The Algorithm

The parallels between Taoism and the Algorithm are unmistakable, comforting and instructive.

According to Wikipedia  “An informal definition” of an algorithm “could be a set of rules that precisely defines a sequence of operations”.

A simple example would be a recipe for baking cakes – don’t be fooled into thinking algos are only for computer nerds.  But not all algorithms are deterministic, meaning that even if you follow a precise set of instructions, the results or outcome may vary dramatically.

These days many of us think that the whole universe may be ruled by a set of algorithms. That all the vast, grand complexity we see around us may be the result of a few relatively simple rules fed back on themselves in an infinite loop. Think Conway’s Game of Life.

At it’s simplest and most intuitive level, Taoism can be described as “going with the flow” accepting whatever outcome emerges. And so with the algorithm – it is like riding a wave, surfing the universe come what may.

I have been drafting computer based trading algorithms for many years and my favorite has always been the trend following algorithm. It is so simple – you hop on a trend like you jump on a wave. If a stock is going up, you ride it until you get thrown off.  There is a glory in such simple physics.

But I have been very forcibly struck in recent weeks that that is just how I want to live my whole life. How I intend to live my whole life. To ride the wave until I get chucked off.

In trading as in life, you never really know where the algorithm will take you, but to follow a set of simple rules is comfortable, in both spheres.  Practical, satisfying and psychologically sound.

Trading stock markets is far from deterministic. You may jump in but the outcome is never assured. And so with life. Your algorithm will be a simple set of rules but you will have little idea how life will turn out, even if you follow those rules.

An algorithm gives you a guideline, an idea of how you want to lead life, even if you do not know where the path leads. Wherever that path may lead, if your set of self imposed instructions are “good” ones, the end result will also be “good”.

To lead life well is not so very difficult if you follow your algorithm and ride the wave. What rules do I try to follow?  Well, if I were allowed one rule only it would have to be that much abused word “love”.

If I were allowed the luxury of spelling my algorithm out in more detail, it might go as follows.

• Seizing the day.
• Being as pleasant and kind to everyone around me as I am able to manage.
• Not to dwell on the past or to worry about the future.
• To keep engaged in something productive, beneficial and absorbing.
• To eat well and keep fit.
• To mend my roof and ensure that I have enough to pay my way.
• To avoid greed and materialism.
• To seek better ways for society.
• To write and to spread my own eccentric views on how humanity can and should live.

For whatever reason, life of late has been a great deal easier.  I do not claim to live in a state of permanent bliss. Norman Nirvana may live close by, but I can not claim his identity for my own. I am not a goody two shoes and I am frequently a curmudgeonly and grumpy old shyte.  I have to watch myself very carefully and pull myself up sharply by my own bootstraps when I sense bad old habits creeping in.

But to live by a simple algorithm, a simple set of rules, is a great comfort, even if you have to remind yourself from time to time what those rules are. And to stumble back to the paths of righteousness when you catch yourself becoming an unreasonable or unpleasant old bore.