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Motion theory, markets and the speed of information

One of my side hobbies is building small CNC machines.    Some part of this requires a pretty deep understanding of motion theory and, in particular, the interaction between physical hardware and computer systems.  The major problem in computer controlled motion systems is that, while computer commands to move are virtually instantaneous, motions of physical systems take some time.

One would think that the solution would be to measure this lag, but it’s actually much more complicated than that.   Part of the motion problem is that the lag is highly dependent on various environmental factors, such as load or amount of wear in the system.   In order to deal with all these problems, motion control engineers have developed something called PID feedback.

Basically, PID feedback uses a position sensor to figure out what the current position of the system and what the next command should be.   It looks typically like this, if you imagine it as a conversation:

  • Move to position
  • Acceleration to ‘cruising speed’
  • Where are you?
  • Not there yet
  • Where are you?
  • Close
  • Deceleration
  • Where are you?
  • Passed position
  • Go back to position
  • Reverse
  • Where are you?
  • Before position
  • Go back to position
  • (etc)

What is clear from this sequence is that the system winds up in a forwards-backwards oscillation.   Motion systems deal with this through precision and dampening.    In practice, there is almost always oscillation, its virtually impossible to get rid of, at least in motion PID systems.  Wikipedia has a great article about PID feedback and control.

So, what does have this have to do with markets?

Well, in the last few months, I’ve paid much closer attention to financial markets that I usually do.   Part of this was because there have been some real stock bargains, but also because I was curious about what is a really bad market.   One of the interesting things I noticed was that markets seem to behave much like PID controlled motion systems.  If you look at the daily down ups and downs, they look an awful lot like oscillations in a PID system.

y theory is that the current speed of information is much like computers commanding motion systems to a position, but markets are like physical systems, so they take time to react and move to the ‘position’.   Basically, you have digital system (modern high-speed, universal, virtually instantaneous information delivery) trying to control an analog system (markets and the humans behind them).

Of course, none of this is a predictor or gives any sort of insight into when the oscillations in the market will end.    It’s just an interesting thing I noticed.

Chris Maresca is a business & technology strategist who as advised over 30 global 500′s and over 60 startup companies.   In 2001, he founded the Olliance Group where he is currently Chief Strategist.  He can be found on the web at