But knowledge to work and grow your business with c i T from transportation to healthcare to manufacturing. C i T offers commercial lending, leasing, and treasury management services for small and middle market businesses. Learn more at c I T dot com put Knowledge to Work. Hello, and welcome
to another episode of the Odd Lots podcast. I am Tracy Alloway, executive editor of Bloomberg Markets, and uh, let me just say that I think what you are about to hear is probably the most random edition of Odd Lots that we've done so far. And just to give you an idea of how random it is, I have with me a special co host. It is lauracan Roche Kelly. Here's our resident cow expert. That's how random this is. Say hello, lorcan h Tracy, how is it going? I
think I'm a cow expert? I think well, I'll definitely that one is a compliment, co owner, if nothing else, it is meant to be a compliment. Mark, we don't have a lot of cow experts, so that that's pretty special. You're reducing the compliment straight away, Tracy. I should say that my normal co host, Joe Wisenhal is still on his epic business trip and he's left me to do this podcast? Up? How do I intro this podcast? Um? All right, So a couple of weeks ago I noticed
mathematical paper. It was called quote, A Mathematical Model for the Dynamics and Synchronization of Cows. Lorcan. I think I sent it to you at the time. Yeah, I think you said to me was this email subject was? Can you believe this exists? I think may have been something online what the email subject was. I was very excited to see it, I must say, because anything to do with cows excites me. Right, how many cows do you have? Now, Lorcan? I think at first, I think you ever asked a
farm or how many cows? Yes, because it's a way of working out for his income is but I think enough to keep me busy is the standard answer. I think that I'm sorry, I just made a bovine faux paw. I guess, all right, enough to keep you busy? That's good enough for this podcast. Okay, So we got this paper, A mathematical Model for the Dynamics and Synchronization of cows.
It's written by let's see one, two, three, four mathematicians at various universities, and it talks about hurting behavior in cows and sort of mathematical models used to analyze that behavior. And I know you're all thinking, what in the world does this have to do with markets and investment and finance. But if you'll remember, we often talk about investors acting
in markets like a herd. We often talk about hurting behavior, people crowding into the same types of investments, the same posit editions, basically following each other seeking the safety of numbers. So it's not totally off the wall, lorcan am I stretching that a bit? I think that's fair. I don't think it's stretching it at all. I think I'm like I suppose I spend a lot of my time looking at the markets and some of my time looking at cows.
And while the similarities don't immediately jump out to me, I must say when I'm working in either world both, there is generally a feeling that markets gain momentum, and the more I suppose more people talk about the trades, the more likely people are to get on the trade or just have an opinion on the trade anyway, And much like with cows, if one cow finds good grass, the rest of the cows will see the good grass and run over and get some for themselves, so that
on the high level, the herding idea, I think it's been well established within markets, and it's it comes from animals, comes from herds of anis, That's where the world comes from. So I'd imagine to examine what cows do should tell us something about hurting in markets, or at least give us away of modeling her new markets, which is why I wanted to paper. Say, do you ever look out your window on your farm in Ireland and watch your cows and like ponder them as you think about markets?
I have this image of you doing that. There there is I can see my cows from my window. Depending on what field they're in. Whether what I'm doing is pondering them, are pining to be with them rather than staring at some unfinished coffee and folking me, I'm not sure. All right, Without further ado, we are going to bring in the authors of this paper. We have three of them with us, and because we have three guests, it's the first time I think we've ever had a trio
of guests on this podcast. I'm going to ask them to quickly introduce themselves so that you all know who they are. UM, why don't we start with j j Can you say hello and intro yourself? Hey, Hello, this is j Um. Last name is Son actually come currently assistant professor in the Mass Department at Clarkson University. It is in Potsdam, New York, Upstate New York. UM. I work with a lot of the complex systems, networks, no linear dynamics and more recently UM studying the information flow
in those complex systems. By the way, the time the paper was written, actually it was a graduate student visiting UM with at the time my advisor or quote UM who is here also today And it was a very exciting UM journey for me to be on this project. Fantastic Eric, why don't you say hello? Hello? I'm Eric Bolt, also Clarkson University and John Harrington, Professor of Mathematics. So UM, like real, we do a lot with nonleader dynamics, a
lots of that dad UM. In years past we'd called chaos theory, but UM in recent years we do a lot also with large scale complex systems, which is something we're developing a center for a Clarkson so and this is also a nonlo dynamics. And then finally we have Mason Porter joining us, I think from l A. Yeah, I'm Mason Porter. Um. I'm currently a professor of mathematics at u C l A. UM I just moved over
from University of Oxford a few weeks ago. Um. I'm also a specialist in complex systems and networks and non their dynamics, And it's one of the things I wanted to mention. You were talking about similarities between between hurting and animals and hurting and markets. In fact, one of those things that we specialize in is exactly collective behavior and complex systems, which can be things like hurting in all sorts of context, or ideas becoming viral and and
and so on. So we actually take an abstract point of view and very specifically study these sorts of things in many different types of systems. Exactly, we've all we've all worked together in these different sorts of things, including swarming, um schooling if it's fish, and then also human behaviors when they work in groups. Well maybe that's a good
jumping off points. So we have collective behavior, and there's been a lot of study of collective behavior, whether it's in animals or humans or or systems and that sort of thing. What made you decide to focus on cows specifically for this paper? Okay, so maybe I should answer that because the project actually UM started with me and
the fourth The fourth co author is Marian Dawkins. She's actually she's a zoologist rather than a mathematician, and and she and I know each other from being in the same Oxford College UM, and we formulated a project actually about a year or so before before Eric and Jay visited.
