{"id":4534,"date":"2019-11-25T16:47:18","date_gmt":"2019-11-25T20:47:18","guid":{"rendered":"https:\/\/www.shortform.com\/blog\/?p=4534"},"modified":"2022-03-11T16:24:11","modified_gmt":"2022-03-11T20:24:11","slug":"what-is-a-fractal","status":"publish","type":"post","link":"https:\/\/www.shortform.com\/blog\/what-is-a-fractal\/","title":{"rendered":"What Is a Fractal? How They Work in the Real World"},"content":{"rendered":"\n<p>What is a fractal? How are fractals useful in representing and predicting relatively unpredictable events?<\/p>\n\n\n\n<p>A fractal is a geometric pattern that repeats at different scales. Fractals, unlike pure geometric shapes like triangles or circles, are seen quite frequently in nature.<\/p>\n\n\n\n<p>We&#8217;ll cover what a fractal is and how it can help us make predictions in a world full of uncertainty.<\/p>\n\n\n\n<!--more-->\n\n\n\n<h2 class=\"wp-block-heading\">What Is a Fractal?<\/h2>\n\n\n\n<p>Developed by mathematician Beno\u00eet Mandelbrot in the 1970s, \u201cfractals\u201d are Mandelbrot\u2019s coinage for geometric patterns that repeat at different scales. Fractals, unlike pure geometric shapes like triangles or circles, are seen quite frequently in nature. For example, a leaf\u2019s veins look like little branches, and a tree\u2019s branches look like little trees: the basic shape of the tree is echoed at the smaller scales.<br><\/p>\n\n\n\n<p>So can the phenomena of <a href=\"https:\/\/www.shortform.com\/blog\/extremistan\/\">Extremistan<\/a> be modeled\u2014and thereby predicted\u2014at all?&nbsp; Not precisely; but they <em>can <\/em>be approximated\u2014by the use of <em>fractals<\/em>.<br><\/p>\n\n\n\n<p>What is a fractal, and how is it useful in predicting unpredictable events? The reason fractals are helpful in representing <a href=\"https:\/\/www.shortform.com\/blog\/black-swan-theory\/\">Black Swans<\/a> is that their internal ratios stay constant across scales. Unlike bell curves, in which ratios decline at accelerating rates the further one gets from the average, fractals exhibit no (or mild) acceleration. They obey <em><a href=\"https:\/\/www.shortform.com\/blog\/power-law-distribution\/\">power laws<\/a><\/em>, which describe a functional relationship between two quantities in which the relationship remains constant no matter what the initial size of the quantities.<br><\/p>\n\n\n\n<p>Take the European wealth example noted just above. As the wealth number doubled, the incidence decreased by 4x (wealth greater than 1 million: 1 in 62.5; wealth greater than 2 million: 1 in 250; wealth greater than 4 million: 1 in 1,000; etc.). The \u201cpower\u201d in this relationship is 2, because 2^2 (2 squared) is 4.<br><\/p>\n\n\n\n<p>Now, imagine the power was 1: Each time the wealth doubled, the incidence would only decrease by 2x (2^1=2). <strong>The probability of extraordinary wealth would increase<\/strong>. This helps us understand why fractals are useful and it helps us answer the question, What is a fractal?<br><\/p>\n\n\n\n<p>For Extremistan phenomena, the power laws aren\u2019t known with any certainty, but they can be approximated. Say, for example, you want to assess the risk of a stock portfolio, and you know that, based on past data, the worst-case scenario is a -5% move once every 2 years. With a power of 2\u2014remember that the power is estimated\u2014you can assume that a -10% move will happen once every 8 years (2^2=4) and a -20 percent move will happen once every 32 years. (For scale, in the 1987 crash, the U.S. stock market lost almost 23% of its value, an <em>impossibility<\/em> according to Gaussian economic models.) <strong>With fractal\/power-law distributions, a 1000-year flood can become a 100-year one, and a 100-year one can become a 10-year one<\/strong>.<br><\/p>\n\n\n\n<p>When we begin to analyze Extremistan in terms of the fractal paradigm, some Black Swans suddenly become \u201cgray\u201d\u2014they\u2019re not predictable with any sort of precision, but they are, at least, <em>imaginable<\/em>.&nbsp;&nbsp;<\/p>\n\n\n\n<p>What is a fractal? It&#8217;s a geometric pattern that repeats at different scales and it&#8217;s useful in making predictions in a world of uncertainty.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>Fractals and the Limits of the Bell Curve<\/strong>&nbsp;<br><\/h2>\n\n\n\n<p>When answering the question, <em>What is a fractal?