|
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 |
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 |
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
expanding them, extracting profits and then moving on as the
induced bubbles burst. Following Das's key points the
complex adaptive system (CAS)
aspects are highlighted.
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 |
|
|
Financial WMDs
Summary
Charles Ferguson argues that the US power structure has become
highly corrupt.
Ferguson identifies key events which contributed to the
transformation:
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 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.
;
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 is President Franklin Delano Roosevelt. He is notable for his contributions to the US CAS: - New Deal strategies including:
- Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.
- Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.
will appear.
Following our summary of his arguments, RSS is Rob's Strategy Studio comments on them framed by
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)
theory. Once the constraints are removed from CAS
amplifiers, it becomes advantageous to leverage the increased 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.
flows. And it is often
relatively damaging not to participate. Corruption and parasitism is a long term relationship between the parasite and its host where the resources of the host are utilized by the parasite without reciprocity. Often parasites include schematic adaptations allowing the parasite to use the hosts modeling and control systems to divert resources to them or improve their chance of reproduction: Toxoplasma gondii. can become
entrenched.
Predator Nation
In Charles Ferguson's book
'Predator Nation' he describes the This page reviews the inhibiting effect of the value delivery system on the
expression of new phenotypic
effects within an agent.
extended
phenotypic alignment around corporate America's
80 yearlong strategies to undermine Franklin Roosevelt's (FDR is President Franklin Delano Roosevelt. He is notable for his contributions to the US CAS: - New Deal strategies including:
- Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.
- Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.
) New Deal was FDR's political platform to help the poor, support the economy and reform the banking system. The architects included Henry Morgenthau, Harry Hopkins, and Frances Perkins, who leveraged Al Smith's social welfare reform program plan. The New Deal: - Included liberal legislation: Emergency Banking Relief Act, Banking Act, SSA, Securities Act, Securities Exchange Act, National Housing Act, NIRA, National Labor Relations Act, FLSA, RTAA, Wealth Tax Act;
- Used Presidential executive orders,
- Enhanced the role of federal government in promoting economic growth with programs supporting:
- Reformed trade policy with the RTAA.
- Blocked deflation by limiting economic competition with the NRA.
- Rural standard of living through electrification with the REA and TVA.
- Reduced unemployment with the WPA and CCC.
- Made taxation progressive through the Wealth Tax Act, capturing private wealth and allowing income to flow to the emergent middle class.
.
It eventually reached from the Republican Party through the
global financial network & into Democratic
administrations.
Opening
Pandora's Box: The era of deregulation, 1980-2000
From 1972 to 1982 America experienced major setbacks:
- The fall of South Vietnam in 1975
- Watergate hearings and resignation of President Nixon in
1974
- The Yom Kippur War in 1973, OPECs first oil embargo
causing a recession in the US.
- Destabilization of Iran, the fall of the Shah in 1979 and
an Islamic revolution
- OPEC tripling oil prices in 1979, leading to stagflation
in the US.
- Soviet Union invaded Afghanistan in 1979
In this period the US is the United States of America.
financial network was archaic. The network was separated
into parts in the 1930s, by Glass-Steagall Banking Act of 1933 prohibits commercial banks from engaging in the investment business. , to
constrain the 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.
infrastructure 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.
flows that enabled the great
depression. The parts included:
And Ferguson identified fundamental 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. shifts occurring
at this 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:
Ferguson
asserts by 1980 it was clear American 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. dominance was over, with:
- Productivity growth falling from 3% in the 1960s to 1% by
the 1970s.
- Radically better quality products from Japan: Cars, IBM
compatible mainframe computers, Semiconductors;
- Japan responded better to the oil shocks
But it was not obvious what should be done about it.
Ferguson argues the US should have: refocused on saving,
improved 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, information
technology, tougher antitrust policy, energy conservation and
greater understanding of other nations. But instead
President Reagan proposed a simple
reassuring alternative strategy: Lower taxes, reduce
government regulation, and strengthen the military; a strategy
that has constrained
all subsequent presidents.
Reagan accomplished many of his goals: Tax cuts and
deregulation. But Ferguson argues he:
- Did not cut government spending. A recovery was
built with deficits. Tax cuts did not pay for themselves as
claimed.
- Allowed corruption of politics with lobbyists and industry
executives running government agencies as their industries
increased spending on political donations, lobbying and
hiring of officials.
- Responded to the 2nd OPEC oil shock's inflation driven
collapse of the politically well-connected S&L is savings and loan association. These S&Ls were deregulated by the 1982 Garn-St. Germain act.
s by deregulation - Garn-St.
Germain of 1982 was signed by President Reagan in response to the 1979 oil shock inflation driven collapse of the US S&L industry. The S&Ls had previously only been allowed to offer depositors fixed rate loans on fixed length mortgages which could not adapt to the rapid inflation. The S&L depositors responded by switching to higher interest bearing money market funds. The 1982 act deregulated the savings and loan associations and allowed banks to provide adjustable-rate mortgage loans. act, allowing the S&Ls and their
investment bankers to run wild.
- By appointing S&L industry lobbyist, Richard Pratt
to head the regulator, the Federal Home Loan Bank Board,
the regulations against self-dealing were
weakened.
- Self-dealing allowed S&L owners to raise money with
federally insured CDs via Wall Street Brokers who were
repaid with fees. By leveraging other people's money
and/or credibility, fortunes could be made. Charles
Keating leveraged economist Alan Greenspan and Keating's
five congressmen: Alan Cranston, John Glenn, John McCain,
Donald Riegle, Dennis DeConcini; to sustain his
activities.
- Establishment of the Resolution Trust Corporation to
take over bankrupt is a legal status for an entity that cannot repay its creditor's loans. It holds creditor lawsuits in abeyance while the restructuring process proceeds to allow the entity to continue operations. It also has legal tools for forcing holdout creditors to accept repayments that are lower than the bond sale initially promised.
S&Ls and sell off their assets at a cost to tax payers
of $100 billion, instead of the $10 billion it would have
cost to just let them collapse initially without the
attempted recovery.
- American investment
banks eagerly participated in the S&L
deregulation providing funds in return for high
fees.
- Law firms similarly benefited: Jones,
Day, Reavis and Pogue; Paul, Weiss, Rifkind, and
Kaye Scholer.
