I wasn’t there, but as far as I can tell, in the 1930’s and 1940’s, there was a big push to apply scientific principles to just about everything. Science was going to perfect every aspect of life. See books like The Mathematical Basis of the Arts, or New Musical Resources in the art/music world, for example (I’ve read both of those, and think they are very interesting). Think of studies that led to the 1948 book Sexual Behavior in the Human Male. There are examples everywhere, though many are becoming more obscure as time passes.
TRIZ
Around 1946, Genrich Altshuller started reviewing patents worldwide. The idea was to systematically uncover the essence of innovation, and distill it into principles that could be taught and applied across all fields of science and industry. 40 Inventive Principles were developed under the acronym TRIZ (a Russian acronym with English translation “Theory of Inventive Problem Solving”).
Using the principles is like this: imagine you are going through a cave, and find a big rock blocking your path. So, you pull out a checklist that says “Can you climb over it? Can you crawl under it? Can you move it? Can you drill through it? Can you find another path? etc.” It’s just a bunch of abstract ways people have solved problems in the past. As such, they make for an organized approach to make sure you’ve considered lots of typically good problem-solving angles. So, when you are trying to solve a problem, or make an improvement in something, you can read through the principles and see if any of them turn on any lights.
I’ve tried to use TRIZ before in my past life as a software developer, with some success. The principles are sufficiently abstract that, for me, they kind of spark ideas through free-association. You know, like that game where you hear a word and you say the first thing that comes to mind? For example, one of the principles is “Segmentation: Divide an object into independent parts. Make an object easy to assemble/dissasemble.” An example of this idea in trading might be candlestick charts, which break the day into time segments. Another might be dividing equity among different sectors for diversification. Of course, these are existing solutions–the goal is to be able to apply the principle of segmentation to new trading problems, or to the same problems in different ways (P&F charts, anyone?).
TRIZ and Trading
People have pre-tailored the TRIZ principles to specific fields, so that the wording and examples are immediately more relevant. A good place to look for that, and other TRIZ info is The TRIZ Journal, which is an active on-line journal of TRIZ-related articles. I found The 40 Inventive Principles of TRIZ Applied to Finance (pdf) there.
I thought it might be fun to try to run through the principles with more of a stock trading focus. Maybe I’ll make 4 posts of 10 principles each? I’m certain than when you all see the principles, you’ll immediately think of examples and insights that I didn’t. Post ‘em!
August 29th, 2006 at 2:17 pm
[...] Here, I’m going to cover the first 5 of the 40 TRIZ Principles, as they relate to trading. You might want to glance at the Kick-off Article on this series, if you haven’t seen it. Basically, these are principles derived from an international study of patents. The idea is to isolate the foundations of innovative ideas, which can be applied to any creative endeavor. [...]
November 20th, 2006 at 3:12 pm
[...] Here, I’m going to cover the second 5 of the 40 TRIZ Principles, as they relate to trading. You might want to glance at the Kick-off Article and First 5 Principles in this series, if you haven’t seen them. Basically, these are principles derived from an international study of patents. The idea is to isolate the foundations of innovative ideas, which can be applied to any creative endeavor. [...]
November 22nd, 2006 at 10:38 am
[...] Here, I’m going to cover the next 5 TRIZ Principles, as they relate to trading. There are 40 in all. You might want to glance at the Kick-off Article in this series, if you haven’t seen it, for further explanation. Basically, these are principles derived from an international study of patents. The idea is to isolate the foundations of innovative ideas, which can be applied to any creative endeavor. [...]