper

While the underlying mathematics of complex systems science is highly advanced, Thinking Differently About Markets is accessible to those without a mathematical background.

Thinking Differently About Markets is a joint venture between Portfolio Construction Forum and investment strategist, Wayne Fitzgibbon, Founder of Thinking Differently.

Portfolio Construction Forum is the specialist, independent, investment continuing education, accreditation and certification service for Australian and NZ investment and wealth professionals. We provide a curriculum of live and on-demand content – at the heart of which is our multi-media library – curated for the community of professionals involved in constructing or giving advice on multi-asset, multi-manager portfolios. The Forum enables better quality portfolio construction knowledge and competence for practitioners, to help them improve the financial wellbeing of individuals.

Wayne Fitzgibbon is Founder and Chief Investment Strategist with Thinking Differently (Sydney). His deep understanding of financial markets, economics, and risk management, stems from a career spanning roles as a macroeconomist, market trader, portfolio manager, CIO and institutional adviser. He was formerly Head of Investment Consulting at Mercer UK prior to which he was Global Head of Fixed Income, Currency and Commodities at Macquarie Funds Management in London. Wayne worked in a trading role with Banker’s Trust in London, as Head of Asset Allocation at Macquarie Bank in Sydney, in a senior role in the Monetary Policy section of Commonwealth Treasury, and as an economist at the Industries Assistance Commission (now the Productivity Commission) and at Australian Bureau of Statistics where he began his career. Wayne holds a Bachelor of Economics from University of Newcastle and a Masters of Economics (Economics and Finance) from The Australian National University.

Thinking Differently About Markets is relevant to institutional and investment and wealth management practitioners who have a responsibility to understand the drivers of and outlook for investment markets including:

• investment advisers giving investment advice on multi-manager, multi-asset funds to individual investors;
• fund researchers;
• portfolio managers designing, building and managing multi-manager investment portfolios; and/or,
• members of investment committees that oversee multi-asset, multi-manager portfolios and/or funds.

Since the tightening of monetary policy began in 2022, the “old rules” for positioning portfolios in a rising rate environment have simply not worked. And, it is equally likely the “old rules” for positioning portfolios will also not work under Trump 2.0. Why? Because that is what usually happens when the economic and market regime shifts. The imperative should be to understand what is happening, what might happen as a result, and what to do about it.

Understanding the secular, structural and cyclical drivers of economies and financial markets is critical for portfolio construction. But, in a world where Volatility, Uncertainty, Complexity, and Ambiguity (VUCA) are becoming more acute, making sense of what is happening in economies and markets, and assessing the implications for future investment returns and risks, has become truly daunting. Investors and their investment advisers are confronted with a reality that is, on the one hand, at odds with the theories they have been taught and, on the other, not easily analysed with the methodologies and analytical tools at their disposal.

For the past 30 years, a revolution has been underway in how markets and economies should be viewed and understood. The theories and mathematics of evolutionary biology, physics, and climatology are increasingly being applied to economies and financial markets and in time, this will better enable investors and their investment advisers to successfully navigate their way through the VUCA world.

Thinking Differently About Markets embraces this revolution in thinking about economies and markets – termed Complexity Economics - which views economies and markets as living and evolving organisms, where outcomes are determined by our collective behaviour, the “whole” is always more than the sum of its parts, and history never repeats.

This shift in thinking is liberating, allowing for a deeper and more realistic understanding of economic and financial dynamics, empowering greater clarity and agility in portfolio construction by deepening your understanding of how economies and markets really work.

While the underlying mathematics of complex systems science is highly advanced, Thinking Differently About Markets is accessible to those without a mathematical background.

Boost your knowledge and earn 1.50 CE hours

• Backgrounder: Thinking Differently About Markets - this introduces the key elements of complexity economics and the implications for understanding market behaviour and constructing portfolios.

When you subscribe to Thinking Differently About Markets you are joining a Community of Practice that recognises that the traditional tools and theories of economic orthodoxy are not sufficient - and so, instead, embraces complexity economics to construct more resilient, robust portfolios grounded in how economies and markets really work (without requiring an advanced mathematical background).

There are three components to the Thinking Differently About Markets subscription service:

1.  3WhatWebinars

These bi-monthly webinars (July, September, November, January, March, May) focus on a contemporary economic or markets topic, examining it through a “three what” lens: What We Know; What We Do Not Know; and, most importantly, What To do About It in portfolios. So you leave with actionable insights to construct more resilient, robust investment portfolios. And, each webinar provides 1 CE hour.

2.  WhatsApp group

Led by Wayne Fitzgibbon, the WhatsApp group fosters ongoing dialogue amongst the Community of Practice, providing a dynamic, real-time platform for members to share insights and pose questions - a space for informal peer support and spontaneous knowledge exchange between the bi-monthly 3WhatWebinars.

3.  Short Course - 4 CE hours

The Thinking Differently About Markets short course provides the foundation knowledge for members of the Community of Practice. While the course introduces advanced concepts, it is designed to be accessible to those without a technical background, focusing on real-world applications rather than mathematical theory. Comprised of six lectures, and providing participants with 4 CE hours, the course:

• explores what it means to “think differently” by challenging conventional economic theories and developing a new perspective on market behaviour.
• reviews financial market theories that have been deeply linked to scientific, political, and social changes over the past three centuries, tracing the evolution of economic and financial theories to provide historical context to modern thinking about the markets.
• examines the concept of “markets” both theoretically and practically, suggesting a flexible and nuanced approach that questions conventional wisdom and embraces alternative approaches results in better decision-making.
• emphasises the importance of understanding market behaviour (particularly how credit ebbs and flows), how central banks make interest rate decisions, and the signs that indicate shifts in asset performance and potential investment opportunities.
• explores portfolio construction in a financial landscape defined by VUCA, recapping orthodox and heterodox economic theories, complexity economics as a transformative approach to market understanding, today’s market realities (including leverage, speculation, and second-guessing behaviour in investing) and the evolving nature of money and debt, emphasising their historical transformations and interdependence.
• advocates a different way of thinking about the future - one that identifies trends and structural changes that are already underway and that will continue to shape economies and markets.

Thinking Differently About Markets is available to AFS licensees, representatives of licensees, and Sophisticated Investors by annual subscription, payable by credit card. Once payment has been processed, you will automatically receive an invoice for your records.

By using the link below to subscribe to Thinking Differently About Markets, you agree you have read, understood and agree to be bound by the [Thinking Differently About Markets Terms and Conditions].

• Individual Subscription:  A$995+GST per annum  Subscribe now