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We are products of complexity,
but our evolution has focused our
understanding on the situation of hunter gatherers on the
African savanna.
As humanity has become more powerful we can significantly impact
the systems we depend on. But we struggle to comprehend
them. So this web frame
explores significant real world complex
adaptive systems (CAS):
- Assumptions of randomness & equilibrium allowed the
wealthy & powerful to expand the size and leverage of
stock markets, by placing at risk the insurance and
retirement savings of the working class. The
assumptions are wrong but remain entrenched.
- The US nation was built
from two divergent political
views of: Jefferson and Hamilton. It also
reflects the development
of competing ancient ideas of Epicurus and
Cyril. But the collapse of Bretton Woods forced Wall
Street into a position of power, while the middle and
working class were abandoned by the elites. Housing
financed with cash from oil and derivative transactions
helped hide the shift.
- Most US health care is still
operating the way cars built in the 1940s did.
Geisinger is an example of better solution. But
transforming the whole network is a challenge. And
public health investment has proved far more
beneficial.
- Helping our children learn to be
effective adults is part of our humanity, but we have
created a robust but deeply flawed education system.
Better alternatives have emerged.
- Spoken language, reading and writing emerged allowing our
good ideas to
become a second genetic material.
- The emergence
of the global economy in the 1600s and its subsequent
development;
It explains how the examples relate to each other, why we all
have trouble effectively comprehending these systems and
explains how our inexperience with CAS can lead to catastrophe. It
outlines the items we see as key to the system and why.
Example systems frame |
Dietrich Dorner argues complex adaptive systems (CAS) are hard to understand and
manage. He provides examples of how this feature of these
systems can have disastrous consequences for their human
managers. Dorner suggests this is due to CAS properties
psychological impact on our otherwise successful mental
strategic toolkit. To prepare to more effectively manage
CAS, Dorner recommends use of:
- Effective iterative planning and
- Practice with complex scenario simulations; tools which he
reviews.
Complexity catastrophes |
E. O. Wilson reviews the effect of man on the natural world to
date and explains how the two systems can coexist most
effectively.
Adaptive ecology |
Barton Gellman details the strategies used by Vice President
Cheney to align the global system with his economics, defense, and
energy goals.
US vds alignment |
Kevin Kruse argues that from 1930 onwards the corporate elite
and the Republican party have developed and relentlessly
executed strategies to undermine Franklin Roosevelt and the New Deal. Their
successful strategy used the credibility of conservative
religious leaders to:
- Demonstrate religious issues
with the New Deal.
- Integrate the corporate
elite and evangelicals.
- Use the power of corporate
advertising and Hollywood to reeducate the American
people to view the US as historically religious and
the New Deal and liberalism as anti-religious
socialism.
- Focus the message through evangelicals including Vereide and Graham.
- Centralize the strategy through President Eisenhower.
- Add religious elements to
mainstream American symbols: money, pledge;
- Push for prayer in
public school
- Push Congress to promote prayer
- Make elections more
about religious positions.
Following our summary of his arguments RSS frames them from the
perspective of complex adaptive system (CAS) theory.
Strategy is the art of the possible. But it also depends
on persistence.
Inventing Christian America |
Charles Ferguson argues that the US power structure has become
highly corrupt.
Ferguson identifies key events which contributed to the
transformation:
- Junk bonds,
- Derivative
deregulation,
- CMOs,
ABS and analyst fraud,
- Financial network deregulation,
- Financial network consolidation,
- Short term incentives
Subsequently the George W. Bush administration used the
situation to build
a global bubble, which Wall Street
leveraged. The bursting of the
bubble: managed
by the Bush Administration and Bernanke Federal Reserve;
was advantageous to some.
Ferguson concludes that the restructured and deregulated
financial services industry is damaging to
the American economy. And it is supported by powerful, incentive aligned academics.
He sees the result being a rigged system.
Ferguson offers his proposals
for change and offers hope that a charismatic young FDR will appear.
Following our summary of his arguments, RSS comments on them framed by
complex adaptive system (CAS)
theory. Once the constraints are removed from CAS
amplifiers, it becomes advantageous to leverage the increased flows. And it is often
relatively damaging not to participate. Corruption and parasitism can become
entrenched.
Financial WMD |
Matt Taibbi describes the phenotypic
alignment of the American justice system. The result
he explains relentlessly grinds the poor and undocumented into
resources to be constrained, consumed and ejected. Even as
it supports and aligns the financial infrastructure into a
potent weapon capable of targeting any company or nation to
extract profits and leave the victim deflated.
Taibbi uses five scenarios to provide a broad picture of the:
activities, crimes, policing, prosecutions, court processes,
prisons and deportation network. The scenarios are:
Undocumented people's neighborhoods, Poor neighborhoods, Welfare
recipients, Credit card debtors and Financial institutions.
Following our summary of his arguments, RSS comments on them framed by
complex adaptive system (CAS) theory. The alignment of the
justice system reflects a set of long term strategies and
responses to a powerful global arms race that the US leadership intends to
win.
Aligned justice |
Jonathan Powell describes how the government of, the former UK Prime Minister, Tony Blair,
actually operated. Powell was Blair's only chief of
staff.
Mechanics of power |
H. A. Hayek compares and contrasts collectivism and
libertarianism.
Libertarianism |
John Doerr argues that company leaders and their
organizations, hugely benefit from Andy Grove's OKRs.
He promotes strategies
that help OKR success: Focus,
Align, Track, Stretch; replaces yearly performance
reviews, and provides illustrative success
stories.
Doerr stresses Dov Seidman's
view that employees are adaptive and will
respond to what they see being measured. He asserts culturally supported OKRs/CFR processes will be transformative.
Following our summary of his arguments, RSS comments on them
framed by complex adaptive system (CAS) theory. Doerr's architecture
is tailored for the startups KPCB
invests in. It is a subset of the general case of schematic plans, genetic operators and Shewhart cycles that drive all
CAS. Doerr's approach limits support of learning and deemphasizes the
association to planning.
Startup PDCA |
David Bodanis illustrates how disruptive effects can take
hold. While the French revolution had many driving forces
including famine and
oppression the emergence of a new philosophical vision ensured
that thoughtful leaders
were constrained and conflicted in their responses to the
crisis.
Voltaire's disruptive network |
An epistatic meme suppressed for a thousand years reemerges
during the enlightenment.
It was a poem
encapsulating the ideas of Epicurus rediscovered by a
humanist book hunter.
Greenblatt describes the process of suppression and
reemergence. He argues that the rediscovery was the
foundation of the modern world.
Complex adaptive system (CAS) models of the memetic mechanisms
are discussed.
Constraining happiness |
Isaacson uses the historic development of the global cloud of
web services to explore Ada
Lovelace's ideas about thinking
machines and poetic
science. He highlights the value of computer
augmented human creativity and the need for liberal arts to
fulfill the process.
Complex adaptive system (CAS) models of agent networks and
collaboration are discussed.
Arts technology & intelligence |
Haikonen juxtaposes the philosophy and psychology of
consciousness with engineering practice to refine the debate on
the hard problem of consciousness. During the journey he
describes the architecture of a robot that highlights the
potential and challenges of associative neural
networks.
Complex adaptive system (CAS) theory is then used to illustrate the
additional requirements and constraints of self-assembling
evolved conscious animals. It will be seen that
Haikonen's neural
architecture, Smiley's Copycat
architecture and molecular biology's intracellular
architecture leverage the same associative properties.
Associatively integrated robots |
Good ideas are successful because they build upon prior
developments that have been successfully implemented.
Johnson demonstrates that they are phenotypic expressions of
memetic plans subject to the laws of complex adaptive systems (CAS).
Developing ideas |
A government sanctioned monopoly
supported the construction of a superorganism
American Telephone and
Telegraph
(AT&T). Within this Bell Labs was at the center of
three networks:
- The evolving global scientific
network.
- The Bell telephone network. And
- The military
industrial network deploying 'fire and missile
control' systems.
Bell Labs strategically leveraged each network to create an innovation
engine.
They monitored the opportunities to leverage the developing
ideas, reorganizing to replace incumbent
opposition and enable the creation and growth of new
ideas.
Once the monopoly was
dismantled, AT&T disrupted.
Complex adaptive system (CAS) models of the innovation mechanisms are
discussed.
Strategic innovation |
Roger Cohen's New York Times opinion about the implications of
BREXIT is summarized. His ideas are then framed by complex
adaptive system (CAS) theory and
reviewed.
BREXIT |
Scott Galloway argues that Apple, Amazon, Facebook and Google
are monopolists that
trade workers for technology. Monopolies that he argues
should be broken up to ensure the return of a middle
class.
Following our summary of his arguments, RSS comments on these arguments
assuming they relate to a complex adaptive system (CAS).
While Scott's issue is highly significant his analysis conflicts
with relevant CAS history and theory.
Monopoly job killers |
The IPO of Netscape is
defined as the key emergent event of
the New Economy by Michael Mandel. Following the summary
of Mandel's key points the complex adaptive system (CAS) aspects are highlighted.
New economy |
Ed Conway argues that Bretton Woods produced a unique set of
rules and infrastructure for supporting the global economy. It was
enabled by the experience of Keynes
and White during and after the First World War, their dislike of the Gold Standard,
the necessity of improving
the situation between the wars and the opportunity created
by the catastrophe of the Second
World War.
He describes how it was planned
and developed. How it
emerged from the summit.
And he shows how the opportunity inevitably allowed the US to replace the UK at the center of the global economy.
Like all plans there are
mistakes and Conway takes us through them and how the US recovered the situation as
best it could.
And then Conway describes the period after
Bretton Woods collapsed. He explains what followed
and also compares the relative performance of the various
periods before during and after Bretton Woods.
Following our summary of his arguments RSS comments from the
perspective of Complex Adaptive System (CAS)
theory. Conway's book illustrates the rule making and
infrastructure that together build an evolved amplifier.
He shows the strategies at play of agents that were for and
against the development
and deployment of the system. And The Summit provides a
key piece of the history of our global economic CAS.
Bretton woods |
A key agent in the 1990 - 2008
housing expansion Countrywide is linked into the residential
mortgage value delivery system (VDS)
by Paul Muolo and Mathew Padilla. But they show the VDS
was full of amplifiers and control points. With no one
incented to apply the brakes the bubble grew and burst.
Following the summary of Muolo and Padilla's key points the
complex adaptive system (CAS)
aspects are highlighted.
Housing amplifiers |
Derivative systems |
Johnson & Kwak argue that expanding the national debt
provides a hedge against unforeseen future problems, as long as
creditors are willing to continue lending. They illustrate
different approaches to managing the debt within the US over its history and of the
eighteenth century administrations of England and France.
The US embodies two different political and economic systems which
approach the national debt differently:
- Taxes to support a sinking
fund to ensure credit to leverage fiscal power in:
Wars, Pandemics, Trade disputes, Hurricanes, Social
programs; Starting with Hamilton,
Lincoln & Chase,
Wilson, FDR;
- Low taxes, limited infrastructure, with risk assumed by
individuals: Advocated by President's Jefferson & Madison,
Reagan,
George W. Bush (Gingrich);
Johnson & Kwak develop a model of what the US
government does. They argue that the conflicting
sinking fund and low tax approaches leaves the nation 'stuck in
the middle' with a future problem.
And they offer their list of 'first principles' to help
assess the best approach for moving from 2012 into the
future.
They conclude the question is still political. They hope
it can be resolved with an awareness of their detailed
explanations. They ask who is willing to
push all the coming risk onto individuals.
Following our summary of their arguments RSS frames them from the
perspective of complex adaptive system (CAS) theory.
Historically developing within the global cotton value delivery
system, key CAS features are highlighted.
National debt |
Robert Gordon argues that the inventions of the second
industrial revolution were the foundation for
American economic growth. Gordon shows how flows of people
into difficult rural America built a population base
which then took the opportunity to move on to urban settings: Houses, Food in supermarkets,
Clothes in
department stores;
that supported increasing productivity and standard of living.
The deployment of nationwide networks: Rail, Road, Utilities;
terminating in the urban housing and work places allowing the workers to
leverage time saving goods and services, which helped grow
the economy.
Gordon describes the concomitant transformation of:
- Communications
and advertising
- Credit
and finance
- Public
health and the health
care network
- Health insurance
- Education
- Social
and welfare services
Counter intuitively the constraints
introduced before and in the Great Depression and the demands of World War 2
provide the amplifiers that drive the inventions deeply and
fully into every aspect of the economy between 1940 and 1970
creating the exceptional growth and standard of living of post
war America.
Subsequently the
rate of growth was limited until the shift of women
into the workplace and the full networking of
voice and data supported the Internet and World Wide Web
completed the third industrial revolution, but the effects were
muted by the narrow reach of the technologies.