- Accounting firms: Ernst & Young and Arthur Andersen
were later forced to pay high settlements for allowing
S&Ls to fake their books.
Junk
Bonds, Leveraged Buyouts, and the Rise of Predatory Investment
Banking
Michael Milken's research suggested previously unrated companies
could have debt underwritten. In 1977 Milken's employer
investment bank Drexel Burnham Lambert, started underwriting
'junk' bond issues by unrated companies. Ferguson writes
that in an environment where the stock market had fallen
severely many public companies were bargains, or could be made
attractive by replacing poor management teams, able to be
purchased with junk bonds:
- Nixon/Ford treasury is the department of the treasury. It is a federal government executive department created by Act of Congress in 1789 to manage government revenue. The Secretary of the Treasury is a Cabinet officer. With monetary policy devolved to the Federal Reserve, treasury manages fiscal policy. To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt.
secretary William Simon leveraged bonds to purchase and flip
Gibson Greeting Cards in 1982.
- Ted Forstmann's firm flipped 'Dr Pepper'.
- The junk bond amplifier induced a bubble which Milken and
others fed through fraud.
- Junk bonds enabled Green Mail, where boards would use junk
bonds to pay corporate
raiders is the pooling of commitments from fund investors, to: buy assets that are not publicly traded: companies, real estate, and debt; improve their acquisition's value and sell them again, returning the sale cash to the fund investors. Private equity companies gain competitive advantage from being lightly regulated, and wealth from the fees and special tax privileges. Private equity companies were initially corporate raiders.
to abandon their take over bids.
- Arbitrage bets on the take over battles were illegally
supported by insider details.
- Investment banking's traditional
partner based structure and capital base was replaced
by short term, one-time transaction fees. Investment
banks went public. The bankers were paid a percentage
of the immediate deal.
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, Junk bond financing
pushed up the price of stocks which made the initial leveraged
buyouts very profitable. Further rounds of junk-bond
financed LBOs were induced. A bubble lasted through the
1980s. Milken became a billionaire. Even prison and
fines did not impact his 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. .
Milken has since setup foundations which fund pro-business
academic economists 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. .
Financial
Innovation, Derivatives, and the 1987 Market Crash
Ferguson explains how the Wall Street boom aligned with growth
in institutional stock portfolios supported by computerized
portfolio management. A stock market bubble was
induced. Portfolio
insurance promised to allow a stock portfolio fund manager to protect against a market fall by buying put options that allow stocks in the portfolio to be sold when their floor is reached. Actually the 'insurer' short sells stock-index futures, since these make the exchange trades managable, for cash at the floor price and then sells the portfolio stocks that have been purchased from the insurance counter party to fully limit the risk. Unfortunately for the portfolio insurer, the market exchange was not obligated to buy the stocks in the counter parties portfolio at the price defined in the put and would not if it ran out of liquidity. And the buyers of the stock index futures would sell the underlying stocks to hedge their positions. The portfolio inurance products were enabled by software developed at UC Berkeley by finance professors Hayne Leland and Mark Rubinstein. Once a portfolio manager selected a desired price floor the computers would trade automatically accelerating futures selling as markets fell shifting those positions into cash. But once the hedge strategy was widely adopted it would result in a cascade of adaptive sales unless systemically regulated. If the real stock markets responded by additional selling, a cycle develops and reinforces the selling activity as happened on 'Black Monday', October 19th 1987 when over $50 billion of equity assets were covered by portfolio insurance resulting in a stream of sell orders on the portfolio assets required to lock in the hedges. was deployed to mitigate the risk. The
strategy failed but the crash in 1987 was eventually stabilized
by the Fed, under Chairman Alan Greenspan, with a flood of new
money. Ferguson concludes that regulation is required
since any leveraged financial instrument: 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
expanding them, extracting profits and then moving on as the
induced bubbles burst. Following Das's key points the
complex adaptive system (CAS)
aspects are highlighted.
Derivatives including 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.
; can cause cascades of
selling in a downturn.
Deregulation
Triumphant: The Clinton Administration
Ferguson argues that America's strong 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. performance in
the 1990s was due to: Internet-based innovation is the economic realization of invention and combinatorial exaptation. Keynes noted it provided the unquantifiable beneficial possibility that limits fear of uncertainty. Innovation operates across all CAS, being supported by genetic and cultural means. Creativity provides the mutation and recombination genetic operators for the cultural process. While highly innovative, monopolies: AT&T, IBM; usually have limited economic reach, constraining productivity. This explains the use of regulation, or even its threat, that can check their power and drive the creations across the economy. and
entrepreneurship, venture capital is venture capital, venture companies invest in startups with intangable assets
and start-up system; which generated higher 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. wide productivity is the efficiency with which an agent's selected strategy converts the inputs to an action into the resulting outputs. It is a complex capability of agents. It will depend on the agent having: time, motivation, focus, appropriate skills; the coherence of the participating collaborators, and a beneficial environment including the contribution of: standardization of inputs and outputs, infrastructure and evolutionary amplifiers. and
launched: Amazon,
eBay, Yahoo, Google,
Craigslist, Facebook and many smaller businesses. And he
notes that policy actions by the Clinton administration were
catalytic: Privatizing parts of the Internet, reforming the
telecommunications sector and constraining Microsoft.
But Ferguson notes the Clinton administration's changes
to the regulatory environment enabled the rapid
concentration of the industry, the financial bubble and
eventually the crash of 2008. And he asserts the
administration signalled, is an emergent capability which is used by cooperating agents to support coordination & rival agents to support control and dominance. In eukaryotic cells signalling is used extensively. A signal interacts with the exposed region of a receptor molecule inducing it to change shape to an activated form. Chains of enzymes interact with the activated receptor relaying, amplifying and responding to the signal to change the state of the cell. Many of the signalling pathways pass through the nuclear membrane and interact with the DNA to change its state. Enzymes sensitive to the changes induced in the DNA then start to operate generating actions including sending further signals. Cell signalling is reviewed by Helmreich. Signalling is a fundamental aspect of CAS theory and is discussed from the abstract CAS perspective in signals and sensors. In AWF the eukaryotic signalling architecture has been abstracted in a codelet based implementation. To be credible signals must be hard to fake. To be effective they must be easily detected by the target recipient. To be efficient they are low cost to produce and destroy.
their acquiescence of bad behavior by investment bankers.
