Across Disciplines: Frameworks For Investment Thinking

There was an interesting back and forth on X the other day in which U.S. academics debated the “seriousness” of economics as a discipline. It got me thinking about an idea that I’d been turning over for some time: the different faces of investment theory, the sense of the markets as a sphere that requires both art and science to comprehend it, where “merely” immersing yourself in the academic literature isn’t enough. I recognize how much of the way I think about investment is predicated on mental models and frameworks drawn from other disciplines. Occam’s Razor, for instance, or the Overton Window, or feedback loops.

Back to the academic mini-controversy on X. Ben Golub, of Northwestern, pointed out that economics is a subject almost unique among the social sciences in the way it doesn’t demand that its practitioners are versed in the subject’s academic history.

Another way of phrasing this is that, unlike other disciplines — history, for instance — economics as it is studied today has evolved dramatically, even unrecognizably over the past years and decades. It isn’t all that useful – one might argue – for today’s economists to spend their time reading Adam Smith, rooted as he was in the economic realities of the 18th century, a place of manual labour and nascent industrialization, just as you would not judge a geneticist for not knowing Mendel inside out. But you would, of course, raise an eyebrow if a literature student hadn’t read Shakespeare. For more on this subject, do read the always-brilliant Noah Smith on Noahpinion.

Economics looks forward, rather than backward. As a discipline it is trapped between science and humanities, neither rigorously empirical enough for the former, nor interpretive or judgmental enough for the latter.

A similar narrative might be forged around the art/science of investing. To some — my chartist friends — it is a science, reducible to a series of measurable and predictable patterns: inflection points, moving averages and momentum indicators.

To behavioral economists, markets are closer to the humanities, a reflection of unnumbered human dramas playing out across the world: fear and greed, panic and exuberance.

To me, the markets are not about one thing, but about everything. To understand the movement of financial assets, you have to be an expert in geopolitics and history, sociology and mathematics, literature and anthropology. The markets to my mind are two seemingly paradoxical things at once: both machines governed by hard rules and also a narrative space where subjective forces express themselves.

This is why for our MAIS Conference at University of Oxford each year, we seek to bring the best minds from across a wide range of different disciplines: not just markets, but the world. I’ve written before about the benefits of adjacent thinking here: The Age Of Adjacency And Moneyball Finance.

Markets are stories we tell ourselves about the future. They are where numbers meet narrative, where abstraction collides with reality. But the tools we use to understand them — DCF models, CAPE ratios, technical indicators — are often blunt instruments for something so intricate. These tools assume that markets are systems of data, when they are in fact just as much systems of meaning.

To see markets clearly, then, we must think like outsiders. We must raid the treasuries of other disciplines — philosophy, physics, literature, biology — for frameworks that they use to address the world. What can we learn from fields that have long grappled with complexity, ambiguity and the unpredictability of human behavior?

Let’s start with science. In physics, a phase transition occurs when a system undergoes a dramatic transformation after crossing a critical threshold — water boiling, for instance, or ice melting. The system behaves predictably until it doesn’t, shifting suddenly into a new state. Markets, too, operate in phases: periods of calm punctuated by moments of chaos.

But here’s the crucial insight: Phase transitions don’t happen randomly. They are driven by the accumulation of stress, the hidden build-up of fragility. The 2008 financial crisis wasn’t a black swan event; it was the boiling point of a system under strain, where leverage and opacity had quietly created the conditions for collapse.

The physics of phase transitions tells us to look not at the event itself, but at the system’s thresholds. What are the hidden forces — illiquidity, concentrated leverage, shadow banking – that might suddenly tip the markets into a new state?

In biology, ecosystems are governed by cycles: predator and prey, bloom and collapse. These cycles are not symmetrical or perfectly timed; they are messy, adaptive, and shaped by feedback loops. Markets, too, are evolutionary systems, where cycles of greed and fear drive growth and collapse.

The biological model reminds us to look for meta-cycles – the evolution of cycles themselves. What happens, for instance, when AI begins to dominate trading strategies? Will it create new feedback loops that amplify volatility or reduce it? By thinking biologically, we stop looking at markets as static systems and start seeing them as adaptive environments, constantly reshaped by innovation and behavior.

What about the study of literature? I tend always to have both a novel and a nonfiction book on the go at once: I feel like I learn as much from the former as the latter. Literary theorists often talk about the “intentional fallacy,” the idea that an author’s intent doesn’t fully determine the meaning of a text. Markets, similarly, resist simple interpretation. A stock price is a sentence in a larger story — a fragment of collective sentiment that means different things to different participants.

Think of the rise of Tesla. To a traditional analyst, it might have seemed wildly overvalued for years, defying every fundamental metric. But Tesla wasn’t just a car company; it was a story about innovation, the climate crisis, and Elon Musk’s cult of personality. Its price was the fiction that investors told themselves about the future – a narrative so compelling it bent reality to its will, drawing capital that made the vision possible.

What can literature teach us here? One lesson is that stories don’t have to be “true” to be powerful. Another is that markets, like novels, follow narrative arcs: euphoria, climax, disillusionment. Investors who can read markets as fiction – understanding not just the numbers but the underlying sentiment driving them – gain an edge in anticipating how the story might evolve.

What emerges when we steal tools from physics, literature, biology, and elsewhere isn’t just a better way of thinking about markets — it’s a redefinition of investing itself. Markets aren’t machines to be mastered; they’re (super)human systems to be understood. They are, like ecosystems or novels, complex and adaptive, driven as much by psychology and sentiment as by fundamentals.

The best investors already operate at this level. They understand that valuation models are necessary but insufficient, that no amount of data can fully explain the alchemy of collective behavior. They know that their edge comes not from predicting the future, but from interpreting the present, seeing patterns, thresholds, and narratives that others overlook.

This isn’t an easy way to think. It requires humility, curiosity and the willingness to be wrong. But for those willing to think beyond the traditional tools of finance, the rewards of this cross disciplinary approach to investment are profound: a clearer understanding of the markets and the human impulses that drive them.