The development of Big Data, Robots,
and Artificial Intelligence may support additional growth,
but Gordon is unconvinced because of the collapse of
the middle class.
Following our summary of Gordon's book RSS frames his arguments from
the perspective of complex adaptive system (CAS) theory.
American growth |
Carl Menger argues that the market induced the emergence of
money based on the attractive features of precious metals.
He compares the potential for government edicts to create money
but sees them as lacking.
Following our summary of his arguments RSS frames his arguments from
the perspective of complex adaptive system (CAS) theory.
With two hundred years of additional knowledge we conclude that
precious metals are not as attractive as Menger asserts.
Government backed promissory notes are analogous to:
- Other evolved CAS forms of ubiquitous high energy
transaction intermediates and
- Schematic strategies that are proving optimal in
supporting survival and replication in the currently
accessible niches.
Emergence of money |
Eric Beinhocker sets out to answer a question Adam Smith
developed in the Wealth of Nations: what is wealth? To do
this he replaces traditional
economic theory, which is based on the assumption that an
economy is a system in
equilibrium, with complexity
economics in which the economy is modeled as a complex
adaptive system (CAS).
He introduces Sugerscape
to illustrate an economic CAS model in action. And then he
explains the major features of a CAS economy: Dynamics,
Agents, Networks, Emergence, and
Evolution.
Building on complexity economics Beinhocker reviews how evolution applies to
the economy to build wealth. He explains how design spaces
map strategies to instances of physical and
social
technologies. And he identifies the interactors and
selection mechanism of economic
evolution.
This allows Beinhocker to develop a new definition
of wealth.
In the rest of the book Beinhocker looks at the consequences of
adopting complexity economics for business and society: Strategy, Organization, Finance,
& Politics
& Policy.
Following our summary of his arguments, RSS explores his conclusions
and aligns Beinhocker's model of CAS with the CAS theory and evidence we
leverage.
Economic complexity |
Sven Beckert describes the historic transformation of the
growing, spinning, weaving, manufacture of cotton goods and
their trade over time. He describes the rise of a first global
commodity, its dependence on increasing: military power, returns for
the control points in the value delivery system(VDS), availability of land
and labor to work it including slaves.
He explains how cotton offered the opportunity for
industrialization further amplifying the productive capacity of
the VDS and the power of the control points. This VDS was quickly
copied. The increased capacity of the industrialized
cotton complex adaptive system (CAS) required more labor to
operate the machines. Beckert describes the innovative introduction of wages
and the ways found to
mobilize industrial labor.
Beckert describes the characteristics of the industrial cotton
CAS which made it flexible enough to become globally interconnected.
Slavery made the production system so cost effective that all
prior structures collapsed as they interconnected. So when
the US civil war
blocked access to the major production nodes in the
American Deep South the CAS began adapting.
Beckert describes the global
reconstruction that occurred and the resulting destruction of the traditional ways
of life in the global countryside. This colonial expansion
further enriched and empowered the 'western' nation
states. Beckert explains how other countries responded
by copying the colonial strategies and creating the
opportunities for future armed conflict among the original
colonialists and the new upstarts.
Completing the adaptive
shifts, Beckert describes the advocates for industrialization in
the colonized global south and how over time they joined
the global cotton CAS disrupting the early western manufacturing
nodes and creating the current global CAS
dominated by merchants like Wal-Mart
pulling goods through a network of clothing manufacturers,
spinning and weaving factories, and growers competing with each
other on cost.
Following our summary of Beckert's book, RSS comments from the
perspective of CAS theory. The transformation of
disconnected peasant farmers,
pastoral warriors and their lands into a supply chain for a
highly profitable industrial CAS required the development over
time: of military force, global transportation and communication
networks, perception and representation control networks, capital stores and flows,
models, rules, standards and markets; along with the support at
key points of: barriers, disruption, and infrastructure and
evolved amplifiers. The emergent
system demonstrates the powerful constraining influence of
extended phenotypic alignment.
Globalization from cotton |
The structure and problems of the US
health care network is described in terms of complex adaptive
system (CAS) theory.
The network:
- Is deeply embedded in the US nation state. It reflects the
conflict between two
opposing visions for the US: high tax with safety net
or low tax without. The emergence
of a parasitic elite supported by tax policy, further
constrains the choices available to improve the efficiency
and effectiveness of the network.
- The US is optimized to sell its citizens dangerous
levels of: salt,
sugar, cigarettes,
guns, light, cell phones, opioids,
costly education, global travel,
antibacterials, formula, foods including
endocrine disrupters;
- Accepting the US controlled global supply chain's
offered goods & services results in: debt, chronic stress,
amplified consumption and toxic excess, leading to obesity, addiction, driving instead of
walking, microbiome
collapse;
- Globalization connects disparate environments in a network. At the edges,
humans are drastically altering the biosphere. That
is reducing the proximate natural environment's
connectedness, and leaving its end-nodes disconnected and
far less diverse. This disconnects predators from
their prey, often resulting in local booms and busts that
transform the local parasite
network and their reservoir and amplifier
hosts. The situation is setup so that man is
introduced to spillover
from the local parasites' hosts. Occasionally, but
increasingly, the spillover results in humanity becoming
broadly infected. The evolved
specialization of the immune system
to the proximate environment during development
becomes undermined as the environment transforms.
- Is incented to focus on localized competition generating
massive & costly duplication of services within
physician based health care operations instead of proven
public health strategies. This process drives
increasing research & treatment complexity and promotes hope
for each new technological breakthrough.
- Is amplified by the legislatively structured separation
and indirection of service development,
provision, reimbursement and payment.
- Is impacted by the different political strategies for
managing the increasing
cost of health care for the demographic bulge of retirees.
- Is presented with acute
and chronic
problems to respond to. As currently setup the network
is tuned to handle acute problems. The interactions
with patients tend to be transactional.
- Includes a legislated health insurance infrastructure
which is:
- Costly and inefficient
- Structured around yearly
contracts which undermine long-term health goals and
strategies.
- Is supported by increasingly regulated HCIT
which offers to improve data sharing and quality but has
entrenched commercial EHR
products deep within the hospital systems.
- Is maintained, and kept in
alignment, by massive network
effects across the:
- Hospital platform
based
sub-networks connecting to
- Physician networks
- Health insurance networks - amplified by ACA
narrow network legislation
- Hospital clinical supply and food
production networks
- Medical school and academic research network and NIH
- Global
transportation network
- Public health networks
- Health care IT supply
network
Health care |
Deaton describes the wellbeing
of people around the world today. He explains the powerful benefit of public
health strategies and the effect of growth in
material wellbeing but also the corrosive effects of
aid.
Following our summary of Deaton's arguments RSS comments from the
perspective of complex adaptive system (CAS)
theory. The situation he describes is complex including
powerful amplifiers, alignment and incentives that overlap
broadly with other RSS summaries of adaptations of: The
biosphere, Politics, Economics,
Philosophy and Health care.
Improving wellbeing |
Donald Barlett and James Steele write about their investigations
of the major problems afflicting US
health care as of 2006.
Problems of US health care |
Glenn Steele & David Feinberg review the development of the
modern Geisinger healthcare business after its near collapse
following the abandoned merger with Penn State AMC. After an overview of the
business, they describe how a calamity
unfolding around them supported building a vision of a
better US health care network. And they explain:
- How they planned
out the transformation,
- Leveraging an effective
governance structure,
- Using a strategy
to gain buy in,
- Enabling
reengineering at the clinician patient
interface.
- Implementing the reengineering for acute, chronic
& hot
spot care; to help the patients and help the
physicians.
- Geisinger's leverage of biologics.
- Reengineering healing with ProvenExperience.
- Where Geisinger is headed next.
Following our summary of their arguments RSS comments on them. We
frame their ideas with complex adaptive system (CAS)
theory.
E2E insured quality care |
Robert Pearl explains the perspectives of a health care leader
and son who know that the current health care network interacts
with human behavior to induce a poorly performing system that
caused his father's death. But he is confident that these
problem perceptions can be changed. Once that occurs he
asserts the network will become more integrated, coordinated,
collaborative, better led, and empathetic to their
patients. The supporting technology infrastructure will be
made highly interoperable. All that will reduce medical
errors and make care more cost effective.
Following our summary of his arguments RSS comments on them. We
frame his ideas with complex adaptive system (CAS) theory
including synergistic examples of these systems in
operation. The health care network is built out of
emergent human agents. All agents must model the signals
they perceive to represent and respond to them. Pinker
explains how this occurs. Sapolsky explains why fear and
hierarchy are so significant. He includes details of Josh
Green's research on morality and death. Charles Ferguson
highlights the pernicious nature of financial incentives.
Bad medical models |
US healthcare is ripe for
disruption. Christensen, Grossman and Hwang argue that
technologies are emerging which will support low cost business
models that will undermine the current network. Applying
complex adaptive system (CAS)
theory to these arguments suggests that the current power hierarchy can effectively resist
these progressive forces.
Disrupting health care |
Atul Gawande writes about the opportunity for a thirty per cent
improvement in quality in medicine by organizing
to deploy as agent based teams using shared schematic
plans and distributed signalling or as he puts it the use of checklists.
With vivid examples from a variety of situations including construction, air crew support and global health care Gawande illustrates
the effects of
complexity and how to organize to cope with it.
Following the short review RSS
additionally relates Gawande's arguments to its models of
complex adaptive systems (CAS) positioning his discussion within
the network of US health care,
contrasting our view of complexity, comparing the forces shaping
his various examples and reviewing facets of complex
failures.
Complexity checklists |
Friedman and Martin leverage the lifelong data collected on
1,528 bright individuals selected by Dr. Lewis Terman
starting in 1921, to understand what aspects of the subjects'
lives significantly affected their longevity. Looking
broadly across each subject's: Personality,
Education, Parental impacts,
Energy
levels, Partnering,
Careers, Religion,
Social networks,
Gender, Impact from war and
trauma; Friedman and Martin are able to develop a set of model pathways,
which each individual could be seen to select and travel
along. Some paths led to the traveler having a long
life. Others were problematic. The models imply that
the US approach to health and
wellness should focus
more on supporting
the development and selection of beneficial pathways.
Following our summary of their arguments RSS comments from the
perspective of CAS theory. The pathways are most
applicable to bright individuals with the resources and support
necessary to make and leverage choices they make. Striving
to enter and follow a beneficial pathway seems sensible but may
be impossible for individuals trapped in a collapsing network,
starved of resources.
Promoting longevity |
Gawande uses his personal experience, analytic skills and lots
of stories of innovators to demonstrate better ways of coping
with aging and death. He introduces the lack of focus on
aging and death in traditional medicine. And goes on to
show how technology has amplified
this stress point. He illustrates the traditional possibility of the
independent self, living fully while aging with the
support of the extended family. Central
planning responded to the technological and societal changes
with poorly designed infrastructure and funding. But
Gawande then contrasts the power of
bottom up innovations created by experts responding to
their own family situations and belief
systems.
Gawande then explores in depth the challenges
that unfold currently as we age and become infirm.
He notes that the world is following the US path. As such it will
have to understand the dilemma of
integrating medical treatment and hospice
strategies. He notes that all parties
involved need courage to cope.
He proposes medicine must aim to assure
well being. At that point all doctors will practice
palliative care.
Complex adaptive system (CAS) models of agency, death,
evolution, cooperation and adaptations
to new technologies are discussed.
Agent death |
Sonia Shah reviews the millennia old (500,000 years) malarial arms race between Humanity, Anopheles
mosquitoes and Plasmodium. 250 - 500 million people are
infected each year with malaria and one million die.
Malaria |
Peter Medawar writes about key historic events in the evolution
of medical science.
Medical science events |
Using John Holland's theory of adaptation in complex
systems Baldwin and Clark propose an evolutionary theory of
design. They show how this can limit the interdependencies
that generate complexity
within systems. They do this through a focus on
modularity.
Modular designed systems |
Lou Gerstner describes the challenges he faced and the
strategies he used to successfully restructure the computer
company IBM.
Compartmented systems |
Grady Booch advocates an object oriented approach to computer
software design.
Object based systems |
Bertrand Meyer develops arguments, principles and strategies for
creating modular software. He concludes that abstract data
types and inheritence make object orientation a superior
methodology for software construction. Complex adaptive
system (CAS) theory suggests agents provide an alternative strategy
to the use of objects.
Software construction |
Tools and the businesses that produce them have evolved
dramatically. W Brian Arthur shows how this occurred.
Tools |
Matt Ridley demonstrates the creative effect of man on the
World. He highlights:
- A list of
preconditions resulting in
- Additional niche
capture & more free time
- Building a network
to interconnect memes processes & tools which
- Enabling inter-generational
transfers
- Innovations
that help reduce environmental stress even as they leverage fossil
fuels
Memetic trading networks |
E O. Wilson argues that campfire gatherings on the savanna supported
the emergence of human creativity. This resulted in man
building cultures and
later exploring them, and their creator, through the humanities. Wilson
identifies the transformative events, but he notes many of these
are presently ignored by the humanities. So he calls for a
change of approach.