Deregulation allowed the:
- Development of 'innovative' financial instruments that
supported the structuring of a securitization
value delivery system.
- Use of short term cash incentives for every agent in the
chain, encouraging conflicts of interest and removing
penalties for causing losses.
Taming
Mortgages but Creating a Monster
Larry
Fink's CMO is a: - Chief medical officer or a
- Care maintenance organization or in finance a
- Collateralized mortgage obligation. The collateralized mortgage obligation was invented by Larry Fink (BlackRock) and team while they were at First Boston in 1983. The key innovation was that the risk in these contracts was more predictable than in an MBS due to the presence of a trust that guaranteed payments to the bond holders. The risk was separated into tranches with different credit ratings and yields. The structure was used by the banking and securities companies to finance the subprime housing boom.
helped S&Ls is savings and loan association. These S&Ls were deregulated by the 1982 Garn-St. Germain act. to lend more money to
home buyers by allowing banks, such as First Boston, to buy the
prime rate mortgages from the S&Ls and sell them, packaged
in the CMOs, onto investors.
Ferguson argues there was a flaw in the securitization process,
since it disconnected the initial credit decisions from
subsequent credit risk and consequences. This could be
fixed by making sellers accept some of the impact of any
subsequent losses. But Ferguson explains the opposite
actually happened with the securitization
of sub-prime mortgages. And with hedge funds 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. trading the
ABS is an asset-backed security defined as backed by nonconforming loans rather than Fannie Mae or Freddie Mac quality loans used in original MBS or CMO. s the opacity and quality
of the securities fell. 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.
s,
issued by London based AIG
Financial
Products, were falsely assumed to offset the risk posed by
the expanding leverage and falling quality.
The Internet driven innovation is the economic realization of invention and combinatorial exaptation. Keynes noted it provided the unquantifiable beneficial possibility that limits fear of uncertainty. Innovation operates across all CAS, being supported by genetic and cultural means. Creativity provides the mutation and recombination genetic operators for the cultural process. While highly innovative, monopolies: AT&T, IBM; usually have limited economic reach, constraining productivity. This explains the use of regulation, or even its threat, that can check their power and drive the creations across the economy.
justified a spike in startup IPOs. But Ferguson notes only
Wall Street analysts' corrupt valuations allowed loss making
companies with no route to profitability equity investments when
they went public. And established companies used
fraudulent accounting, connections and donations to exploit the
Internet market bubble: Enron, WorldCom. Enron board
member Wendy Gramm, a former Chair of the CFTC is the commodity futures trading commission, the regulator of the futures and options markets, was created in 1974. It enforced the CEA for these commodities. , was also wife of Senator
Phil Gramm of Texas, the chairman of the Senate Banking
Committee.
Next wave
of Financial Deregulation
The Clinton administration, Congress (Newt Gingrich, Phil Gramm)
and 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.
(Alan Greenspan) drove financial deregulation with
new laws: HOEPA is the home ownership and equity protection act. It was developed by the Republican led Congress and signed ito law by President Clinton in 1994. , repeal
of Glass-Stegall Banking Act of 1933 prohibits commercial banks from engaging in the investment business. ,
CFMA is the commodity futures modernization act which constrained derivative market regulation, catalyzing the derivative fueled housing boom and 2008 recession. It was supported by Senator Phil Gramm and the Republican led Congress, Federal reserve Chairman Alan Greenspan and the Clinton Administration's Treasury Department led by Larry Summers. Former Treasury Secretary Robert Rubin also lobbied to over-rule Brooksley Born, the dissenting chair of the CFTC. President Clinton signed the act into law in 2000. , TRA of 1997 is the Tax Reform Act of 1997. President Clinton reduced several federal taxes and allowed the first $500,000 in gains from selling a house to be nominally tax free if it was rolled into a new house purchase. ; regulatory
changes: But none from the Fed to leverage HOEPA, CFTC is the commodity futures trading commission, the regulator of the futures and options markets, was created in 1974. It enforced the CEA for these commodities. 's Brooksley Born
overruled on the need for 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
expanding them, extracting profits and then moving on as the
induced bubbles burst. Following Das's key points the
complex adaptive system (CAS)
aspects are highlighted.
derivative
regulation by Treasury is the department of the treasury. It is a federal government executive department created by Act of Congress in 1789 to manage government revenue. The Secretary of the Treasury is a Cabinet officer. With monetary policy devolved to the Federal Reserve, treasury manages fiscal policy. To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt.
Secretary Rubin, Summers,
Greenspan and S.E.C. is the Securities and Exchange Commission. It was provided with power to regulate the securities industry by the Securities act and Securities Exchange act. chair
Levitt; and reduced
law enforcement. The weakening of protections was
not slowed by a concurrent wave of scandals involving dubious
derivatives losses by Gibson cards, Air products, P&G, Sandoz,
Orange County, Barings Bank, Daiwa Bank, Sumitomo Bank, LTCM was Long-Term Capital Management, a hedge fund that used Black-Scholes quantitative models to trade in derivatives. The hedge fund's bets failed during the Asian and Russian debt crisis of 1998 and it had to be rescued by the Federal Reserve. . The chief
architects of deregulation were well remunerated: Rubin left the
administration to join Citicorp
making $120 million there. Larry Summers eventually joined
D.E.
Shaw making $5.2 million from 2006 to 2008. Other
key people from the administration: Laura
Tyson, Tom Donilon, Franklin Raines, Michael Froman, David
Lipton; left to join banks, hedge funds 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. and GSE is a Government Sponsored Entity. Fannie Mae and Freddie Mac are examples. s.
After the 2008 financial crisis, AIGs
collapse and $10 trillion in losses Greenspan finally admitted
there had been "a flaw" in his model!
Structural
consolidation
Deregulation, technology and increased capitalization of
computerized operations drove broad financial consolidation,
creating huge financial conglomerates through mergers and
acquisitions.
By the time George W. Bush took office each segment of the US
financial network was dominated by an oligopoly of highly
collusive large firms:
- Investment
banking: Merrill
Lynch, Goldman
Sachs, Morgan
Stanley, Lehman
Brothers, Bear
Stearns; along with subsidiaries of Citigroup,
JPMorgan
Chase and Bank
of America and Europeans: Deutsche
Bank, UBS
and Credit
Suisse.