<\/em> it&#8217;s useful to understand an alternate way of representing the world. The classic bell curve\u2014which is also called the \u201cGaussian distribution\u201d after German mathematician Carl Friedrich Gauss\u2014is an accurate description of <a href=\"https:\/\/www.shortform.com\/blog\/mediocristan\/\">Mediocristan<\/a> phenomena, but it is dangerously misleading when it comes to Extremistan.<br><\/p>\n\n\n\n<p>Consider human height, an eminently Mediocristan phenomenon. With every increase or decrease in height relative to the average, the odds of a person being that tall or short decline. For example, the odds that a person (man or woman) is three inches taller than the average is 1 in 6.3; 7 inches taller, 1 in 44; 11 inches taller, 1 in 740; 14 inches taller, 1 in 32,000.<br><\/p>\n\n\n\n<p>It\u2019s important to note that the odds not only decline as the height number gets further and further away from the average, but they decline at an accelerating rate. For example, the odds of someone being 7\u20191\u201d are 1 in 3.5 million, but the odds of someone being just four inches taller are 1 in 1 billion, and the odds of someone being four inches taller than <em>that <\/em>are 1 in 780 billion! This would phenomena would not be represented by fractals.<br><\/p>\n\n\n\n<p>Now consider an Extremistan phenomenon like wealth. In Europe, the probability that someone has a net worth higher than 1 million euros is 1 in 62.5; higher than 2 million euros, 1 in 250; higher than 4 million, 1 in 1,000; higher than 8 million, 1 in 4,000; and higher than 16 million, 1 in 16,000. <strong>The odds decrease at a constant, rather than accelerating, rate<\/strong>, <strong>indicating that their distribution doesn\u2019t conform to a <a href=\"https:\/\/www.shortform.com\/blog\/the-bell-curve\/\">bell curve<\/a>.<\/strong><br><\/p>\n\n\n\n<p>(Note: The European wealth statistics cited above aren\u2019t precise, but they illustrate the central point: that wealth is <a href=\"https:\/\/www.shortform.com\/blog\/what-is-scalability\/\">scalable<\/a> and does not look like a bell curve.) What is a fractal? A fractal is an important way to represent randomness.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>What is a fractal? How are fractals useful in representing and predicting relatively unpredictable events? A fractal is a geometric pattern that repeats at different scales. Fractals, unlike pure geometric shapes like triangles or circles, are seen quite frequently in nature. We&#8217;ll cover what a fractal is and how it can help us make predictions in a world full of uncertainty.<\/p>\n","protected":false},"author":4,"featured_media":4549,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[24,25],"tags":[60],"class_list":["post-4534","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-society","category-statistics","tag-black-swan","","tg-column-two"],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v24.3 (Yoast SEO v24.3) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>What Is a Fractal? 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Learn how they help us describe a random world.\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.shortform.com\/blog\/what-is-a-fractal\/\" \/>\n<meta property=\"og:site_name\" content=\"Shortform Books\" \/>\n<meta property=\"article:published_time\" content=\"2019-11-25T20:47:18+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2022-03-11T20:24:11+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.shortform.com\/blog\/wp-content\/uploads\/2019\/11\/swan-fractal.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"775\" \/>\n\t<meta property=\"og:image:height\" content=\"515\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"Amanda Penn\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Amanda Penn\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\/\/www.shortform.com\/blog\/what-is-a-fractal\/#article\",\"isPartOf\":{\"@id\":\"https:\/\/www.shortform.com\/blog\/what-is-a-fractal\/\"},\"author\":{\"name\":\"Amanda Penn\",\"@id\":\"https:\/\/www.shortform.com\/blog\/#\/schema\/person\/01b0e4c9ddb993e51d03808839d538b0\"},\"headline\":\"What Is a Fractal? 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