He:
- Explores creativity:
how it emerged from the benefits of becoming an omnivore hunter-gatherer,
enabled by language & its catalysis of invention, through stories told in the
evening around the campfire. He notes the power of
fine art, but suggests music provides the most revealing
signature of aesthetic
surprise.
- Looks at the current limitations of the
humanities, as they have suffered through years of neglect.
- Reviews the evolutionary processes of heredity and
culture:
- Ultimate causes viewed
through art, & music
- The bedrock of:
- Ape senses and emotions,
- Creative arts, language, dance, song typically studied
by humanities,
&
- Exponential change in science and
technology.
- How the breakthrough from
our primate past occurred, powered by eating meat,
supporting: a bigger brain, expanded memory &
language.
- Accelerating changes now driven by genetic cultural coevolution.
- The impact on human nature.
- Considers our emotional attachment to the natural world: hunting, gardens; we are
destroying.
- Reviews our love of metaphor, archetypes,
exploration, irony, and
considers the potential for a third enlightenment,
supported by cooperative
action of humanities and science
Following our summary of his arguments RSS frames these from the
perspective of complex adaptive system (CAS) theory:
- The humanities are seen to be a functionalist framework
for representing the cultural CAS while
- Wilson's desire
to integrate the humanities and science gains support from
viewing the endeavor as a network of layered CAS.
Evening campfire rituals |
Brynjolfsson and McAfee explore the effects of Moore's law on the
economy. They argue it has generated exponential
growth. This has been due to innovation.
It has created a huge bounty of
additional wealth.
But the wealth is spread unevenly across
society. They look at the short and long term implications of
the innovation bounty and spread
and the possible future of
technology.
Following our summary of their arguments RSS comments from the
perspective of CAS theory.
Brilliant technologies |
Salman Khan argues that the evolved global education system is
inefficient and organized around constraining and corralling
students into accepting dubious ratings that lead to mundane
roles. He highlights a radical and already proven
alternative which offers effective self-paced deep learning
processes supported by technology and freed up attention of
teams of teachers. Building on his personal experience of
helping overcome the unjustified failing grade of a relative,
Khan:
- Iteratively learns how to teach: Starting with Nadia, Leveraging
short videos focused on content,
Converging on mastery,
With the help of
neuroscience, and filling
in dependent gaps; resulting in a different approach
to the mainstream method.
- Assesses the broken US education system: Set in its ways, Designed for the 1800s,
Inducing holes that
are hidden by tests, Tests
which ignore creativity.
The resulting teaching process is so inefficient it needs to
be supplemented with homework.
Instead teachers were encouraging their pupils to use his tools at home so
they could mentor them while they attended school, an
inversion that significantly improves the economics.
- Enters the real world: Builds a scalable service,
Working with a
real classroom, Trying stealth
learning, At Khan Academy full time, In the curriculum at
Los Altos, Supporting life-long
learning.
- Develops The One World Schoolhouse: Back to the future with
a one
room school, a robust
teaching team, and creativity enabled;
so with some catalysis
even the poorest can
become educated and earn credentials
for current jobs.
- Wishes he could also correct: Summer holidays, Transcript based
assessments, College
education;
- Concludes it is now possible to provide the infrastructure
for creativity to
emerge and to support risk taking.
Following our summary of his arguments RSS frames them from the
perspective of complex adaptive system (CAS) theory. Disruption is a powerful force for
change but if its force is used to support the current teachers
to adopt new processes can it overcome the extended phenotypic alignment and evolutionary amplifiers sustaining the
current educational network?
Education versus guilds |
Amy Chua and Jed Rubenfeld's New York Times opinion based on The
Triple Package is summarized. Their ideas are then framed
by CAS theory and reviewed.
What drives success |
Peter Turchin describes how major pre-industrial empires
developed due to effects of geographic boundaries constraining
the empires and their neighbors' interactions. Turchin
shows how the asymmetries of breeding rates and resource growth
rates results in dynamic cycles within cycles. After the
summary of Turchin's book complex adaptive system (CAS) theory
is used to augment Turchins findings.
Warrior groups |
Through the operation of three different food chains Michael
Pollan explores their relative merits. The application of
complex adaptive system (CAS)
theory highlights the value of evolutionary
testing of the food chain.
Natural systems |
E. O. Wilson & Bert Holldobler illustrate how bundled cooperative strategies can
take hold. Various social insects have developed
strategies which have allowed them to capture the most valuable
available niches. Like humans they invest in
specialization and cooperate to subdue larger, well equipped
competitors.
Insect superorganisms |
Computational
theory of the mind and evolutionary
psychology provide Steven Pinker with a framework on which
to develop his psychological arguments about the mind and its
relationship to the brain. Humans captured a cognitive niche by
natural selection 'building out'
specialized aspects of their bodies and brains resulting in a system of mental organs
we call the mind.
He garnishes and defends the framework with findings from
psychology regarding: The visual
system - an example of natural
selections solutions to the sensory challenges
of inverse
modeling of our
environment; Intensions - where
he highlights the challenges of hunter-gatherers -
making sense of the objects
they perceive and predicting what they imply and natural
selections powerful solutions; Emotions - which Pinker argues are
essential to human prioritizing and decision making; Relationships - natural selection's
strategies for coping with the most dangerous competitors, other
people. He helps us understand marriage, friendships and war.
These conclusions allow him to understand the development and
maintenance of higher callings: Art, Music, Literature, Humor,
Religion, & Philosophy; and develop a position on the meaning of life.
Complex adaptive system (CAS) modeling allows RSS to frame Pinker's arguments
within humanity's current situation, induced by powerful evolved
amplifiers: Globalization,
Cliodynamics, The green revolution
and resource
bottlenecks; melding his powerful predictions of the
drivers of human behavior with system wide constraints.
The implications are discussed.
Computationally adapted mind |
The stages of development of the human female, including how her brain changes and the
impacts of this on her 'reality' across a full life span:
conception, infantile
puberty, girlhood,
juvenile pause, adolescence, dating years, motherhood, post-menopause; are
described. Brizendine notes the significant difference in
how emotions are processed
by women compared to men.
Complex adaptive system (CAS) theory associates the stages with
the evolutionary under-pinning, psychological implications and
behavioral CAS.
Evolved female brain |
The complexity of behavior is explored through Sapolsky
developing scenarios of our best and worst behaviors across time
spans, and scientific subjects including: anthropology,
psychology, neuroscience, sociology. The rich network of adaptive flows he
outlines provides insights and highlight challenges for
scientific research on behavior.
Complex adaptive system (CAS) theory builds on Sapolsky's
details highlighting the strategies that evolution has captured
to successfully enter niches we now occupy.
CAS behavior |
Carlo Rovelli resolves the paradox of time.
Rovelli initially explains that low level physics does not
include time:
- A present that is common throughout the universe does not exist
- Events are only partially ordered. The present is
localized
- The difference between past and future is not foundational.
It occurs because of state that through our blurring appears
particular to us
- Time passes at different speeds dependent on where we are and how fast we travel
- Time's rhythms are due to
the gravitational field
- Our quantized physics shows neither
space nor time, just processes transforming physical
variables.
- Fundamentally there is no time. The basic equations
evolve together with events, not things
Then he
explains how in a physical world without time its perception can
emerge:
- Our familiar time emerges
- Our interaction with the world is partial, blurred,
quantum indeterminate
- The ignorance determines the existence of thermal time
and entropy that quantifies our uncertainty
- Directionality of time is real
but perspectival. The entropy of the world in
relation to us increases with our thermal time. The
growth of entropy distinguishes past from future: resulting in
traces and memories
- Each human is a
unified being because: we reflect the world, we
formed an image of a unified entity by
interacting with our kind, and because of the perspective
of memory
- The variable time: is one
of the variables of the gravitational field.
With our scale we don't
register quantum fluctuations, making space-time
appear determined. At our speed we don't perceive
differences in time of different clocks, so we experience
a single time: universal, uniform, ordered; which is
helpful to our decisions
Emergence of time |
Consciousness has confounded philosophers and scientists for
centuries. Now it is finally being characterized
scientifically. That required a transformation of
approach.
Realizing that consciousness was ill-defined neuroscientist
Stanislas Dehaene and others characterized and focused on conscious access.
In the book he outlines the limitations of previous
psychological dogma. Instead his use of subjective
assessments opened the
window to contrast totally unconscious
brain activity with those
including consciousness.
He describes the research methods. He explains the
contribution of new sensors and probes that allowed the
psychological findings to be correlated, and causally related to
specific neural activity.
He describes the theory of the brain he uses, the 'global neuronal
workspace' to position all the experimental details into a
whole.
He reviews how both theory and practice support diagnosis and
treatment of real world mental illnesses.
The implications of Dehaene's findings for subsequent
consciousness research are outlined.
Complex adaptive system (CAS) models of the brain's development and
operation introduce constraints which are discussed.
Conscious access |
Reading and writing present a conundrum. The reader's
brain contains neural networks tuned to reading. With
imaging a written word can be followed as it progresses from the
retina through a functional chain that asks: Are these letters?
What do they look like? Are they a word? What does it sound
like? How is it pronounced? What does it mean? Dehaene
explains the importance of
education in tuning the brain's networks for reading as
well as good strategies for teaching reading and countering dyslexia. But
he notes the reading
networks developed far too recently to have directly evolved.
And Dehaene asks why humans are unique in developing
reading and culture.
He explains the cultural
engineering that shaped writing to human vision and the exaptations and neuronal structures that
enable and constrain reading and culture.
Dehaene's arguments show how cellular, whole animal and cultural
complex adaptive system (CAS) are
related. We review his explanations in CAS terms and use
his insights to link cultural CAS that emerged based on reading
and writing with other levels of CAS from which they emerge.
Evolved reading |
Read Montague explores how brains make decisions. In
particular he explains how:
- Evolution can create indirect abstract models, such as the dopamine system, that
allow
- Life changing real-time
decisions to be made, and how
- Schematic structures provide
encodings of computable control
structures which operate through and on incomputable,
schematically encoded, physically active structures and
operationally associated production
functions.
Receptor indirection |
Daniel Goleman and Richard Davidson describe a scientific
investigation of meditation's
impact on the brain. They introduce
the book by describing their experiences with meditation,
science and the research establishment, their friendship, how
meditation is now used in two distinct ways: deep - leading to altered
traits & wide - that can reach the multitudes; which
the book reviews as it critiques the claims and research used to
back them up.
Goleman and Davidson describe meeting as Harvard psychology
graduate students, interested in consciousness, and how minds
work. They rebel against the behavioral orthodoxy, visit Asia and discover the Eastern
tradition of exploring and altering the mind.
Goleman had travelled to Sri Lanka to understand an Asian model
of the mind, which he presented to the undergraduates at
Harvard. Goleman and Davidson developed it into a shared vision of
consciousness. It took over twenty years for
scientific theory and experimental data to catch up and align
with this model. Much of the prior
experimental data had to be abandoned.
They introduce meditation's
impact on the amygdala
responding to pain and stress.
They look at the changes in:
- Stress
- Compassion
- Attention
- Self-awareness; and the
potential for use of mediation
in psychiatry.
And they warn of the occurrence of dark
nights.
They detail how scientists were able to study the brains of Tibetan meditation masters,
starting with Mingyur Rinpoche,
and detect meditation altering
traits.
Finally they discuss the potential
benefits of meditation and strategies to distribute it
broadly to a busy America.
Meditating neurons |
Tara Brach was worried from
a young age that there was something terribly wrong with
her: she like many others felt unworthy. She responded
by developing Radical
Acceptance. Brach then explains the steps in
applying it: pause,
greet what happens next with unconditional
friendliness; allowing us to:
- Initially attend to the sensations
of our body,
- Accept the
wanting self and discover its source of boundless
love.
- Welcome
fear with a widening
attention, accept the pain of death and become
free.
- Use adversity as a gateway to limitless compassion for ourselves
and others.
- Focus on
our basic goodness to counter Western culture turning anger, at being betrayed,
towards ourselves. Extend observing this goodness in
everyone. This enables the use of loving-kindness.
- Leverage
friendships to understand more about our shared nature
and strengthen Radical Acceptance.
- Realize our Buddha nature.
Complex adaptive system (CAS) theory describes the emergence of
the dualistic self and the tree of life linked by the genetic
code and machinery. It provides an analog of the Buddhist
presence.
Compassionate CAS |
The influence of childhood on behavior is significant.
