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Governance Reimagined: Organizational Design, Risk, and Value Creation by David R. Koenig

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Chapter 4

The Emergence of Complexity Economics

My undergraduate and graduate studies were in Economics and Mathematics. Building on these and the interest in markets that my father's gift of Texaco stock had stimulated, I began my career on the trading floor of the First National Bank of Chicago—or First Chicago as it was referred to in those days—working for the bank's futures subsidiary.

In the 1980s, money was flowing into the financial markets and seemed likely to do so for the foreseeable future. On the job, while I droned on about macroeconomic variables and Federal Reserve policies, others taught me about the “technical” measures of market behavior. Some of the smartest traders were trying to predict the markets using all manner of charts and tools. Big money was being made and lost, and careers were catapulted or stunted based on one's fortunes in “beating the market.”

My first real trading mentor knew about the emotions of trading and how to best understand human responses to gains, losses, and risk. He taught me how these feelings would influence the trading behaviors of others and how to spot this in the movement of prices. The message was this: in order to succeed, you need to master an understanding of your own emotions and those of the collective market, not to know about changes in the money supply.

Much of my on-the-job experience conflicted with my academic coursework in economics, and I knew from these real-world experiences that something was missing from ...

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