And one of the things that that had UM predated the project was that Marian was sort of lamenting that many UM people who are who are theorists and working on problems that come from biology, were not sufficiently interfacing with biology. And at some point the conversation turned to her work on cows and other animals, which is something that she's been doing for many years, and it seemed interesting to me and I was interested in collective behavior
in general. So we formulated UM a project that we did in a certain manner called an Agent based Model UM. This was the year before Eric and Ja visited UM, and then that one was attempting to be more realistic but was a bit abstract, and so we wanted to step back and have a bare bones project. So serendipity, I suppose, is a short version of that answer. And
I tend to be interested in just about everything. And I had a local expert, and so we worked on it, and then Eric visited me along with Ja the next year, and so we decided that we would pursue that further. So when we think about hurting behavior in cows, and I guess other mammals like antelope, seabro whatever, um, we usually think that they all move, I guess in tandem, like like Lorcan was saying, if one cow sees fresh grass, then all the cows migrate there. But also I guess
for protective reasons to protect themselves from predators. Is that is that the accepted version of hurting behavior in cows? I think that's at least part of it. There's also, um, if they're in a pen, for instance, they actually may also want to just all be able to lie down at a similar time, especially if they're if they're under similar um sort of forces from a from a day night cycle. So so you know, some of this is
actually protection, but some of it is also similar needs. Yeah, so um, all those elements are in our work Actually we have a follow on work which actually includes things like why would they do that, optimizing their um, their resilience to petitors, and so forth. But the centerpiece of the model is that the cow individually has these different things that go on inside their bodies. You know, they need to eat, their need to digest, which is kind of complicated in the cow, and um, then they need
to sleep. So it's a little bit like a self of parture kating rhythm in your own body. And for the other reasons you's described. Then it actually turns out to be a good thing if they do it together. So that's the synchronization aspect, and whether they're in a pen or or there in the wild, um, there's some aspect of they want to do it together. Now in the pen, they're not really predated anymore, but they carry
on that natural behavior. Yeah. So one of the things was that so those interactions to not to be really important as a determining factor of whether they could synchronize and to what extent they do synchronize UM, which happened to be also related to the production and even a though we don't know how happy they are, people do say that they seem to be happier when they actually produce more and most synchronized. Just from the looking from
the paper, they are rich paper. Do you have the look at a single cow model and then you looked at what you call coupled cows. But just for your information on the farming background, when you say cows are coupling, you means something completely different. But they are. But they said in a larger heard that the synchronicity seems to break down. Is it's what you're seeing to be saying the paper that well as the as the stand ups sit down cyclist, the one that you're looking at, it
seems to break down. See if a mixture of cows standing up and sitting down. And I'm wondering, is that I think that you're soften observation or something that you produce from your mathematical models yourself. Our second paper actually has an aspect where um the groups can become too large um two for their own good, and they break apart and they may subsynchronize in the smaller groups. Now do you see that in your farm? Yeah, well, the way if I had that many cows, I'm sure i'd
say it. But it's I think I'm with with the way I'm supposed to get back to nothing boast of farming. The way the farming works here is that it is very The synchronicity I see tends to be much more. If it's going to rain in the next twenty minutes, most of the cows are sitting down. If it's very hot, most are standing up. But beyond that they will generally I suppose that the heart is big enough that someone will be sitting down, someone be standing up at any time.
Whereas if you put a small number of cows in the shed, that occasion will do with some are lane. If we take if we have cows learn name, we take them out of the herd because they can keep up to your house, and we have three or four cows together, and they will synchronize very strongly, like so the four will decision down, order four will be standing up.