Enneagrams define personality
types: Reformer, Helper, Achiever,
Individualist, Investigator, Loyalist, Enthusiast,
Challenger and Peacemaker; based on the impact of
childhood driven wounds.
The Enneagram becomes
a tool to enable interested people to transform from the
emotionally wounded base, hidden within
the armor of the type, to the liberated underlying essence.
Childhood leaves each of us with some environmentally specific Basic Fear. In response each
of us adopts an induced Basic Desire
of the type. But as we develop the inner observer, it will
support presence and
undermine the identification
that supports the armor of the type.
The Enneagram reveals three sets of relations about our type
armor:
- Triadic self
revealing: Instinctive,
feeling, thinking; childhood needs
that became significant wounds
- Social style
groupings: Assertive, compliant, withdrawn; strategies for
managing inner conflict
- Coping styles: Positive outlook, competency, reactive; strategies for
defending childhood wounds
Riso and Hudson augment the Enneagram with instinctual
distortions reflected in the interests of the variants.
The Enneagram also offers tools for understanding a person's level of development:
unhealthy, average, healthy,
liberation; including their
current center of gravity,
steriotypical social role,
wake-up call, leaden rule, red
flag, and direction
of integration and disintegration.
Complex adaptive system (CAS) theory associates the models
presented by the Enneagram with evolved behaviors and structures
in the mind: feelings, emotions, social behaviors, ideas; driven
by genetic and cultural evolution and the constraints of family
and social life. Emergent evolved amplifers can be
constrained by Riso and Hudson's awareness strategies.
Enneagram strategies |
Antonio Damasio argues
that ancient
& fundamental homeostatic processes,
built into
behaviors and updated by evolution
have resulted in the emergence
of nervous systems and feelings. These
feelings, representing the state of the viscera, and represented with general
systems supporting enteric
operation, are later ubiquitously
integrated into the 'images'
built by the minds of higher animals
including humans.
Damasio highlights the separate
development of the body frame in the building of
minds.
Damasio explains that this integration of feelings by minds
supports the development of subjectivity and consciousness. His chain of
emergence suggests the 'order of things.' He stresses the
end-to-end
integration of the organism which undermines dualism. And he reviews Chalmers
hard problem of consciousness.
Damasio reviews the emergence of cultures
and sees feelings, integrated with reason, as the judges of the
cultural creative process, linking culture to
homeostasis. He sees cultures as supporting the
development of tools
to improve our lives. But the results of the
creative process have added
stresses to our lives.
Following our summary of his arguments RSS frames his arguments from
the perspective of complex adaptive system (CAS) theory.
Each of the [super]organisms
discussed is a CAS reflecting the theory of such systems:
- Damasio's proposals about homeostasis routed signalling, aligns
well with CAS theory.
- Damasio's ideas on cultural stresses are elaborated by CAS
examples.
Emergence of feelings |
Robert Coram highlights the noble life of John Boyd. John
spent a lot of time alone
during his childhood.
He: excelled at swimming and was a lifeguard, enlisted in the
Army Air Corp while at school which rejected him for pilot
training, was part of the Japan occupation force where he swam;
so the US paid for him to attend University
of Iowa, where he: joined the Air Force Officers' training
corps, was accepted to be an Air Force pilot, and got engaged to
Mary Bruce.
Boyd trained at Nellis AFB to become a
combat ready pilot in
the Korean War.
While the US Air Force focused on
Strategic bombing, Boyd loved
dogfights. His exceptional tactical ability was
rewarded with becoming an instructor. Boyd created new
ways to think about dogfighting and beat all-comers
by using them in the F-100.
He was noticed and enabled by Spradling. As he trained, and defeated the top
pilots from around the US and allied base network, his
reputation spread. But he needed to get
nearer to the hot spring in Georgia, and when his move to
Tyndall AFB was blocked he used the AFIT to train in engineering at
Georgia tech. While preparing to move he documented his FWS training
and mentored Ronald Catton.
While there he first realized the
link between energy
and maneuverability.
At Eglin, in partnership with Tom Christie,
he developed tools to model the link. They developed
comparisons of US and Soviet aircraft which showed the US
aircraft performing poorly. Eventually General Sweeney
was briefed on
the theory and issues with the F-105, F-4, and F-111.
Sent to the Pentagon
to help save the F-X budget, Boyd joined forces with Pierre Sprey to
pressure procurement into designing and
building tactically exceptional aircraft: a CAS tank killer and a
lightweight maneuverable
fighter. The navy aligned with
Senators of states with navy bases, prepared to sink the
F-X and force the F-14 on
the Air Force. Boyd saved
the plane from the Navy and the budget from Congress, ensuring
the Air Force executive and its career focused hierarchy had the
freedom to compromise
on a budget expanding over-stuffed F-X (F-15). Boyd requested to
retire, in disgust.
Amid mounting hostility from the organizational hierarchy Boyd
and Sprey secretly
developed specifications for building prototype lightweight
fighters with General Dynamics: YF-16;
and Northrop: YF-17; and enabled by Everest Riccioni.
David Packard
announced a budget of $200 million for the services to spend on
prototypes. Pierre Sprey's friend Lyle Cameron picked a
short takeoff and landing transport aircraft and Boyd's lightweight fighter to
prototype.
Boyd was transferred to Thailand
as Vice Commander of Task
Force Alpha, inspector general and equal opportunity
training officer; roles in which he excelled. And he
started working on his analysis of creativity: Destruction
and Creation. But on completion of the tour Boyd was
apparently abandoned and sent to run
a dead end office at the Pentagon.
The power hierarchy moved to protect the F-15, but: Boyd,
Christie, Schlesinger,
and the Air Force chief of staff; kept the
lightweight fighter budgeted and aligned with Boyd's
requirements in a covert campaign. The Air Force
threw a phalanx of developers at the F-16, distorting Boyd's
concept. He accepted he had lost the fight and retired
from the Air Force.
Shifting to scholarship Boyd reflects on how rigidity must be destroyed to enable
creative new assemblies. He uses the idea to explain
the operational success of the YF16 and F-86 fighters, and then
highlights how the pilot can take advantage of their
infrastructure advantage with rapid decision making he
explains with the O-O-D-A Loop.
Boyd encouraged Chuck Spinney
to expose the systemic cost overruns
of the military procurement process. The military
hierarchy moved to undermine the
Spinney Report and understand the
nature of the reformers. Boyd acted as a progressive
mentor to Michael
Wyly, who taught the
Marine Corps about maneuver
warfare, and Jim Burton.
Finally, after the military hierarchy appears to have
beaten him, Boyd's ideas are tested during
the First Gulf War.
Following our summary of his main points, RSS frames the details from the
perspective of complex adaptive system (CAS) theory. Boyd was Darwinesque, placing the art of
air-to-air combat within a CAS framework.
Air warrior |
Alfred Nemeczek reveals the chaotic, stressful life of Vincent
van Gogh in Arles.
Nemeczek shows that Vincent was driven
to create, and successfully
invented new methods of representing feeling in paintings, and
especially portraits. Vincent
worked hard to allow artists like him-self
to innovate. But
Vincent failed in this goal, collapsing into psychosis.
Nemeczek also provides a brief history of
Vincent's life.
Following our summary of his main points, RSS frames the details from the
perspective of complex adaptive system (CAS) theory.
Vincent creates |
Reginald Dwight, better known as Elton John, writes a hilarious
memoir, full of anecdotal and sometimes morbid humor and gossip, which describes his
immediate family, upbringing, development as a singer
songwriter, stardom and its support for his problems, collapse
and eventual recovery.
Elton stresses the serendipitous nature
of his emergence as a musician. He describes
the contributions of his parents, Stanley & Sheila, mother's
sister, and her mother Ivy;
who formed his early
childhood proximate environment which prepared
him for a job in entertainment: he
developed his performance in the club circuits, setup a
commercial partnership with Bernie Taupin to write songs;
entering a network based around Dick James Music.
And he almost got married.
DJM focused Elton and Bernie's initial song writing
while they studied the songs they admired and Elton did session
work, tightening his performance skills and paying for the
food. A first album supported touring and the formation of
a band. A second one sent them to the US where Elton became an
overnight sensation. And during this period of time
Elton's testosterone
level ramped. Life changed
dramatically.
Stardom provided many rewards but there
were still life's problems to deal with. Elton was
befriended by his idol, John Lennon; he achieved new heights of
success but, sensitive to any hint of failure and fraud, suicidally disassociated.
His career crested, he struggled with loneliness and drugs, and
foresaw a fearful vision of his future, as fame caged him idly
in hotels between concerts. His hair abandoned him.
But he was saved by the challenge of
transforming the collapsed Watford football club. He
retired from touring which allowed him the time to reconstruct his life.
Empowered by success, supported by the removal of constraints,
Elton dominates - limiting feedback, doing whatever he
hopes will bring him happiness:
trying new options, expanding the range and increasing the
quantity of mind altering substances; eventually hitting John Reid and marrying
Renata.
He allows his drug use to enter the recording studio. Problems stress him. He is
frightened by a cancer
scare, AIDS, inspired by
Ryan White, angered by the
Sun, and saddened at
breaking Renata's heart. But he was there for Ryan White's
final days. And his lover Hugh Williams confronted Elton
about his string of addictions.
Elton finally agreed he had a problem.
He went to rehab, stopped hating himself,
gave up his current addictions, accepted the influence of a
higher force, and began admiring the everyday world and other
people.
It seemed the higher force was
supporting Elton's progress: he wrote the music for the
Lion King, met David Furnish who accepted Elton warts and all;
they both enjoyed a friendship with Gianni Versace; until Gianni
was murdered. Princess Diana
died soon after, and Elton performed at the funeral.
He toured with Billy Joel and aimed to do the same with Tina
Turner. While his new records sold well he found
himself in debt and terminated the management relationship
with John Reid
Enterprises.
Elton and Bernie improved their
situations: Elton started writing film scores, he helped
turn the film Billy Elliot into a musical, Bernie lobbied Elton
to improve the way they were making records, Elton and David
entered into a civil partnership, and Elton made a record with
his seminal influence: Leon
Russell.
Elton and David became parents of
two boys: Zachary and Elijah; using their sperm a surrogate
mother and network in California. They quietly get married
when the UK allows.
Elton's mum remains
difficult and cruel to him, but he is sad when she dies, and many
at the funeral recall her fun side with him. Being parents
increases the long-term
stresses on their lives, forcing them to adjust, so they can be there for their boys.
But Elton needs to go out with a bang!
And everyone helps.
Following our summary of his main points, RSS frames the details
of the creative process from the perspective of complex
adaptive system (CAS) theory.
My song |
Richard Feynman
outlines a series of amusing vignettes, as he reviews his life story.
Richard's personality
encouraged him to patiently
seek out fun: performing Shewhart cycles
with electricity, in his childhood laboratory, and aligning theory, and
practice through building and fixing radios.
Leonardo's life inspired him to try
innovation, which he
concluded was hard. He played
with the emotion
in communications, a skill
which he used later at
Caltech. And he made a game of avoiding following
orders at MIT. Working during
the holidays revealed the benefit of joining theory and
practice.
Feynman enrolled as a graduate
student at Princeton, where the successful
approach to science was just like his.
His approach was based on
patience and fun: he used his home lab and other tools for
qualitative exploration. Overtime he added experimental
techniques. He would test
the assertions in articles with amusing investigations;
with his mind aligned by
feelings of joy. Everyone at Princeton heard he would want to be hypnotized.
He was driven to compare the challenges of complex subjects being
taught at Princeton to his current pick. In his summer
recess he explored biology.
Gathering problems in challenging areas of science, and then picking one to solve, supported his
creativity. And his practical
orientation and situation when growing up in Far Rockaway,
supported his desire for choices
and adolescent dislike for purely intellectual and cultural
pursuits. Being mostly self-taught, he
developed different approaches to problems than the
standard strategies provided by mass education.
Richard saw his skill set as very different to that exhibited by his father. But are they very
different?
While Richard was at Princeton, America became concerned about
the implications of the European war. After a friend
enlisted he decided to dedicate his
summer holiday to helping the war effort. Feynman got involved in the
Manhattan Project, and went to Los Alamos where he
experienced constraints, applied by: the military, the
physics of the project, him on Niels
Bohr; but was
freed from them by Von
Neumann. The records & reports of the project
were kept in filing cabinets. Richard explored the weaknesses of
the locks and safes deployed to secure these
secrets. Just after the war he was called up by the draft
board for a medical but was rejected for being mentally
unfit.
After the war, Richard was asked to become a professor at Cornell.
He initially struggled in this role: Too young to match
expectations, stressed by the demands of his new job and his
recent experiences; until he adopted an approach that focused on
fun. He enjoyed knowing
about numbers: using, learning about them and the tools to
use them, and competing with others; to calculate, interpolate
and approximate a value the fastest.