- Securities
insurance: MBIA,
Ambac;
and subsidiaries of AIG
[and Berkshire
Hathaway].
- Securities rating:
Moody's, Standard & Poor's, Fitch
- Corporate auditing: Arthur Andersen, Deloitte, Ernst &
Young, PwC, KPMG,
- Global derivative trading: JP Morgan Chase, Goldman Sachs
- Consumer credit catalyzes the purchase of homes and durable goods by spreading out the payment into a series and removing the need to obtain the entire purchase price in advance as described by Gordon. It is supported by an evolved amplifier, including: a clear benefit to the purchaser, a profit stream captured by the lender, enforceable contractual agreements, within a schematic regulatory framework. Taibbi describes the amplifier's architecture as deployed by Chase. Nineteenth century US rural purchases were credit based but with a large initial commitment. Cash purchases increased between 1890 and 1910. Between 1910 and 1915 cash purchasing shifted back to leveraging credit. By 1920 credit accounts were offered at department stores. Installment plans, provided by finance companies: GMAC; with minimal upfront commitments supported the purchase of costly durable items including automobiles.
cards: Visa, Mastercard, American Express
- Interstate banking: Bank of America, Citigroup, JP Morgan
Chase,
- Asset management: Fidelity,
Vanguard,
Alliance Capital, BlackRock,
Pimco,
Putnam;
They formed joint industry associations and leveraged shared
lobbying and law firms and academic experts.
Incentives
Ferguson notes a trend across the finance network. Prior
to the 1970s incentives were long term and demanded
caution. But then the nature of the incentives changed:
- The New York Stock exchange only allowed private
partnerships until 1971. Then it relaxed the rule,
just as investment
banks started to go public. Bankers started to
get annual bonuses and stock options and these were annual
and in cash by 2000. Senior bankers were no longer
required to place the majority of their own money at
risk.
- Mortgage securitization disconnected lenders from
repayments. It incented volume. And the opacity
of the products, the fee structures, and the compensations
encouraged bankers to sell junk.
- Until the 1970s rating agencies were paid by the buyers of
securities they rated. But by 2000 all three agencies
were paid by the issuers, and also rated the debt of the
banks themselves.
- Securities insurance companies adopted the same
compensation schemes as the bankers. Losses impacted
the company not the sales representatives.
- Hedge funds 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.
were
compensated by a 2% fee per year of assets managed and 20%
of all gains. Losses did not count encouraging the
managers to take risks with client money and accept ratings
uncritically.
- Ferguson asserts regulatory and policy incentives were
transformed after the Clinton administration limited
enforcement of the law for financial companies.
The Bubble,
Part one: Borrowing and lending in the 2000s
Ferguson argues that after the 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.
dot.com
bubble burst in 2000 the Bush administration used tax
cuts, federal deficits, a housing bubble, and consumer
spending based on second mortgage borrowing to engineer an
unsustainable recovery. He laments that there were massive
job losses in manufacturing and services where these could be
outsourced or automated. The profits from productivity is the efficiency with which an agent's selected strategy converts the inputs to an action into the resulting outputs. It is a complex capability of agents. It will depend on the agent having: time, motivation, focus, appropriate skills; the coherence of the participating collaborators, and a beneficial environment including the contribution of: standardization of inputs and outputs, infrastructure and evolutionary amplifiers. gains
were captured by the wealthiest 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.
families. Workers' wages stagnated or fell.
A
marriage of Convenience Produces a Bubble
Fed rate cuts, between 2000 and 2003, encouraged house prices to
rise allowing house owners to capture valuation increases as
loans and spend them on 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).
goods and second homes. This process expanded the 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. and helped 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.
build a bubble. Ferguson notes
that the situation was helped along by frauds against the
borrowers who were tricked into using overly expensive
loans.
From 2003 to mid-2007 $3 trillion of [ABS is an asset-backed security defined as backed by nonconforming loans rather than Fannie Mae or Freddie Mac quality loans used in original MBS or CMO. ] supported additional
expansion globally, leveraging mortgages issued by new lightly
regulated mortgage
originators. The ABS were repackaged into CDOs
by investment
banks to expose the high return/risk tranches for
investors. The 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.
s
were sweetened with securities
insurance and AAA ratings.
Ferguson notes that more than half this increase in lending
volume was subprime or equivalent and much of this was
defective, depending on people who were speculating, committing
fraud or being defrauded. The defective CDOs were driven Ponzi style through the
value chain. Ferguson writes of clear evidence that
many CEOs and senior executives lied to their investors,
auditors, regulators, and the public during and after the
bubble. And President Clinton's TRA of 1997 is the Tax Reform Act of 1997. President Clinton reduced several federal taxes and allowed the first $500,000 in gains from selling a house to be nominally tax free if it was rolled into a new house purchase. encouraged
flipping during the bubble. The powerful amplifier pulled
in house buyers and then trapped them, or worse in the
collapse.
Ferguson notes the massive fraud where realtors, loan brokers and mortgage
originators, sales practices and deceptive low initial
rate loan structures sustained with refinancing trapped
borrowers in unnecessarily expensive and sometimes coerced loan
agreements. Illegal immigrants were particularly
targets.
Ferguson explains that the FBI was aware of the epidemic of
mortgage fraud but they were focused on counterterrorism.
And he asserts the George W. Bush Administration deliberately
disempowered the investigative and enforcement branches of the SEC is the Securities and Exchange Commission. It was provided with power to regulate the securities industry by the Securities act and Securities Exchange act. . So mortgage lenders
and Wall
Street felt immune from criminal sanctions.
Ferguson asks why the mortgage banks & Wall Street tolerated
the frauds. He concludes subprime lending was where the
interest rates were highest, which allowed investment banks to
build products, their investors wanted, with more yield.
And this induced very crooked behaviors.
The Rise
of Subprime Mortgage Lenders and the Shadow Banking Sector
Most of the loan
originators financing mortgages used warehouse loans, is a loan extended from a large bank or Wall Street firm to a nonbank to originate mortgages. from
Wall
Street, based on short term credit. They included: New
Century, Ameriquest, Golden West Financial, Long Beach
Mortgage, WMC
and 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.