But whether that's because they're in the shed and not out in the field, it's you know, that's what the externalities would be very hard to calculate within a model like this. The externalities are a very big deal. And um one of the things that the people argue about is, you know how much of this is from circadian rhythms, and how much of it is from from say, signals from other animals that are that are nearby. Um. It's
a very difficult thing to um um disentangle from each other. UM. One thing I want to mention it is kind of going back on your on your earlier comment in terms of having a larger herd having kind of not complete synchrony. In the paper, we're not actually demanding um complete synchrony. We're just measuring how synchronized they are and trying to do it in an a sort of a quantitative way so you can measure. And this is something that comes
originally from the theory of coupled oscillators. The term the term coupled has a very specific meaning in mathematics and physics that's not quite the same as the English meaning. That just means that they're interacting. UM. So if you write down equations and you have some some term that has has parts of two different equations, this is a way for for this is a way for them to
be coupled together. UM. But um, there there are there are some measures that that are from um from long studies of oscillations, from biological rhythms, for example, that tries to measure how synchronized things are. And so it's not that you have a yes or no that everybody is synchronized. You have sort of how much they are. And you can imagine doing this um with with animal behavior as well, um by just saying, okay, well do they do different
cows stand up at a similar time? You know, maybe there's a delay of one second versus ten seconds, and so you would say that the delay of one second, if you n able, if you're able to measure that would be more synchronized than if then if it's ten seconds. Apart whether any extent to which that comes from cows getting signals from others by watching what others are doing, and how much comes from having similar desires, that's very difficult to dista. I think that suppost initiate aside is
um um. The one thing that work cows completely appos de synchronized themselves from the rest of her is when they're about to give birth to a calf. And I think there's a product available. I don't know if I have it from white House my farm. It's called moo called mlo cl What is it is? A small Are you making this up. No, I'm not making that. You can google it does exist. It's a it's a lectronic part that I attached to the cow's tail, and what it measures is how much the cow switches her tail.
And before cow gets birth, she becomes agitated, she has more tail swishing, and this product notices the extra tail swishing and it sends me a text message to say that this cow is going to calve in the next two hours. And what what that How that that thing works is that you've put it on the cow and it stays and going to It's an idea of what the cow's rhythm is, and then it noticed the changing rhythm and acknowledge that that there's something big is happen there.
That's a change room. So cows generally have a strong rhythm within themselves. Suppose it's what this company is taken advantage of that they're just stand up, sit down switched their tail. Is can be very easily predicted within a certain sucset of circumstances. So when the circumstances changed, as in the cow is about to have a calf, it connect the exect use that information to send me a text message to say, this is about the calf. Now, is there an analog of moo cow for the market.
It's on the market. Yes, it's something that I mean from market market prediction. You can put it on the traders. Although if you could figure out what it is, I imagine you get very rich. You won't tell me about this. I'm actually surprised that we've gotten this far and you haven't remarked that, actually, what does a bullmarket mean? We're saving that first. We are going to take a short break for a word from our sponsors. But knowledge to work and grow your business with c i T. From
transportation to healthcare to manufacturing. C i T offers commercial lending, leasing, and treasury management services for small and middle market businesses. Learn more at c i T dot com put Knowledge to Work. Okay, and we are back. We are talking cows hurting behavior and mathematics. UM. Just to kick off the second half of the conversation, maybe could you just walk us through in very simple terms what you found in your paper from the mathematical model you use, and
what it says about cows hurting behavior. UM. I think from the math medical point of view, UM, there are something that's very unique about this particular model because one thing about calls and some other animals are that, um, they actually have different modes, right, It's not um that they follow one type of motion or dynamics and then they just continue. For cars, there are three distinct modes. They can walk, stand, they eat, or they lie down.