Traveling to Buffalo in a light plane once a week to give a
physics lecture before flying back the next morning wasn't much
fun for Richard. So he used
the stipend to visit a bar after each lecture to meet
beautiful women. Richard liked bars and nightclubs, spending a summer in Albuquerque
frequenting one, and later
ones in Las Vegas, as he explored how to get the girls he
drank with to sleep with him.
Richard reflects on various times when he made government
officials obey their parts of contracts: patent fees, limits on red tape;
Richard became frustrated with his life at Cornell, seeing more
things that interested him on the sunny west coast at Caltech. Both
institutions, and Chicago, offered him incentives to help his decision making,
but Richard began to find reevaluating the alternatives a waste
of time and he saw risks in
a really high salary, deciding he would move to Caltech
and stay there.
Richard is invited to attend a scientific symposium in
Japan. Each of the US attendees is asked to learn a little
Japanese. Richard takes lessons, persists, can converse
effectively, but stops when he
finds the cultural parts of the language conflict with his
individualism.
Richard was unhappy with his achievements in physics. He
felt: slower than his peers, not keeping up or understanding the
latest details, fearful that
he could not cope; as the community
worked to understand the laws of beta decay. But
Martin Block pushed him to question the troubling parity
premise. Encouraged by Oppenheimer the community focused
on parity and failures were discovered in a cascade of
reports. Richard attended a meeting where Lee & Yang
discussed a failure and a theory to explain it. Richard
felt terrified and could not understand what they said.
His sister pushed him to change his attitude: act like a student
having fun, read every
line and equation of their paper; he would understand it.
And he did, as well as developing additional insights about what
was happening and what still seemed conflicted. He
reported his ideas back to the community. After Richard
returned from Brazil he reviewed the confusion of facts with
Caltech's experimental physicists who made him aware of
Gell-mann abandoning another former premise of Beta decay.
Feynman realized his ideas were consistent: fully and simply
describing the details of beta decay. He had identified
the workings of a fundamental law. Years later he was awarded the Nobel
prize for physics. He was conflicted about the prize
and attending the ceremony, but eventually enjoyed the trip,
where he discussed cultural achievement with the Japanese
ambassador.
Richard was interested in the operation of the brain, modeling
it on a digital computer. He explored hallucinations and the reality of
experiences.
Richard lobbies for integrity
in science.
In aspects of his life that weren't focused directly on science,
Richard was quirky. He would tease those who asked for his
help: pushing bargains to their logical conclusion; insisting on everyone keeping to
their part of the agreement. And he paid no attention to the
logistical details of planning. He loved percussion,
playing: drums, bongos, baskets, tables, Frigideira; and became quite a success. He
eventually discovered art could be
fun, and tried to express his joy at the underlying
mathematical beauty of the physical world. He had a great
art teacher. But he discovered although he could
eventually draw well he did not understand art.
Many of the artists he met were fakers, and even the powerful,
who were interested in integrating art and science, did not
understand either subject. He found the situation was
similar in other complex adaptive systems: philosophy, religion and
economics; which he dabbled in for a while but found the
strategies of other people practicing the study of such subjects
made him angry and
disturbed, so he avoided participating in them. It seemed
ironic that he was eventually asked to help in bringing
culture to the physicists!
He discusses issues in teaching creative physics in Brazil. He gets
involved in the California public school text
book selection process which he concluded was totally
broken, but also reveals how his father
provided him with a vision of how our world works,
inspiring his interest in experimentation and physical
theory.
Following our summary of his main points, RSS reviews how his personality, family and cultural history supported
his creative development from the perspective of complex
adaptive system (CAS) theory.
Richard draws |
Desmond & Moore paint a picture of Charles Darwin's life,
expanded from his own highlights:
- His naughty
childhood,
- Wasted
schooldays,
- Apprenticeship with Grant,
- His extramural
activities at Cambridge, walks with Henslow,
life with FitzRoy on the
Beagle,
- His growing
love for science,
- London: geology, journal and Lyell.
- Moving from
Gower Street to Down and writing Origin and other
books.
- He reviewed his position on
religion: the long
dispute with Emma, his
slow collapse of belief
- damnation for unbelievers like his father and brother, inward conviction
being evolved and unreliable, regretting he had ignored his father's
advice; while describing Emma's side of the
argument. He felt happy with his decision to dedicate
his life to science. He closed by asserting after Self &
Cross-fertilization his strength will be
exhausted.
Following our summary of their main points, RSS frames the details from the
perspective of complex adaptive system (CAS) theory. Darwin placed
evolution within a CAS framework, and built a network of supporters whose
complementary skills helped drive the innovation.
Darwin emerges |
Richard Dawkin's explores how nature has created implementations
of designs, without any need for planning or design, through the
accumulation of small advantageous changes.
Accumulating small changes |
Russ Abbott explores the impact on science of epiphenomena and
the emergence of agents.
Autonomous emergence |
Terrence Deacon explores how constraints on dynamic flows can
induce emergent phenomena
which can do real work. He shows how these phenomena are
sustained. The mechanism enables
the development of Darwinian competition.
Constraint based phenomena |
|
|
The power of derivative systems
Summary
Satyajit Das uses an Indonesian company's derivative trades to
introduce us to the workings of the international derivatives
system. Das describes the components of the value delivery
system and the key
transactions. He demonstrates how the system
interacted with emerging economies is a human SuperOrganism complex adaptive system (CAS) which operates and controls trade flows within a rich niche. Economics models economies. Robert Gordon has described the evolution of the American economy. Like other CAS, economic flows are maintained far from equilibrium by: demand, financial flows and constraints, supply infrastructure constraints, political and military constraints; ensuring wealth, legislative control, legal contracts and power have significant leverage through evolved amplifiers.
expanding them, extracting profits and then moving on as the
induced bubbles burst. Following Das's key points the
complex adaptive system ( This page introduces the complex adaptive system (CAS) theory
frame. The theory provides an organizing framework that is
used by 'life.' It can be used to evaluate and rank models
that claim to describe our perceived reality. It catalogs
the laws and strategies which underpin the operation of systems
that are based on the interaction of emergent
agents. It highlights the
constraints that shape CAS and so predicts their form. A
proposal that does not conform is wrong.
John Holland's framework for representing complexity is
outlined. Links to other key aspects of CAS theory
discussed at the site are presented.
CAS)
aspects are highlighted.
Traders guns and money
In Satyajit Das's book
'Traders guns and money' he outlines the derivative value
delivery system that This page discusses the mechanisms and effects of emergence
underpinning any complex adaptive system (CAS). Physical forces and
constraints follow the rules of complexity. They generate
phenomena and support the indirect emergence of epiphenomena.
Flows of epiphenomena interact in events which support the
emergence of equilibrium and autonomous
entities. Autonomous entities enable evolution
to operate broadening the adjacent possible.
Key research is reviewed.
emerged
after the creation of derivative contracts. A variety of
types of derivatives and their
risk profile are described.
Das uses a set of related foreign currency
transactions with an Indonesian company during the 1990s
Asian economic is the study of trade between humans. Traditional Economics is based on an equilibrium model of the economic system. Traditional Economics includes: microeconomics, and macroeconomics. Marx developed an alternative static approach. Limitations of the equilibrium model have resulted in the development of: Keynes's dynamic General Theory of Employment Interest & Money, and Complexity Economics. Since trading depends on human behavior, economics has developed behavioral models including: behavioral economics. boom as
an illustration of derivatives in action.
To set the scene - foreign investment and loans were flooding
into Asia in the 1990s. It was part of a repeating process
of integrating developing economies is a human SuperOrganism complex adaptive system (CAS) which operates and controls trade flows within a rich niche. Economics models economies. Robert Gordon has described the evolution of the American economy. Like other CAS, economic flows are maintained far from equilibrium by: demand, financial flows and constraints, supply infrastructure constraints, political and military constraints; ensuring wealth, legislative control, legal contracts and power have significant leverage through evolved amplifiers.
into the western financial system. Das identifies four
phases:
- The World Bank was setup as part of the Bretton Woods agreements, as the International Bank for Reconstruction and Development, to repair and reconstruct Europe after the Second World War and as the World Bank continues to provide reconstruction and development resources for projects in developing economies. It includes:
- International Finance Corporation
had pushed the countries to deregulate to attract foreign
investment. Government controls were relaxed.
Local labor costs were low. There were no employment
laws. Abundant natural resources were available.
The local markets were opening up. But political
instability and no social welfare system forced people to
save money (especially in Swiss accounts). The costs
of office space sky rocketed. Phones and plumbing
didn't work. Traffic was terrible.
- Living standards improve for the fortunate. Property
and share prices climb steeply. More money flows
in. Local banks relax lending standards. Foreign banks
lend to local banks. Investors enter the market.
- Costs rise to levels that make the economy
uncompetitive. Politicians discuss moving up the value
chain. Major initiatives are launched. The
bubble pulls in more investment.
- The new economy collapses.
The international bankers and traders fuelled each boom with new
issues of shares and bonds sold to investors. They gained
commissions trading the securities to foreign investors.
They had produced derivative products which the Asian companies
and investors had snapped up.
In the 1990s the client, an Indonesian company, produced and
sold product in Indonesia, but with the global integration they
concluded it would be cheaper to obtain finances from the global
market. The Indonesian currency is legal tender which provides no interest payments to the holder. It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP. But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive.
was costing 12% for loans while the dollar was only 6%.
Investment banks were happy to assist. The client entered
into derivative contracts. With the Indonesian currency
pegged to the dollar there appeared to be no currency risk, is an assessment of the likelihood of an independent problem occurring. It can be assigned an accurate probability since it is independent of other variables in the system. As such it is different from uncertainty. .
The initial derivatives the company used were swaps:
The bank then told them that the dollar yield curve, plots yield to maturity(y) against time to maturity (x) with the expectation that yield will be higher for debt instruments with longer times before they mature. Price risk is also typically higher on longer maturity debt. However when short term interest rates are rising the short term yield will rise faster than the long term yield and the shape of the yield curve can become inverted. was steep
and that they would benefit from a contract change. So
they added an arrears reset swap:
- The company agrees to pay for dollars at LIBOR - 0.4% at
an interest rate set in arrears (actually 2 days before the
end of the 6 month period of the contract).
When the bank said the dollar yield curve was flattening they
cancelled the arrears reset swap making a profit. Probably
when the dollar interest rate moved the trader no longer wished
to be in the contract.
The company entered into a swap to fix the cost of the dollar
payments, under the assumption that the dollar rate would
rise. By trading in and out they had made another
profit.
The company then entered into a 'double up' swap:
- The company would pay fixed rates in dollars for five
years. But interest rates for five years were higher
than for six months. So the companies cost of
borrowing would be higher. To make that cost cheaper,
the company placed a bet - They were offered a lower
borrowing cost but with some strings attached. If
dollar rates went up, then the fixed rate would convert to a
floating one. If the dollar went down then the deal
($300 million) would double in size ($600 million).
There was also a hidden currency option in the
contract. The exchange rate for the second $300
million was fixed at the original exchange rate.
While this contract reduced the borrowing costs it made no sense
for the company to enter into. Any protection, they
thought they had obtained, against dollar rates changing, was
contractually removed just when they needed it! The
company had no control over the factors that could now impact
them hugely. However, the Federal Reserve of 1913 was a response to a series of banking panics with the goal of responding effectively to stresses. It setup: - At least 8 and not more than 12 private regional Federal Reserve banks. Twelve were setup
- Federal Reserve Board with seven members to govern the system. The President appointed the seven, which must be confirmed by Congress. In 1935 the Board was renamed and restructured.
- Federal Advisory Committee with twelve members
- Single US currency - the Federal Reserve Note.
did.
Das claims that investment banks typically initiated deals with
a customer with a small win (Twinkie) for the customer.
Only later when the customer had built trust and distrust are evolved responses to sham emotions. During a friendship where no sham emotions have been detected trust will build up. and assumed they were
going to get more profits from further contracts would the
hidden hooks appear. Even when the customer lost money
they would come back for more.
Who understood what was happening? Das discusses
the accounting The agents in complex adaptive
systems (CAS) must model their
environment to respond effectively to it. Evolution's
schematic operators and Samuel
modeling together support the indirect recording of past
successes and their strategic use by the current agent to learn
how to succeed in the proximate environment.
models that banks are
required to use. Mark-to-market accounting attempted to
link the various derivative products to their market
values. But since over-the-counter products could be
unique, models were used to derive the value. Dealers
liked mark-to-market since it allowed income to be booked up
front. That introduces risk, is an assessment of the likelihood of an independent problem occurring. It can be assigned an accurate probability since it is independent of other variables in the system. As such it is different from uncertainty. ,
since the other party may not pay, so the banks are required to
keep cash reserves. Das explains that the subjective
nature of the valuations makes reserves a potential slush fund
for profit smoothing - which produces bank results that are
attractive to investors. Regulators and law makers control
the accounting models but the nature of futures introduces
estimations into the valuation process. Accountants wanted
to limit reserves (slush funds). Regulators wanted to
expand them. Traders went with the accountants - they
reported more income and obtained larger bonuses!