Countrywide. Ferguson
asserts the whole loan origination industry was totally
unethical. Most went bankrupt is a legal status for an entity that cannot repay its creditor's loans. It holds creditor lawsuits in abeyance while the restructuring process proceeds to allow the entity to continue operations. It also has legal tools for forcing holdout creditors to accept repayments that are lower than the bond sale initially promised.
destroying 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). but
their former executives and sales personnel remain wealthy 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. . Ferguson
laments that situation reoccurs throughout the book.
Ferguson notes the unscrupulous
manipulation of the buyers by the mortgage
VDS.
Once the bubble
began rewarding corrupt practices the GSE is a Government Sponsored Entity. Fannie Mae and Freddie Mac are examples. s: Fannie Mae is the coloquial name for the FNMA which is:
- The federal
national mortgage association, a GSE.
It was made a publically traded company by the HUD act of 1968 to remove
its debt from the federal budget.
- In 1970 FNMA was authorized to purchase conventional
mortgages. FHLMC was setup
to ensure competition for FNMA in this task.
- In 1981 FNMA issued its first designated MBS.
- In 1992 the Democratic Congress and President Bush
established HCDA which gave FNMA affordable housing goals
set annually by HUD with
Congressional approval.
- In 1999 the Clinton administration put pressure on FNMA
to expand loans to low and moderate income
borrowers. FNMA took on additional subprime
risk.
- In 2000 HUD placed anti-predatory lending rules on the
affordable housing goals, but these constraints were
dropped in 2004. In effect they just pushed mortgage
originators to Wall
Street finance.
- Once mortgage
originators started to use warehouse loans, the GSEs
lost visibility and control of origination.
- The GSEs purchased AAA mortgages from commercial
banks. Many of these classifications were fraudulent
leaving the GSEs with bad debt. In 2008 to maintain
the stability of the global economy
the George W. Bush administration seized the GSEs and
placed them in conservatorship under the FHFA, ensuring
they could not collapse.
- In 2010 FNMA's stock was delisted from the NYSE.
They still trade over-the-counter.
and Freddie Mac is the Federal home loan mortgage corporation (FHLMC), a GSE. , happily
participated, leveraging their This page discusses the benefits of bringing agents and resources to the
dynamically best connected region of a complex adaptive system (CAS).
central
position in the mortgage market.
Wall
Street makes a bubble and gives it to the world
Ferguson assesses how the Wall Street firms who purchased the
mortgages, securitized them and sold them on to investors could
have participated when they understood the toxic nature of the
AAA rated assets. He proposes five possibilities:
- The bonuses would make each
participant fabulously wealthy 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. .
- It is hard to fight a team or firm that is being hugely
successful, in terms of short term bonuses.
- Few people could see the systemic situation.
- Once you are participating and realize there are problems
identifying them will put you, your team and firm at risk of
destruction.
- Fraud was not punished. Ferguson explains that no
one on Wall Street lost out or was personally
punished. "The people responsible for the bubble are
still wealthy, out of jail, socially accepted, and either
retired or not, as they prefer. Even those who really
did lose something -- CEOs, eminences on boards of
directors, business unit heads, people such as Richard Fuld,
Robert Rubin, Angelo
Mozilo, Stan O'Neal, or Joseph Cassano -- are still
enormously wealthy as a result of having taken lots of cash
out during the bubble, and/or from their severance
payments."
Ferguson notes that the George W. Bush
administration and 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.
supported dangerous strategies by the banks. In 2004 the SEC is the Securities and Exchange Commission. It was provided with power to regulate the securities industry by the Securities act and Securities Exchange act. allowed the five largest
banks: Bear
Sterns, Lehman
Brothers, Merrill
Lynch, Goldman
Sachs and Morgan
Stanley; to calculate their own leverage limits.
These banks used massive leverage, so that when the underlying
assets declined by just 3% they went bankrupt is a legal status for an entity that cannot repay its creditor's loans. It holds creditor lawsuits in abeyance while the restructuring process proceeds to allow the entity to continue operations. It also has legal tools for forcing holdout creditors to accept repayments that are lower than the bond sale initially promised. unless rescued:
Goldman Sachs and Morgan Stanley. Other regulators reduced
their risk-analysis and enforcement staff. Ferguson lists
examples of the resulting frauds: Charles Schwab sued: BNP
Paribas, 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.
Countrywide, Bank
of America, Citicorp,
Credit
Suisse, Deutsche
Bank, Goldman
Sachs, Greenwich Capital, HSBC is a major financial services and banking corporation. It was originally the Hong Kong Shanghai Bank Corp. Taibi describes how HSBC setup a global process to hide accounts that were used for money laundering. ,
Wells Fargo, Morgan
Stanley, UBS;
having analyzed 75,144 loans with 45% failing one of their four
tests.
Ferguson describes serious issues he identified at: Bear
Stearns which securitized
$192 billion, Goldman
Sachs's GSAMP,
Morgan
Stanley which securitized $44
billion in one quarter of 2007; Ferguson notes that
his former colleague Laura Tyson, who was a board member of
Morgan Stanley, criticized the short sellers 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.
of Morgan
Stanley stock and said the banks compensation practices did not
contribute to its problems!
The Rating Agencies
Ferguson explains that the ratings agencies: Moody's Standard
& Poor's and Fitch; run an oligopoly. They encouraged
their entrenchment: the SEC recognizing their oligopoly, the NRSRO is nationally recognized statistical rating organizations: Moody's, Standard & Poor's and Fitch; , government pension
funds were required to invest in assets with a high NRSRO
rating. But the companies claimed that ratings were just
free speech 'opinions,' limiting the legal liabilities. If
their power was threatened they would propose adjusting or not
rating the assets owned by the combatant.
Additionally the incentives and rewards of the NRSRO are paid by
the product issuers. Ferguson writes a cynical partnership
ensued: corruption and exploitation; where the ratings agencies
issued AAA ratings, and collected fees, on failed junk.