And the turns are that there are you know, very traditional and machinery in mathematics that that we could use for for particularly to model this behavior um as well as their interactions. So so one thing we found that sort of contraintuitive is you would imagine that maybe by interacting more or more intensively, they would necessarily synchronize more,
and that wasn't um the case. So what that means in reality is if you start to you know, put them in fans and with higher density, it's not necessarily true that you make them synchronize more. They actually could break the synchrony by increasing those coupling. So when you have more cows together and they're in a crowded, confined area, they don't actually exhibit hurting behavior. Is that right? I mean again it's not not yes, no question, UM. It's
the extent to which they synchronize could actually decrease. Where you put more in the finite vertical space, and is that competition for resources or they just start to feel pressure because there's too many other cows. It's more of a pressure scenario. Yeah, well, why don't we widen out the discussion because I know that you all, um also study network effects and chaos theory and things like that. So how much can we extrapolate from cow behavior into
other types of behavior and specifically humans and or human investors. So, um, one of the things one of the advantages of mathematics is that it's automatically massively parallel. You know, people talk about mathsily parallel UM computation. With mathematics, you can get insights on a specific system and then other other systems that might have similar model equations possible. It will teach
you something about that. So UM Jay was talking about the fact that you could have stronger coupling in this situation leading to less synchronized behavior. So that can also potentially occur elsewhere. So if people are interacting with each other more strongly, UM, at least this is known in mathematical models, you can have situations where they're not necessarily more synchronized as a result, UM, I don't know how to experimentally verify that. I mean, that's it's much more
reality is much more complicated than mathematical model. But it's a very general um situation that one sees mathematically, not just in the specific model that we did, And others have um reported similar results using other models of synchronization in the last few years. So that's that's one example. Another thing I say about this this work is it's it's actually um it's a scientific study on two levels.
So it's about cows and we're studying the topical area of cows, and we want to make conclusions about cows. But the tools that we bring to it is actually an unique kind of tool set in the area of modeling a complex system like an animal, because it, as Jay said, it's a uh, what's called a piece wise impulsive system as we've modeled it, which means it's a bit like a bouncing ball. Something continues continuously for a
while and then it reaches a threshold it switches. So it might switch from um the lyne digesting state to say, okay, now I'm done with that, onto onto sleeping. So those states and switching between the states is actually a unique a neat neat element in the in the area of modeling um uh dynamical systems like a cow UM. Now, if we want to bring that over to people, then you might say, okay, great, the cow is a kind
of a simple system um compared to a person. And if we said a person's like this, then they would have many many states, perhaps because I think we would think the cow is probably somewhat m a simpleton in the sense of the different kind of scenarios they would run through. So if I were to be courageous enough to advance this into human behavior, I would want a many part um scenario and switches between them, and then
we can ask do those synchronized. So we haven't done that study, but I think that's how I would roll this forward if I were to do so. We keep finding that the interaction is that just as as important as the individual. Well that that's actually that's a very good point. I want to expand on that. In the study of you know, in traditional studies where people are reductionists, you often talk about how an individual um, an individual
entity behaves. And one of the things that that that people try to convey in the study of networks more generally, UM is that you know, the interactions really matter. And this is something, of course now in the modern world we see i would say, much more than we see before, and the study of networks and complex systems really tries to focus on what effects can emerge from interactions that you don't just see from individual components, and so things
like you know, which memes go viral? You know it's you know, there's a bunch of cat memes that go viral. It's probably not because of the intrinsic quality, but probably because of interaction. Uh. Now we're in in my area of expertise, which is of course cat memes, cat videos. Yeah, exactly.
UM well, I mean this idea of how things impact on each other is really interesting and it's really important in markets and finance, and we've seen various attempts over the past decades, I suppose, UM, with different degrees of success to model that how exactly. This has always fascinated me.
Before the financial crisis, I looked at things like ghostsian copulas on Wall Street, the things that we're used to UM try to model how you know, one corporate or one mortgage default would impact other defaults in the same space. How difficult is it to mathematically model things that are impacting on something else. This actually is something that Eric and I have started to walk on starting a few
years ago. UM. We we think it's a very difficult proper and scientists try to find this so called causality of causation between different components in a very big system in the financial sector will be like different corporations, as you said, Um, So the challenge comes from two means. One is you have to disentangle the effect from their individual motion dynamics from the actual interactions. What you observe is the aggregating effect. So you first have to find
a way to distangle that. And we've been using um truls from information theory, which seems to be very natural for for those types of analysis. The real challenge I think applying this to any practical situation is that depending on the environment, UM, you know, the actual interactions might really change. And that's something that's very difficult to predict. It's like an extreme event. UM. You sort of have
to believe that. Um, your process is sort of stationary. Um, the underlying rules don't change in order to make those predictions, but they do change, and then you can see you know, your model may fail to predict those situations, but people do look at it's also called early warning science, and that's an encouraging interaction to go basically by looking at um the science that since my statue change, and that
that's that's hope. There's hope there. Yeah. Just I suppose that with that idea to go back and look, I suppose that something we talked about earlier where you said a larger herd will tend to break up, the synchronicity will lose. Once I heard me, I don't know if we gotta say the herd reach the critical science. But in a larger heard you of less synchronicity, do we Is there a chance that we can see some of that?