Often all three parties to a swap like the result: A
company can trade variable interest rate debt for fixed rate
debt. When interest rates are volatile this is a good
hedge. For that risk reduction the issuer of the fixed
rate debt can obtain access to variable rate debt at an
especially low price. The bank obtains transaction fees
and maybe more. Over Carlo Rovelli resolves the paradox of time.
Rovelli initially explains that low level physics does not
include time:
- A present that is common throughout the universe does not exist
- Events are only partially ordered. The present is
localized
- The difference between past and future is not foundational.
It occurs because of state that through our blurring appears
particular to us
- Time passes at different speeds dependent on where we are and how fast we travel
- Time's rhythms are due to
the gravitational field
- Our quantized physics shows neither
space nor time, just processes transforming physical
variables.
- Fundamentally there is no time. The basic equations
evolve together with events, not things
Then he
explains how in a physical world without time its perception can
emerge:
- Our familiar time emerges
- Our interaction with the world is partial, blurred,
quantum indeterminate
- The ignorance determines the existence of thermal time
and entropy that quantifies our uncertainty
- Directionality of time is real
but perspectival. The entropy of the world in
relation to us increases with our thermal time. The
growth of entropy distinguishes past from future: resulting in
traces and memories
- Each human is a
unified being because: we reflect the world, we
formed an image of a unified entity by
interacting with our kind, and because of the perspective
of memory
- The variable time: is one
of the variables of the gravitational field.
With our scale we don't
register quantum fluctuations, making space-time
appear determined. At our speed we don't perceive
differences in time of different clocks, so we experience
a single time: universal, uniform, ordered; which is
helpful to our decisions
time the
competition between banks and the goal of increasing transaction
volume would push each new derivative product into a
commoditized product processed in bulk by a warehouse. There were no
arrangement fees. Banks profited from the spread between
the bid and offer. The products were easily reverse
engineered. Commoditization and competition ensured the
need for volume. To improve the potential for profits
traders would take open positions rather than hedge the
derivatives.
Das comments that swaps that hedged interest rate and currency risk, is an assessment of the likelihood of an independent problem occurring. It can be assigned an accurate probability since it is independent of other variables in the system. As such it is different from uncertainty. created opportunities as
countries started to open up their markets. The various
currencies and financial systems allowed investors to find
undervalued currencies providing them with access to low cost capital is the sum total nonhuman assets that can be owned and exchanged on some market according to Piketty. Capital includes: real property, financial capital and professional capital. It is not immutable instead depending on the state of the society within which it exists. It can be owned by governments (public capital) and private individuals (private capital). .
Enabling
the Japanese investor in the 1980
Japan was particularly attractive for banks and issuers.
Byzantine investment rules, mostly unwritten and obscure,
prevented investors from investing where they wanted. Investment
banks and issuers devised structures to circumvent the
rules.
Japanese investors were limited in the amount of foreign currency is legal tender which provides no interest payments to the holder. It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP. But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. bonds they could
buy, but a bond denominated in a foreign currency issued by a
Japanese entity are, according to Abbott, a class including people, families, corporations, hurricanes. They implement abstract designs and are demarcatable by their reduced entropy relative to their components. Rovelli notes entities are a collection of relations and events, but memory and our continuous process of anticipation, organizes the series of quantized interactions we perceive into an illusion of permanent objects flowing from past to future. Abbott identifies two types of entity: - At equilibrium entities,
- Autonomous entities, which can control how they are affected by outside forces;
was not
a foreign currency bond under the rules. In 1985 Long Term
Credit Bank a AAA rated Japanese lender entered a contract with
Bankers Trust for a bond with a 1% higher interest rate than
normal. In return the investors, Japanese insurance reduces volatility in standard of living by compensating for losses of income during periods of unemployment, for catastrophic losses from disaster, or death of a family income earner as described by Gordon. Insurance companies must set aside reserves to handle such claims. Britain initially required that insurance buyers also have an insurable interest. That is required in insurance markets to ensure buyers of insurance don't destroy their asset just to obtain the insurance. Health insurance is treated separately being unusual, since the subscriber is likely to know more about their state of health than the insurer is and the subscriber is more likely to purchase the health insurance when aware of their increased risk. This behavior collapses the risk pool by: forcing the insurer to increase the premiums, and encouraging healthy individuals to opt out of health insurance coverage. companies took
on uncertainty is when a factor is hard to measure because it is dependent on many interconnected agents and may be affected by infrastructure and evolved amplifiers. This is different from risk, although the two are deliberately conflated by ERISA. Keynes argued that most aspects of the future are uncertain, at best represented by ordinal probabilities, and often only by capricious hope for future innovation, fear inducing expectations of limited confidence, which evolutionary psychology implies is based on the demands of our hunter gatherer past. Deacon notes reduced uncertainty equates to information. if the
yen rose above 169 to the dollar over the next 10 years.
If it reached 84.5 to the dollar the investors lost their entire
principal.
Similarly Japanese investors liked US$ zero coupon bonds.
These pay no interest over the 10 year period but then pay the
principal and compounded interest in one sum. If the
Japanese yen fell (the bank of Japan policy kept the yen weak)
the final dollar payment was amplified in terms of yen.
Further while the initial bond investment was a payment the
final repayment was classed as a capital is the sum total nonhuman assets that can be owned and exchanged on some market according to Piketty. Capital includes: real property, financial capital and professional capital. It is not immutable instead depending on the state of the society within which it exists. It can be owned by governments (public capital) and private individuals (private capital). gain which was not
taxed in Japan at the Carlo Rovelli resolves the paradox of time.
Rovelli initially explains that low level physics does not
include time:
- A present that is common throughout the universe does not exist
- Events are only partially ordered. The present is
localized
- The difference between past and future is not foundational.
It occurs because of state that through our blurring appears
particular to us
- Time passes at different speeds dependent on where we are and how fast we travel
- Time's rhythms are due to
the gravitational field
- Our quantized physics shows neither
space nor time, just processes transforming physical
variables.
- Fundamentally there is no time. The basic equations
evolve together with events, not things
Then he
explains how in a physical world without time its perception can
emerge:
- Our familiar time emerges
- Our interaction with the world is partial, blurred,
quantum indeterminate
- The ignorance determines the existence of thermal time
and entropy that quantifies our uncertainty
- Directionality of time is real
but perspectival. The entropy of the world in
relation to us increases with our thermal time. The
growth of entropy distinguishes past from future: resulting in
traces and memories
- Each human is a
unified being because: we reflect the world, we
formed an image of a unified entity by
interacting with our kind, and because of the perspective
of memory
- The variable time: is one
of the variables of the gravitational field.
With our scale we don't
register quantum fluctuations, making space-time
appear determined. At our speed we don't perceive
differences in time of different clocks, so we experience
a single time: universal, uniform, ordered; which is
helpful to our decisions
time.
In December 1985 at the Plaza Accord, the
Reagan administration got the agreement of the G7 is the group of seven: Canada, EU, France, Germany Italy, Japan, UK, US. central bankers that the Bank
of Japan would let the yen float. The yen rose
dramatically an appreciation of 310% at its peak. The
Japanese investors, who had always assumed the Bank of Japan
would keep the yen weak to help the countries exporters suffered
huge derivative losses.
The long term effect of the yen appreciation was to push the
Japanese economy is a human SuperOrganism complex adaptive system (CAS) which operates and controls trade flows within a rich niche. Economics models economies. Robert Gordon has described the evolution of the American economy. Like other CAS, economic flows are maintained far from equilibrium by: demand, financial flows and constraints, supply infrastructure constraints, political and military constraints; ensuring wealth, legislative control, legal contracts and power have significant leverage through evolved amplifiers. into
depression. The central bank dropped interest rates to
0. Japanese insurance reduces volatility in standard of living by compensating for losses of income during periods of unemployment, for catastrophic losses from disaster, or death of a family income earner as described by Gordon. Insurance companies must set aside reserves to handle such claims. Britain initially required that insurance buyers also have an insurable interest. That is required in insurance markets to ensure buyers of insurance don't destroy their asset just to obtain the insurance. Health insurance is treated separately being unusual, since the subscriber is likely to know more about their state of health than the insurer is and the subscriber is more likely to purchase the health insurance when aware of their increased risk. This behavior collapses the risk pool by: forcing the insurer to increase the premiums, and encouraging healthy individuals to opt out of health insurance coverage.
companies had written policies with guaranteed interest of
3-4%. The economy would not allow their businesses to
generate that. US investment banks were happy to offer derivative products (reverse dual currency bonds)
that might help them generate that capital. Ordinary
Japanese investors were also getting 0% interest on their
savings. They also headed for reverse dual currency
bonds.
Black-Scholes can solve the contingent investment discount rate dilemma for pricing options. It establishes a tracking portfolio with the same payoffs as the option and dynamically tracks the portfolio as the stock price evolves, adjusting the value of the option. It is argued that the adjustment ensures the rate of return to a hedge position remains constant over time.
option pricing allowed derivatives products to be built around
options. The contracts used the models to hedge the risk, is an assessment of the likelihood of an independent problem occurring. It can be assigned an accurate probability since it is independent of other variables in the system. As such it is different from uncertainty. but the models were not
perfect and in Oct 1987 US stock markets collapsed. Option
books failed badly. The models
had proved poor approximations of markets in
meltdown.
Das points out that the former Federal Reserve of 1913 was a response to a series of banking panics with the goal of responding effectively to stresses. It setup: - At least 8 and not more than 12 private regional Federal Reserve banks. Twelve were setup
- Federal Reserve Board with seven members to govern the system. The President appointed the seven, which must be confirmed by Congress. In 1935 the Board was renamed and restructured.
- Federal Advisory Committee with twelve members
- Single US currency - the Federal Reserve Note.
chairman Alan Greenspan argued that derivatives allow banks and
non-banks to unbundle risks
and thereby enhance the process of wealth is schematically useful information and its equivalent, schematically useful energy, to paraphrase Beinhocker. It is useful because an agent has schematic strategies that can utilize the information or energy to extend or leverage control of the cognitive niche. creation.
In the 1990s Greenspan's low interest rate policies, government
regulatory requirements and pension privatization strategies,
consistent economic growth, escalating real estate prices, and
the shaky financial position of many banks drove investment
managers, flush with cash, to seek safer and higher returns in
the financial markets. The excess of capital enabled hedge fund is an investment fund that accepts investments from a limited number of accredited individual or institutional investors. Hedge funds are able to use investment methods that are not allowed for other types of fund. s to operate
as investment vehicles.
The buy side - are customers,
corporations and investors who trade derivatives with investment
banks. They do it to hedge risk, is an assessment of the likelihood of an independent problem occurring. It can be assigned an accurate probability since it is independent of other variables in the system. As such it is different from uncertainty. ,
manage exposure or speculate. Money managers need to match
or beat their competitors. They often do that by investing
a large proportion of their funds in the market (index funds use simple rules to decide what assets to include in an investment fund: mutual fund or ETF. John Bogle leveraged the low cost and predictability of the approach to build Vanguard's index funds for consumer investors, explaining "My ideas are very simple. In investing, you get what you don't pay for. Costs matter, so intelligent investors will use low-cost index funds to build a diversified portfolio of stocks and bonds, and they will stay the course. And they won't be foolish enough to think they can consistently outsmart the market." University of Chicago economists: Renshaw, Feldstein, Samuelson; initially developed the indexing idea to obtain a diversified open-ended vehicle aligned with the assumed random operation of the market. Complexity economics undermines these ideas, suggesting index funds are an evolved amplifier leveraging captive 401K funds. Index funds are not guaranteed to be transparent and the selection process involves lightly regulated companies which can be open to conflict of interest - their selections will alter the demand for and price of the stocks (Feb 2019). ) and then a
small proportion in a hedge
fund is an investment fund that accepts investments from a limited number of accredited individual or institutional investors. Hedge funds are able to use investment methods that are not allowed for other types of fund. where they hope to obtain a higher return.
The sell side - Investment bank
traders, who can trade over-the-counter with buyers, or at the
exchanges, and their support staff: sales team, research
analysts, risk managers, product controllers, compliance
officers, lawyers, quantitative analysts and other back-office
staff. Traders make prices for the sales teams to show
their clients. If the client accepts, the trader must then
buy the asset - hopefully at a lower cost than the price he
set. Traders unbundle derivatives and cover each part in a
trade. Traders can also trade for their own accounts - to
do that successfully they must know the future. Das writes
trading strategies include: overwhelming force, ganging up,
ambush (inside information)! The contractual nature of the
products requires the lawyers to accurately assess the courts
positions.