They rated expanding volumes of: MBS is mortgage backed security, a bond backed by the monthly payments homeowners make on their residences. It was initially developed by Lew Ranieri at Salomon Brothers. ,
ABS is an asset-backed security defined as backed by nonconforming loans rather than Fannie Mae or Freddie Mac quality loans used in original MBS or CMO. , CDOs,
CLOs, auction-rate securities, synthetic securities; given high
ratings. Moody's became the most profitable company in the
Fortune 500. And all three agencies failed to change the
ratings of the investment banks as the banks products' core
assets turned to junk.
"Protection"
and Financial Weapons of Mass Destruction
In part the continued high ratings could be justified because of
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.
'insurance'.
Ferguson argues that AIG
was happy to sell its CDS and place itself at extreme risk
because:
- Complexity and opacity of the market
- CEO and board of AIG were picked by Maurice Greenberg to
be pliable and clueless.
- The CDS business was initially hugely profitable and the
same incentives were deployed at
AIG, encouraging risky practices. The CDS were issued
by London based AIG
Financial Products. They generated $8 billion
for AIG as well as $3.5 billion in cash bonuses for AIGFP by
2005.
Ferguson laments CDSs reappeared in 2012 in the European
sovereign debt crisis.
Financial Culture and Corporate Governance During the Bubble
Ferguson concludes that the cocoon around investment banking
executives: James Cayne, Richard Fuld, Stan O'Neal (Still on the
board of Alcoa), Robert Rubin; and their boards, the executives
huge 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. , perks and
power, and the incentive system made
them self-obsessed and indifferent to the fate of their
companies, employees and customers. Ferguson notes that
once Rubin moved from Treasury is the department of the treasury. It is a federal government executive department created by Act of Congress in 1789 to manage government revenue. The Secretary of the Treasury is a Cabinet officer. With monetary policy devolved to the Federal Reserve, treasury manages fiscal policy. To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt.
Secretary to vice chairman of Citigroup
he called Peter Fischer at Treasury, asking for help in
preventing Enron's credit rating downgrade. Citigroup was
a major creditor and Enron was about to go bankrupt is a legal status for an entity that cannot repay its creditor's loans. It holds creditor lawsuits in abeyance while the restructuring process proceeds to allow the entity to continue operations. It also has legal tools for forcing holdout creditors to accept repayments that are lower than the bond sale initially promised. .
Citigroup was later fined for helping Enron conceal its
losses. Rubin was paid $120 million while at
Citigroup. Ferguson notes that Rubin is, in 2012, co-chair
of the Council of Foreign Relations and a member of Harvard
Corporation and was active on the Obama transition team moving
in the same old unethical policymakers.
Ferguson explains there was one company whose leaders now aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group. Pinker notes the evolved pressure of social rivalry associating power with leadership. Saposky observes the disconnect between power hierarchies and wisdom in apes. John Adair developed a modern leadership methodology based on the three-circles model. did not display
such hubris. Goldman
Sachs were disciplined predators, who consequently made
money during the bubble and then from
its collapse. He concludes they also lied to
Congress in 2010.
All Fall
Down: Warnings, Predators, Crises, Responses
By 2002 prominent players were responding to the weaknesses
being generated by the bubble: William
Ackman 'shorted'
MBIA,
Magnetar
Tricadia
Harbinger
Capital George
Soros and John
Paulson bet against mortgage securities at the end of the
bubble together making over $25 billion and allowing Wall Street
to extend the bubble, Goldman
Sachs accurately timed the end of the bubble and made
money from the bubble and collapse, J.P.
Morgan Chase stayed out of the subprime market, Morgan
Stanley leveraged the bubble but miss-timed the end tactically are goals and actions which respond to the actions of the enemy in a combat, rather than focusing on ones own strategic direction. losing $9
billion, In 2004 Robert Gnaizda warned Alan Greenspan of
problems with toxic mortgages hoping for action via HOEPA is the home ownership and equity protection act. It was developed by the Republican led Congress and signed ito law by President Clinton in 1994. , The IMF is the International Monetary Fund developed as part of the Bretton Woods agreements to provide liquidity to national gold denominated reserve banks at times of stress in the global financial network - a shortage of a particular currency which was inhibiting trade; in support of a broader Bretton Woods framework designed so as to ensure that currencies did not become misaligned with one another, and were a fair representation of what things were worth. The IMF removed the need for nations to depend on private loans from commercial banks, such as Britain's dependence on J. P. Morgan during the 1920s and 30s. The agreement required each Bretton Woods signatory to provide a capital investment or 'quota' into the fund which would subsequently correspond to the amount that the country could borrow from the fund in times of financial stress. The top four countries and their quotas were set by IMF architect, Harry Dexter White, to match FDR's priorities: - US - $2.9 billion, an amount the FDR administration could transfer from Exchange Stabilization Fund without any need to ask for Congress for funds.
- UK - $1.45 billion
- USSR - slightly less than UK quota
- China - less than USSR.
's Rajan
warned central banks of toxic incentives inducing
a financial meltdown; while the system resisted the
undermining forces: MBIA got
the SEC is the Securities and Exchange Commission. It was provided with power to regulate the securities industry by the Securities act and Securities Exchange act. to investigate
Ackman, Greenspan ignored Gnaizda and Rajan while Larry
Summers attacked Rajan.
Amateur
Hour Meets Let Them Eat Cake: Your Tax Dollars at Work
Ferguson laments that 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.
Chair Bernanke and Treasury is the department of the treasury. It is a federal government executive department created by Act of Congress in 1789 to manage government revenue. The Secretary of the Treasury is a Cabinet officer. With monetary policy devolved to the Federal Reserve, treasury manages fiscal policy. To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt.
Secretary Paulson
denied the existence of a bubble or risk until too late.
Indeed he argues Paulson's Goldman
Sachs was part of the lobbying effort that drove: Repeal
of Glass-Steagall Banking Act of 1933 prohibits commercial banks from engaging in the investment business. ,
Banning
the regulation of OTC
derivatives is the commodity futures modernization act which constrained derivative market regulation, catalyzing the derivative fueled housing boom and 2008 recession. It was supported by Senator Phil Gramm and the Republican led Congress, Federal reserve Chairman Alan Greenspan and the Clinton Administration's Treasury Department led by Larry Summers. Former Treasury Secretary Robert Rubin also lobbied to over-rule Brooksley Born, the dissenting chair of the CFTC. President Clinton signed the act into law in 2000. , relaxing disclosure requirements for mortgage
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.
s in 2004, relaxing the SEC is the Securities and Exchange Commission. It was provided with power to regulate the securities industry by the Securities act and Securities Exchange act. 's leverage restrictions on
investment banking in 2004. And he notes Bernanke
continued Greenspan's refusal to regulate the mortgage industry
until 2007. Then the Federal Reserve drafted HOEPA is the home ownership and equity protection act. It was developed by the Republican led Congress and signed ito law by President Clinton in 1994. regulations which were
issued in mid-2008 by which time the crisis had developed.