Like you look at say bubble behavior of bubbles and markets for herding becomes particularly intense in an area like Beau supposed two thousand and seven it was about properly there was a large more bubble in property partickly in some countries in Europe and the US with the mortgage markets in US, and that I suppose the herds internet became unsustainable and had to break up and within turnasial market it's a breakup of heart like that. Almost all
those things to be catastrophic. Am I I suppose my getting towards the right end of the stick or is it something completely different? Well, for cows, I think there'll be two reasons why they wouldn't want to UM, well, they wouldn't synchronize in large groups. One is the difficulty if I keep them all together right and all synchronizing um.
And the other is the communication from one one end of the herd the other end of the herd at some larger scale, UM, the information may not be going back and forth between the large group such that they can stay together. So you can maybe think more like like a wave in a stadium. UM. And then the other aspect is, uh what UM, there's some benefit to synchronizing on a certain scale and maybe not in a
larger scale. And that second aspect I would guess has more to do with the market, because in the market system, I think the communication across large scales, you know, in distance,
isn't the problem. We all just check our iPhone. Do you think, given our conversation that maybe we've entices to do you some research on markets and hurting behavior and markets specifically Yeah, I've been always very be interested in things like bank run because that's essentially UM where you study how the different banks with their customers say, how
they interact and what happens in a financial crisis. Was there this extra layer of coupling from the media, right, because when the media is reporting that we have a problem, then you know, we think there's a problem. And because we think there's a problem, that there's this coupling leads me to say, with your m deposit and if I do that, my friends is my doing that? They do the same, And when everyone does that, you have a bank run and bank banks start to you know, go
go bankruptcy. Um. Obviously the federal government has UM policies now ensure a certain amount of deposit being safe, but that that that in general can happen in different levels, like the property market. If you see all your friends set in their houses, you're more likely to do the same. So this couple actually not is not account it my actually change And I think the media is playing a very big role there to influence sort of the behavior of consumers in joining them. So so I'm very interested
in this topic. And as I said, the tools Eric and I have been developing called causation entropy. We think we we actually might want to utilize this to study data collected from those past years. Interesting. Um, we'll have to have you on again once you've completed that project. We have to leave it for today, though, um, Jay, Eric and Mason, I'd like to thank you so much for coming on and talking to us about cows, mathematics, hurting, and markets. Thank you, thank you for having us. Thank
you so much. I actually think, Um, I thought that was really really interesting, and if I do say so myself, I think we manage to connect it quite well to markets and financial behavior. So I'm pretty happy. I always knew it was a reason why it's attracted to markets.
I think, yes, that the herding thing, but I think it's it's interesting that that the research that suppose is continuing to go into to understand the behavior of people and particularly people in markets, has been has been going on for hundreds of years and will continue to go on. So the more angles that has looked at from is interesting. And if cows comprove the basis for investor behavior, I
think that would be an interesting breakthrough. Right. But I mean, this is one of the most intractable problems of finance and markets and mathematics is trying to calculate this sort of network theory and connectivity and how one thing impacts
the other. Um. One thing I did think was interesting, and you brought this up, Lorgan, in the context of bubbles, was this idea that at some point the herd becomes so big that the hurting instinct or the hurting behavior starts to break down a bit and you see cows, and I suppose you could extrapolate to investors, but you see cows start to kind of group together and do
their own thing. Um. I thought that was interesting when we think about bubbles and markets and how they seem to go on and on and on until suddenly they don't, and then they very quickly break down. As you mentioned, Yes, and I think that it is that that kind of view, like there's will always be in market throws would be contrarians because I suppose in order to buy something, you always hated someone to sell it to you, so they always have to two You need to views in the market.
But if you get the market moving directionally in one way, like house prices of the two houses and seven, there comes a point where the suppose the herd stops wanting, stops wanting to buy, or that you're getting imbalance and her So I think it is interesting and I think it is again the Holy grade. Like we said, it's eased for me to get a piece of technology that
will predict when my cow is going to calve. It's very hard to get a piece of technology that will predict when the market is going to turn from a bullet into a cow or a bulle into a bear, whichever. I can't believe you're getting text messages about when your cows are going to give birth to calves um modern technology. So tell me, has this conversation changed your view of your cows? No, I'm very solid in my view of
my cows. And we go back a long way and then their view with my job is to feed them and keep them happy. So happy cow is a productive co Oh that's nice. We are going to leave it there for now. You can follow me on Twitter. I'm at Tracy Alloway and I'm at Lorcan r K. Thanks for listening. But knowledge to work and grow your business with c i T from transportation to healthcare to manufacturing. C i T Opera commercial lending, leasing, and treasury management
services for small and middle market businesses. Learn more at c I T dot com Put knowledge to work.