The exchanges - Dealers match buyers and sellers of commoditized
derivative products, charging a fee on the transaction.
Warehouses - Investment banks
entered into trades with clients as principals, allowing
immediate execution, but adding to the banks risk, is an assessment of the likelihood of an independent problem occurring. It can be assigned an accurate probability since it is independent of other variables in the system. As such it is different from uncertainty. . The assumption was
that banks could enhance earnings from trading and managing the
risks of the mismatches. Actually warehousing, is a loan extended from a large bank or Wall Street firm to a nonbank to originate mortgages. turned
the traded derivatives into undifferentiated commodities and
typically exchanged profit for volume.
Product groups - include arbitrage teams who leverage the models
and analytics to identify inefficiencies. These
inefficiencies can be exploited by creating derivatives
contracts which traders could bet with.
Quantitative analysts - Produced the models that, for example,
match one item in a forward
with the market benchmark, the analytics that identify market
inefficiencies, and the technologies.
Accountants - model the operation of the banks, assessing assets
and allocating cash flows, revenues and profits to particular
accounts.
Academics - Guardians of the theories leveraged to develop the
models, and create the derivative products, and legal frameworks
that enable the This page discusses the effect of the network on the agents participating in a complex
adaptive system (CAS). Small
world and scale free networks are considered.
network of Plans are interpreted and implemented by agents. This page
discusses the properties of agents in a complex adaptive system
(CAS).
It then presents examples of agents in different CAS. The
examples include a computer program where modeling and actions
are performed by software agents. These software agents
are aggregates.
The participation of agents in flows is introduced and some
implications of this are outlined.
agents to emerge and
operate.
Hedge fund is an investment fund that accepts investments from a limited number of accredited individual or institutional investors. Hedge funds are able to use investment methods that are not allowed for other types of fund. s and
financiers - Hedge funds charge investors a fee and a share of
the profits. They are allowed to perform trades that
typical investors can't - short
selling is a multi part transaction where: - A borrowed tradable asset (this part of the transaction is not performed in the naked version) is sold under the assumption that the asset is going to fall in price during the period when it has been borrowed.
- Once the asset falls in price it is then purchased.
- The asset is returned to the lender, with any additional risk premium.
- The short seller keeps any profit. If the asset gained value during the period of the short then the seller makes a loss.
and leveraged trades. Those trades require
derivatives. They may arbitrage two similar assets that
are differently priced and wait for the prices to
equalize. To make big money these small differences must
be leveraged. The assumption is that the market models
available to the hedge funds limit the risk of mistakes!
Regulators - Global agents such as the World Bank was setup as part of the Bretton Woods agreements, as the International Bank for Reconstruction and Development, to repair and reconstruct Europe after the Second World War and as the World Bank continues to provide reconstruction and development resources for projects in developing economies. It includes: - International Finance Corporation
.
Western economy is a human SuperOrganism complex adaptive system (CAS) which operates and controls trade flows within a rich niche. Economics models economies. Robert Gordon has described the evolution of the American economy. Like other CAS, economic flows are maintained far from equilibrium by: demand, financial flows and constraints, supply infrastructure constraints, political and military constraints; ensuring wealth, legislative control, legal contracts and power have significant leverage through evolved amplifiers. 's central
banks: the US is the United States of America. Federal Reserve
system of 1913 was a response to a series of banking panics with the goal of responding effectively to stresses. It setup: - At least 8 and not more than 12 private regional Federal Reserve banks. Twelve were setup
- Federal Reserve Board with seven members to govern the system. The President appointed the seven, which must be confirmed by Congress. In 1935 the Board was renamed and restructured.
- Federal Advisory Committee with twelve members
- Single US currency - the Federal Reserve Note.
in particular, and US market regulators such as the
regulators of the Chicago Mercantile Exchange.
Derivatives and risk
The forward
contract hedge
A farmer emerged several times and various places, probably first around 11,000 years ago. It depends on and supports evolved amplifiers which introduce instability and problems with sustainability of the populations that depended on it, unlike the earlier hunting and gathering. Today the uncertainty can be hedged, although third world farmers' businesses are undermined by first world agricultural policy. J.R. McNeill explains the sustainability issue: "all farming is a struggle against the depletion of soil nutrients. Crops absorb nutrients; these are eaten by people or animals; then they spend shorter or longer periods of time in human or animal bodies, before returning to the soil. If these nutrients, in one manner or another, return to farmers' fields, then a nutrient cycle can last indefinitely. If they do not, then those fields gradually lose nutrient and over time produce less and less food - unless some intervention such as fertilizer counteracts the nutrient loss." However, McNeill notes three notable exceptions: Egypt until the Aswan High Dam, Southern China, Medieval Europe; "each ecologically successful over long periods of time." Their success resulted from trial and error and favorable circumstances. with no support
subsidies who has invested in a field of wheat, is exposed to
price risk, is an assessment of the likelihood of an independent problem occurring. It can be assigned an accurate probability since it is independent of other variables in the system. As such it is different from uncertainty. (supply &
demand), and potentially volume risk. To control the price
risk the farmer can sell the wheat forward for an agreed
price. By giving up wind fall profits of a high price the
farmer hedges against a low price. Typically the agreed
sales price is created by pre-selling a future share of an
'equivalent' market benchmark product. At the Carlo Rovelli resolves the paradox of time.
Rovelli initially explains that low level physics does not
include time:
- A present that is common throughout the universe does not exist
- Events are only partially ordered. The present is
localized
- The difference between past and future is not foundational.
It occurs because of state that through our blurring appears
particular to us
- Time passes at different speeds dependent on where we are and how fast we travel
- Time's rhythms are due to
the gravitational field
- Our quantized physics shows neither
space nor time, just processes transforming physical
variables.
- Fundamentally there is no time. The basic equations
evolve together with events, not things
Then he
explains how in a physical world without time its perception can
emerge:
- Our familiar time emerges
- Our interaction with the world is partial, blurred,
quantum indeterminate
- The ignorance determines the existence of thermal time
and entropy that quantifies our uncertainty
- Directionality of time is real
but perspectival. The entropy of the world in
relation to us increases with our thermal time. The
growth of entropy distinguishes past from future: resulting in
traces and memories
- Each human is a
unified being because: we reflect the world, we
formed an image of a unified entity by
interacting with our kind, and because of the perspective
of memory
- The variable time: is one
of the variables of the gravitational field.
With our scale we don't
register quantum fluctuations, making space-time
appear determined. At our speed we don't perceive
differences in time of different clocks, so we experience
a single time: universal, uniform, ordered; which is
helpful to our decisions
time of the future sale the benchmark
product is purchased offsetting the price change in the
wheat. At the time of the actual sale the actual wheat and
the bench mark may have moved out of alignment so there is still
some 'basis' risk. It depends how good a model for the
wheat the benchmark future is.
When interest rates are high and volatile (1980) currency is legal tender which provides no interest payments to the holder. It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP. But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. transactions can
be hedged.
You can speculate with forward contracts betting that the price
will rise while buying forward, or that it will fall while selling forward. It
can create leverage since the dealer may only require a deposit
on the transaction.
Borrowers demand money at the lowest prices. Swaps allowed them to exploit
anomalies between capital is the sum total nonhuman assets that can be owned and exchanged on some market according to Piketty. Capital includes: real property, financial capital and professional capital. It is not immutable instead depending on the state of the society within which it exists. It can be owned by governments (public capital) and private individuals (private capital).
markets to raise cheaper funds. They would raise money in
a currency with a low interest rate, while charging their direct
investors a premium, and then swap the currency for the one they
really needed.
Derivative put option
The farmer can attempt to capture a high future price while
'insuring' against a low price with a put option is an agreement, covering a stated period of time, by the put option seller to pay the put option buyer the option price if required, for the asset the buyer owns, even if this underlying asset has a lower current value in the market. The seller of the put option is paid a premium for providing the 'insurance'. . The
contract agrees that
- If prices fall below the strike price the seller of the
option makes up the difference. He does this because
- The farmer will pay a premium for the
'insurance'.
Derivative call option
Call options provide the equivalent 'insurance' on a rise in
price.
Buying options limits your losses to the option premium
paid. Selling options limits your gain to the premium
while the potential loss is unlimited.
Derivative short sell
Contractually agreeing to sell a product or commodity at an
agreed price in the future locks in the price, but the seller does not
need to own the item is where a tradable asset is sold short but no arrangement is made to ensure the asset can be borrowed. The SEC has banned the practice in the US. But traders and hedge funds may take a risk to ensure their goal is achieved, may use an exchange in a country that allows naked trades, or use the court system to avoid punishment. . If the actual price has
dropped at the contracted time of sale then the item can be
purchased at the Carlo Rovelli resolves the paradox of time.
Rovelli initially explains that low level physics does not
include time:
- A present that is common throughout the universe does not exist
- Events are only partially ordered. The present is
localized
- The difference between past and future is not foundational.
It occurs because of state that through our blurring appears
particular to us
- Time passes at different speeds dependent on where we are and how fast we travel
- Time's rhythms are due to
the gravitational field
- Our quantized physics shows neither
space nor time, just processes transforming physical
variables.
- Fundamentally there is no time. The basic equations
evolve together with events, not things
Then he
explains how in a physical world without time its perception can
emerge:
- Our familiar time emerges
- Our interaction with the world is partial, blurred,
quantum indeterminate
- The ignorance determines the existence of thermal time
and entropy that quantifies our uncertainty
- Directionality of time is real
but perspectival. The entropy of the world in
relation to us increases with our thermal time. The
growth of entropy distinguishes past from future: resulting in
traces and memories
- Each human is a
unified being because: we reflect the world, we
formed an image of a unified entity by
interacting with our kind, and because of the perspective
of memory
- The variable time: is one
of the variables of the gravitational field.
With our scale we don't
register quantum fluctuations, making space-time
appear determined. At our speed we don't perceive
differences in time of different clocks, so we experience
a single time: universal, uniform, ordered; which is
helpful to our decisions
time and then sold
on for a profit. If the price has risen then a loss
ensues.
Since the product or commodity shorted is a multi part transaction where: - A borrowed tradable asset (this part of the transaction is not performed in the naked version) is sold under the assumption that the asset is going to fall in price during the period when it has been borrowed.
- Once the asset falls in price it is then purchased.
- The asset is returned to the lender, with any additional risk premium.
- The short seller keeps any profit. If the asset gained value during the period of the short then the seller makes a loss.
is not owned is where a tradable asset is sold short but no arrangement is made to ensure the asset can be borrowed. The SEC has banned the practice in the US. But traders and hedge funds may take a risk to ensure their goal is achieved, may use an exchange in a country that allows naked trades, or use the court system to avoid punishment. , no capital is the sum total nonhuman assets that can be owned and exchanged on some market according to Piketty. Capital includes: real property, financial capital and professional capital. It is not immutable instead depending on the state of the society within which it exists. It can be owned by governments (public capital) and private individuals (private capital). is required to
commit to the sale. The transaction has leverage.
How much depends on the margin required by the dealer in
accepting the trade.
Derivative swaps
Swaps allow one series of future cash flows to be exchanged for
a different series of cash flows. While initially traded
at exchanges these contracts were allowed, in the late 1970s, to
be traded in the over-the-counter (OTC) market, including cash
settlements. That allowed the emergence of a network of
banks and non-banks creating, selling and trading the
contracts.
Large transactions that would disturb the currency is legal tender which provides no interest payments to the holder. It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP. But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. markets, and
typically drive up the interest rate could be virtualized as
swap contracts between organizations which were seeking the
flows. IBM
and the World Bank was setup as part of the Bretton Woods agreements, as the International Bank for Reconstruction and Development, to repair and reconstruct Europe after the Second World War and as the World Bank continues to provide reconstruction and development resources for projects in developing economies. It includes: - International Finance Corporation
used a pair of such flows in a currency swap so IBM could sell
huge volumes of Swiss and German currency it had accumulated at
a profit and the World Bank could buy them at low interest
rates. IBM paid the World Banks dollar bond obligations
while the World Bank paid IBMs Swiss/German bond
obligations. Salomon made a lot of money setting up the
transaction.
Speculation on the future values was argued to increase the
liquidity of the markets.
Regulatory arbitrage
Since the resolution of a derivative contract is in the future
it has no current accounting value, making the contract off
balance sheet. Similarly the contract may never require
ownership of the traded commodity, removing the transaction from
the control of the commodity regulator. Indeed, stock
awards that limit selling for a period of Carlo Rovelli resolves the paradox of time.
Rovelli initially explains that low level physics does not
include time:
- A present that is common throughout the universe does not exist
- Events are only partially ordered. The present is
localized
- The difference between past and future is not foundational.