Consequently Paulson and Bernanke had little regulatory support
(monitoring and constraints) to understand the developing
situation. And Ferguson explains the administration had
filled the upper ranks of the Treasury, SEC etc. with appointees
with little relevant experience necessary to understand the
global financial system's complexity and cope with the
crisis.
Ferguson accepts that once the crisis became acute, in September
2008, Paulson and Bernanke showed nerve and commitment.
But he is scathing about most participants: John
Thain; and notes that Hank Paulson and Ben Bernanke did
not adequately protect public money used to support the banks or
protect the home owners who were impacted by mortgage defaults,
foreclosures and unemployment.
Crime and Punishment: Banking and the Bubble as Criminal
Enterprises
Ferguson concludes that since the 1980s, much of the American
(and global) financial sector has become criminalized, creating
an industry culture is how we do and think about things, transmitted by non-genetic means as defined by Frans de Waal. CAS theory views cultures as operating via memetic schemata evolved by memetic operators to support a cultural superorganism. Evolutionary psychology asserts that human culture reflects adaptations generated while hunting and gathering. Dehaene views culture as essentially human, shaped by exaptations and reading, transmitted with support of the neuronal workspace and stabilized by neuronal recycling. Damasio notes prokaryotes and social insects have developed cultural social behaviors. Sapolsky argues that parents must show children how to transform their genetically derived capabilities into a culturally effective toolset. He is interested in the broad differences across cultures of: Life expectancy, GDP, Death in childbirth, Violence, Chronic bullying, Gender equality, Happiness, Response to cheating, Individualist or collectivist, Enforcing honor, Approach to hierarchy; illustrating how different a person's life will be depending on the culture where they are raised. Culture: - Is deployed during pregnancy & childhood, with parental mediation. Nutrients, immune messages and hormones all affect the prenatal brain. Hormones: Testosterone with anti-Mullerian hormone masculinizes the brain by entering target cells and after conversion to estrogen binding to intracellular estrogen receptors; have organizational effects producing lifelong changes. Parenting style typically produces adults who adopt the same approach. And mothering style can alter gene regulation in the fetus in ways that transfer epigenetically to future generations! PMS symptoms vary by culture.
- Is also significantly transmitted to children by their peers during play. So parents try to control their children's peer group.
- Is transmitted to children by their neighborhoods, tribes, nations etc.
- Influences the parenting style that is considered appropriate.
- Can transform dominance into honor. There are ecological correlates of adopting honor cultures. Parents in honor cultures are typically authoritarian.
- Is strongly adapted across a meta-ethnic frontier according to Turchin.
- Across Europe was shaped by the Carolingian empire.
- Can provide varying levels of support for innovation. Damasio suggests culture is influenced by feelings:
- As motives for intellectual creation: prompting
detection and diagnosis of homeostatic
deficiencies, identifying
desirable states worthy of creative effort.
- As monitors of the success and failure of cultural
instruments and practices
- As participants in the negotiation of adjustments
required by the cultural process over time
- Produces consciousness according to Dennet.
that
tolerates or even encourages systematic fraud. This
criminal behavior includes:
Ferguson describes the prosecutable crimes committed:
But like Taibbi he notes
there were no prosecutions that punished the players themselves!
Agents
of Pain: Unregulated Finance as a subtractive industry
Ferguson argues that the corrupt US financial network undermines
the financial health of the 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.
in two major ways:
- Destabilization due to financial leverage, volatility,
structural concentration, toxic incentives and information
management catalyze bubbles and crises along with
fraud. They spill over into the broader economy
destroying 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). .
- Parasitism is a long term relationship between the parasite and its host where the resources of the host are utilized by the parasite without reciprocity. Often parasites include schematic adaptations allowing the parasite to use the hosts modeling and control systems to divert resources to them or improve their chance of reproduction: Toxoplasma gondii. by the
financial sector based on: legal and tax loopholes,
constraints on information, barriers to market access, lack
of protection for victims, monopoly is a power relation within:
- A state in which a group has enough power to enforce its will on other citizens. If this is a central authority with a cohesive military, it can overpower other warlords and stabilize the society.
- An economy in which one business has enough share in a market segment to control margins to its advantage. An economic monopoly can be broadly beneficial: AT&T monopoly, US patent monopoly rights;
practices and
political subversion. Ferguson laments that the
opportunity encourages smart people to participate here
rather than in value generating activities.
Ferguson notes that the development of the financial sector has
occurred while real economic performance has fallen.
Financial gains in the financial sector are skewed towards the
top 1% of income earners. Once the financial sector is
removed from the US economy statistics real wages are seen to
have fallen.
He suggests the costs of financial deregulation have been huge:
- Americans observed the value of the homes increase between
2001 and 2005. They responded by leveraging the equity
to pay for imported consumer goods, ballooning the trade
deficit. After the crash of 2008 they still had the
debt (Nov
2016). And a lot of capital had been
miss-allocated to excess housing stock and associated
infrastructure services.
- The federal government spent hundreds of billions to
sustain the financial sector, automotive industry, and
supporting the unemployed.
- Deficits expanded due to Congressional constraints on
taxing. Consequently the
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 grew by 50%.
- The US poverty rate has expanded.
- The EU is European Union, the 1992 Maastricht Council of Ministers meeting agreed evolution of the ECSC & CAP cartels to include:
- A single market across the members' countries supporting the transformation of the ECSC. It maintained the CAP transfers assisting French farmers.
