Mitchell Waldrop

Around 2005, through circles of academic economists sharing the works of Dingding Wang and others discussing the complexity research of the Santa Fe Institute (SFI), I encountered Mitchell Waldrop’s book, Complexity: The Emerging Science at the Edge of Order and Chaos. It was then that I began to enter a new realm—viewing the world through the lens of biological evolution.

My acquaintance with complexity started early, but it remained a hazy and superficial awareness that did not initially translate into investment benefits. It wasn’t until January 2025, when I read James Anderson’s article Growth or Graham, published after his departure from Baillie Gifford, that I began to truly grasp the integration of complexity and investing:

Transformation of Thought Path: For nearly 20 years, Anderson had already been investing based on a complexity-oriented thought path, achieving immense financial returns.
The Missed Phase: At that time, I had failed to realize this connection.

Now, a new opportunity lies before us: the AI revolution. This is a new “Generation.” Just as the period from 2000 to 2020 was a wave of globalization accompanied by the expansion of internet giants—giving birth to the explosive growth of companies like Tesla, Apple, and Facebook—we are now entering a third wave.

The current path and framework are being shaped by hardware giants like NVIDIA, AMD, and Intel, alongside the rapid evolution of Claude, Gemini, and ChatGPT.

While I do not know where this wave will ultimately lead, I am optimistic that it will follow a global trajectory similar to the post-2000 world.
It should conform to what Anderson calls the “Law of Increasing Returns to Scale.” This is undoubtedly a new frontier. Having missed the dividends of the 2000-2020 era, the question now is whether this post-2020 wave can enable my assets to achieve another quantum leap—adding one or even two zeros to the balance. Feature: The Santa Fe Spirit—From the Edge of Chaos to the Reconstruction of Capital Markets When Mitchell Waldrop chronicled the birth of the Santa Fe Institute (SFI) in the 1990s, he might not have fully anticipated that this group of geniuses—discussing biological evolution and particle physics in the desert—would thoroughly reshape the mental paradigms of 21st-century elite investors. From James Anderson to Bill Miller, complexity science has become the ultimate weapon for transcending mediocrity and gaining true insight into value. Origin: When Economics Met Non-linear Physics
Collision at the Santa Fe Café: In 1987, brokered by former Citicorp Chairman John Reed, Nobel laureate in Physics Murray Gell-Mann met with economist W. Brian Arthur. The physicists were shocked to find that traditional economics was still using 19th-century equilibrium models, ignoring the most critical traits of the real world: non-linearity and positive feedback.
The “Heresy” of Increasing Returns: Brian Arthur’s theory of “Increasing Returns,” developed at SFI, was initially dismissed as heresy by mainstream economics. However, it perfectly explained how giants like Microsoft, Google, and Amazon achieved exponential expansion through positive feedback loops. This marked the definitive shift from “Resource Scarcity” to “Network Enhancement.” Core Linkage: Translating Complexity Science into Investment Logic
Abandoning the Illusion of Mean Reversion: In complex systems, the past does not equal the future, and the “mean” is not always attractive. SFI research proves that systems can exist in non-equilibrium states for long durations. Investors like James Anderson realized that alpha comes from finding “outlier” (The One) companies that break mean reversion to achieve long-term structural leaps.
Identifying Emergence: A company is not just a collection of financial reports; it is an organically evolving entity. Its competitive advantage “emerges” from internal culture, technological combinations, and user ecosystems. Once formed, this advantage possesses biological vitality, making it extremely difficult to dismantle through simple capital injection.
Survival at the Edge of Chaos: The greatest enterprises exist at the “Edge of Chaos”—balancing enough order for efficient execution with enough chaos to spark innovation. The art of investing lies in identifying an organization’s dynamic ability to maintain this critical state. Practical Mapping: The SFI Imprint on Top Investment Firms
Baillie Gifford’s Evolutionary View: Under James Anderson’s leadership, BG’s investment style became a mirror of SFI thought: long-term holding, enduring volatility, seeking non-linear growth, and betting heavily on founders who change the rules of the system.
Adaptive Market Hypothesis: SFI researchers propose that markets are not “efficient” but “adaptive.” Investors are not rational calculators but species that learn, compete, and evolve. Understanding this explains why panic and euphoria alternate, allowing one to capture positive asymmetric opportunities. Ultimate Revelation for the Complexity Investor Investing is a game of probabilities regarding evolution. We do not need to predict every detail of the future, but we must understand the evolutionary dynamics of the system. In a world of complexity, only those who grasp “Combinatorial Evolution,” “Path Dependency,” and “Antifragility” will see the clear order within the chaos. About the Author: M. Mitchell Waldrop holds a Ph.D. in theoretical physics from the University of Wisconsin. He is a renowned science writer and has served as a senior writer for Science and an editor for Nature. His other notable works include The Dream Machine. (Note: Waldrop’s “Complexity” was first published in Chinese in 1997 by SDX Joint Publishing Company, with a new edition by CITIC Press Group released in February 2024.)