It occurs because of state that through our blurring appears
particular to us
- Time passes at different speeds dependent on where we are and how fast we travel
- Time's rhythms are due to
the gravitational field
- Our quantized physics shows neither
space nor time, just processes transforming physical
variables.
- Fundamentally there is no time. The basic equations
evolve together with events, not things
Then he
explains how in a physical world without time its perception can
emerge:
- Our familiar time emerges
- Our interaction with the world is partial, blurred,
quantum indeterminate
- The ignorance determines the existence of thermal time
and entropy that quantifies our uncertainty
- Directionality of time is real
but perspectival. The entropy of the world in
relation to us increases with our thermal time. The
growth of entropy distinguishes past from future: resulting in
traces and memories
- Each human is a
unified being because: we reflect the world, we
formed an image of a unified entity by
interacting with our kind, and because of the perspective
of memory
- The variable time: is one
of the variables of the gravitational field.
With our scale we don't
register quantum fluctuations, making space-time
appear determined. At our speed we don't perceive
differences in time of different clocks, so we experience
a single time: universal, uniform, ordered; which is
helpful to our decisions
time can be circumvented with a
forward sale contract on the stock.
As significant was the potential to avoid exchange controls and
tariffs. A swap would allow future foreign exchange flows
to be contractually matched with local currency flows. The
investment bank would find a second company that wished to do
the opposite transaction. Both companies would avoid the
taxes.
Credit derivatives allowed banks to offload credit, and hence
reuse capital is the sum total nonhuman assets that can be owned and exchanged on some market according to Piketty. Capital includes: real property, financial capital and professional capital. It is not immutable instead depending on the state of the society within which it exists. It can be owned by governments (public capital) and private individuals (private capital). .
Credit was historically legally tied to a bank. It was
difficult to trade and tied up capital. Credit derivatives
could solve that problem. When interest rates are low and
credit margins thin investors want yield enhancement.
Buying a high interest bond linked to a portfolio of Japanese
bank A rated bonds seemed attractive. If any of the
Japanese banks defaulted on their obligations the investor
suffered a loss, since they got the Japanese bonds of the
defaulting bank (with a 40% of face value) rather than their
investment. But the combined probability of the first to
default actually made the bond a BBB-. The first to
default condition was also leveraged. While the loss is
limited to the face value of the bond the risk, is an assessment of the likelihood of an independent problem occurring. It can be assigned an accurate probability since it is independent of other variables in the system. As such it is different from uncertainty. taken on is five times
that. If the default correlation of the banks is low this
also means more risk for the investor. The bond issuer had
removed the credit risk from their books even though they
nominally still held the Japanese bonds.
The
breakthrough credit derivative was the credit default swap (CDS is a credit-default swap, nominally insurance where the buyer of the CDS gets paid if the subject of the swap can't meet its obligations. It appears to be insurance but insurance companies must set aside reserves to handle such claims. Britain initially required that insurance buyers also have an insurable interest. That is required in insurance markets to ensure buyers of insurance don't destroy their asset just to obtain the insurance. CDS were not required to do the same, because it was decided they were not insurance which encouraged such abuses and risk taking. Stocks could be sold short when they were backed by CDS. And the swap market is limited making it easy to undermine its liquidity. They carry considerable risk because: - They are governed by the CFMA, which ensures they are unregulated and opaque
- The incentives encouraged problems - the more CDS you own the more you benefit from [causing] problems with the 'insured' assets. And unlike traditional insurance you could buy as many CDS as you could afford.
). Here a bank sells
the uncertainty is when a factor is hard to measure because it is dependent on many interconnected agents and may be affected by infrastructure and evolved amplifiers. This is different from risk, although the two are deliberately conflated by ERISA. Keynes argued that most aspects of the future are uncertain, at best represented by ordinal probabilities, and often only by capricious hope for future innovation, fear inducing expectations of limited confidence, which evolutionary psychology implies is based on the demands of our hunter gatherer past. Deacon notes reduced uncertainty equates to information. on a
loan to a buyer for a fee. The investor agrees to
indemnify the bank against losses if the loan taker fails.
The key credit
derivative is the collateralized debt obligation (CDO is a: - Care delivery organization in health care.
- Collateralized debt obligation in finance. The idea is to transfer the credit risk rather than the loan itself. The bank enters into a CDS on the loans with a SPV. The CDO allows the bank to shift its loans outside the reach of regulators. The CDO also can distribute the risk unevenly by tranching. Equity is most at risk. Then any subordinated debt.
). The idea is to
transfer the credit risk, is an assessment of the likelihood of an independent problem occurring. It can be assigned an accurate probability since it is independent of other variables in the system. As such it is different from uncertainty.
rather than the loan itself.
The flexibility of a derivative contract ensured that each
investor could match their desired risk, is an assessment of the likelihood of an independent problem occurring. It can be assigned an accurate probability since it is independent of other variables in the system. As such it is different from uncertainty. and reward profile to a
tradable commodity. The underlying assets could
vary dramatically is when a factor is hard to measure because it is dependent on many interconnected agents and may be affected by infrastructure and evolved amplifiers. This is different from risk, although the two are deliberately conflated by ERISA. Keynes argued that most aspects of the future are uncertain, at best represented by ordinal probabilities, and often only by capricious hope for future innovation, fear inducing expectations of limited confidence, which evolutionary psychology implies is based on the demands of our hunter gatherer past. Deacon notes reduced uncertainty equates to information. : management of liabilities, interest
rates, currencies is legal tender which provides no interest payments to the holder. It is a central aspect of money and in CAS is an analog of a short term potential energy token such as the high energy phosphate bond of the base ATP. But the interaction of the geometric breeding and deaths of agents that perform actions and the linear increase in real resources, described by Turchin, results in the correspondence between energy and currency being complex and adaptive. ,
equities, emerging market local currency securities, credit
eventually including mortgages; unfortunately the liquidity
typically created a bubble in each new asset market which sucked
in investors and then burst. In 1995 Mexico experienced
the Tequila crisis. In 1997 the Asian century burst.
In 1998 Russia defaulted. In 2001 Argentina
collapsed. In 2001 the CDO (credit) market
collapsed.
The application of This page introduces the complex adaptive system (CAS) theory
frame. The theory provides an organizing framework that is
used by 'life.' It can be used to evaluate and rank models
that claim to describe our perceived reality. It catalogs
the laws and strategies which underpin the operation of systems
that are based on the interaction of emergent
agents. It highlights the
constraints that shape CAS and so predicts their form. A
proposal that does not conform is wrong.
John Holland's framework for representing complexity is
outlined. Links to other key aspects of CAS theory
discussed at the site are presented.
CAS theory
represents derivative contracts as a set of This page discusses the mechanisms and effects of emergence
underpinning any complex adaptive system (CAS). Physical forces and
constraints follow the rules of complexity. They generate
phenomena and support the indirect emergence of epiphenomena.
Flows of epiphenomena interact in events which support the
emergence of equilibrium and autonomous
entities. Autonomous entities enable evolution
to operate broadening the adjacent possible.
Key research is reviewed.
emergent niches. The investment
banks could use legal contracts to create:
This page reviews the strategy of setting up an arms race. At its
core this strategy depends on being able to alter, or take
advantage of an alteration in, the genome
or equivalent. The situation is illustrated with examples
from biology, high tech and politics.
Evolutionary amplifiers: the
Twinkies and hooks drove the counter party to act in the
banks best interest. Such an amplifier can be seen
emerging during the deployment of
slaves to operate cotton
plantations and their recapture as
share croppers, trapped by debt, after the brief
freedom following the
US civil war.
- A lack of transparency in the contracting and accounting
process which supported the banks sales
This page discusses the methods of avoiding traps. Genetic
selection and learning to avoid traps are reviewed.
traps.
This page discusses the benefits of bringing agents and resources to the
dynamically best connected region of a complex adaptive system (CAS).
Centralization by investment
banks with the over-the-counter trading.
- Leverage
Flows of different kinds are essential to the operation of
complex adaptive systems (CAS).
Example flows are outlined. Constraints on flows support
the emergence of the systems.
Examples of constraints are discussed.
control of flows: do
not open up a restricted position too quickly. The
investment banks provided access through derivative products
to investors Barriers are particular types of constraints on flows. They can enforce
separation of a network of agents allowing evolution to build
diversity. Examples of different types of barriers: physical
barriers, chemical
molecules can form membranes, probability based,
cell membranes can include controllable
channels, eukaryotes
leverage membranes, symbiosis, human emotions, chess, business; and
their effects are described.
restricted, by the
investor's government's regulatory structures, from access
to the high growth markets.
The agents in complex adaptive
systems (CAS) must model their
environment to respond effectively to it. Evolution's
schematic operators and Samuel
modeling together support the indirect recording of past
successes and their strategic use by the current agent to learn
how to succeed in the proximate environment.
Modeling: that supported the
development of derivative products.
Plans change in complex adaptive systems (CAS) due to the action of genetic
operations such as mutation, splitting and recombination.
The nature of the operations is described.
Genetic operations: at the
investment banks allowed the rapid development of new products.
- Bundled products. The US financial deregulation
allowed
This page reviews the strategy of bundling multiple products
within a single offer in a complex
adaptive system (CAS). The
mechanism is discussed with examples from biology and
business.
bundling of many
financial products with derivatives contracts.
- Benefits for the USA. The derivatives sales process
and contract structures could, and often did,
Rather than oppose the direct thrust of some environmental flow agents
can improve their effectiveness with indirect responses.
This page explains how agents are architected to do this and
discusses some examples of how it can be done.
indirectly, place the US
president and regulators at the most powerful value
chain position.
More broadly financial organizations can be viewed analogously
to mitochondria are the energy molecule generating production functions of eukaryotic cells. They are vestigial blue-green bacteria with their own DNA and infrastructure. Unlike stand-alone bacteria they also use the eukaryotic host DNA and infrastructure for some functions. The high energy molecules are nucleotides with a high energy phosphate bond. The most used high energy molecule is Adenosine-tri-phosphate. ,
with similarly powerful capabilities to:
- Support
Plans are interpreted and implemented by agents. This page
discusses the properties of agents in a complex adaptive system
(CAS).
It then presents examples of agents in different CAS. The
examples include a computer program where modeling and actions
are performed by software agents. These software agents
are aggregates.
The participation of agents in flows is introduced and some
implications of this are outlined.
action within the
larger systems they participate in by providing capital is the sum total nonhuman assets that can be owned and exchanged on some market according to Piketty. Capital includes: real property, financial capital and professional capital. It is not immutable instead depending on the state of the society within which it exists. It can be owned by governments (public capital) and private individuals (private capital). and Carl Menger argues that the market induced the emergence of
money based on the attractive features of precious metals.
He compares the potential for government edicts to create money
but sees them as lacking.
Following our summary of his arguments RSS frames his arguments from
the perspective of complex adaptive system (CAS) theory.
With two hundred years of additional knowledge we conclude that
precious metals are not as attractive as Menger asserts.
Government backed promissory notes are analogous to:
- Other evolved CAS forms of ubiquitous high energy
transaction intermediates and
- Schematic strategies that are proving optimal in
supporting survival and replication in the currently
accessible niches.
liquidity.
- To participate in the destruction of larger agents they
previously facilitated (Dec
2017).
Agents use sensors to detect events in their environment.
This page reviews how these events become signals associated
with beneficial responses in a complex adaptive system (CAS). CAS signals emerge from
the Darwinian information
model. Signals can indicate decision
summaries and level of uncertainty.
Signals
flowing between the system control structures and the
financial organizations ensure coordination of the This page describes the specialized codelets that provide
life-cycle and checkpoint capabilities for Smiley applications.
The codelets implement
a Shewhart cycle.
The structural schematic nature of the cycle is described.
Transcription factor
codelets operate the phase change controls.
How inhibitory agents are integrated into the cycle is described.
An application agent with management
and operational roles emerges.
The codelets and supporting functions are
included.
lifecycle of the larger entities are, according to Abbott, a class including people, families, corporations, hurricanes. They implement abstract designs and are demarcatable by their reduced entropy relative to their components. Rovelli notes entities are a collection of relations and events, but memory and our continuous process of anticipation, organizes the series of quantized interactions we perceive into an illusion of permanent objects flowing from past to future. Abbott identifies two types of entity: - At equilibrium entities,
- Autonomous entities, which can control how they are affected by outside forces;
that
transform capital into action.
It is clear that derivatives allow huge creativity, and To benefit from shifts in the environment agents must be flexible. Being
sensitive to environmental signals
agents who adjust strategic priorities can constrain their
competitors.
flexibility in what actions can be
induced.
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Business Physics Nature and nurture drive the business eco-system Human nature Emerging structure and dynamic forces of adaptation |
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integrating quality appropriate for each market |
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