- A fixed currency 'snake' that allowed the ECSC to operate, binding the deutschmark to the other currencies of participating members: a mini Bretton Woods exchange rate mechanism; that became a single currency, the euro, managed by an independent ECB (based on the independent German Bundesbank); but tax gathering was allocated to the states whose leaders control the Council of Ministers and no effective mechanism was provided to reallocate revenues. This has left Germany with an advantage supported by the aggregate valuation of the euro and not having to flow tax revenues to the weaker economies of the south.
leveraged the
toxic financial products resulting in a sovereign debt
crisis which required massive stimulus spending to
counter. This increased EU debt loads between the
start of 2008 and 2012: Greece 110% became 170%, Italy 100%,
Ireland 70% became 100%, Spain 40% became 60% and Portugal
25% became 110%. This resulted in misery, rioting and
increased political extremism.
- China had to spend $500 billion stimulating its economy
once ten million workers were laid off as a result of the
2008 crash.
All this benefited 50,000 to 100,000 people at the top of the
financial services industry who became very wealthy 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. .
Ferguson concludes these results should dispel the fantasy that
an unregulated financial industry inevitably channels capital to
its best uses. And he notes it was just the latest of a 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
expanding them, extracting profits and then moving on as the
induced bubbles burst. Following Das's key points the
complex adaptive system (CAS)
aspects are highlighted.
series including: LTCM was Long-Term Capital Management, a hedge fund that used Black-Scholes quantitative models to trade in derivatives. The hedge fund's bets failed during the Asian and Russian debt crisis of 1998 and it had to be rescued by the Federal Reserve. and the 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.
Internet bubble. Then he looks
at the details to show the inherent issues:
- Rollover Roulette - After deregulation began investment
banks started to shift their financing from long to short
term because they could borrow short term debt much more
cheaply. But Ferguson notes that is much more risky
since any liquidity freeze would happen much more
rapidly. And they increased the amount, leverage and
shortness with time. By 2007 there was $1.7 trillion
of debt that turned over daily. Additionally they used
mark-to-market
accounting in the boom to boost estimated income and
bonus payments, until the assets value collapsed. And
while short term debt was secured with collateral posted by
the banks these safe assets shifted from being Treasury is the department of the treasury. It is a federal government executive department created by Act of Congress in 1789 to manage government revenue. The Secretary of the Treasury is a Cabinet officer. With monetary policy devolved to the Federal Reserve, treasury manages fiscal policy. To support funding of high cost investments: Disaster recovery, Wars, Famines; the treasury can issue debt instruments and manage the national debt.
bonds to
mortgage debt over this 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
period. During the fall of 2008 the short term debt
markets froze up to escape the obvious bubble. As the
investment banks struggled to rollover their debt, the money
market funds also froze. The Federal government had to
guarantee the money market funds to limit the cascade.
- Extreme leverage - was used to increase profits once it
was allowed by deregulation:
- Structural concentration - integration ensured the
financial services giants were too big to fail.
- Tight coupling - was induced by information technology
integrating financial operations across global
markets. Regulated banks and unregulated shadow banks
were thus linked together with 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
and mutual firms. This undermined the risk management
strategies deployed by the banks.
- Toxic incentives - Ferguson is disappointed that Hank
Paulson and Tim Geithner did not constrain the incentive system as a condition of
handing over $250 billion to save the financial system,
instead of teaching the bankers it was OK to take
risks.
Ferguson explains how modern
financial services are parasitic is a long term relationship between the parasite and its host where the resources of the host are utilized by the parasite without reciprocity. Often parasites include schematic adaptations allowing the parasite to use the hosts modeling and control systems to divert resources to them or improve their chance of reproduction: Toxoplasma gondii. :
- Portfolio management - Low cost indexed portfolios
typically outperform actively managed assets. Until
recently most pension
plans and endowments used active management to invest
their funds.
- High-Frequency trading - Ferguson describes James Simons's
Renaissance
Technologies strategies as a small tax on use of the
stock market with no social benefit or 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.
utility. Simon's success has made him very wealthy 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. so other large
traders are using the strategy making this approach the
majority of trading volume.
- Obscuring debt - Ferguson uses the example of Goldman
Sachs's Greek
currency swaps which obscured debt from Greece's books
and generated fees for Goldman.
- Tax avoidance - Ferguson objects to how: Weakened
enforcement, Tax and legal loopholes, Increasing inequality; have
focused attorneys and financial advisors on tax
avoidance. The effect has been for the 400 wealthiest
US families to pay far less tax.
- Private equity is the pooling of commitments from fund investors, to: buy assets that are not publicly traded: companies, real estate, and debt; improve their acquisition's value and sell them again, returning the sale cash to the fund investors. Private equity companies gain competitive advantage from being lightly regulated, and wealth from the fees and special tax privileges. Private equity companies were initially corporate raiders.
industry - Ferguson notes that private equity incomes are
astronomical. And he sees much of the industry's
success coming from hidden government subsidies and tax
loopholes, citing the example of CEO Mitt Romney's Bain
Capital.
The ivory tower
Ferguson describes the alignment of academia with the US
financial network. While he notes that:
Ferguson provides a breakdown of this highly influential
network. A network that he argues is incented to influence
legislation, public debate, regulation, prosecution,
class-action lawsuits, antitrust judgments and taxes to the
benefit of their sponsors. The network includes:
- Academic regulatory consulting firms: Berkeley
Research Group leverages Laura
D'Andrea Tyson, Analysis
Group leverages: Harvard's
economics chair John
Campbell, MIT is Massachusetts Institute of Technology.
health care economist Jonathan Gruber, Columbia
business
school dean Glenn
Hubbard; Brattle
Group, Criterion,
Compass
Lexecon and Charles
River Associates.
- The Money People: Columbia's
Glen
Hubbard who co-authored 'How
Capital Markets Enhance Economic Performance and
Facilitate Job Creation' and lobbies for reduced
taxes, Larry
Summers who Ferguson argues was brilliant and an
unapologetic champion of financial deregulation, Fredric
Mishkin who Ferguson criticizes for misleading
reports about Icelandic Banks, Richard Portes who
Ferguson criticizes for misleading reports about Icelandic
Banks, Laura
D'Andrea Tyson, Martin
Feldstein, Hal
Scott, John
Campbell; who are associated with academic, legal,
regulatory, and policy consulting
firms.
- Academic administrators and university presidents with
major involvement with financial services firms: Brown
University president Ruth Simmons, Columbia
University's Barnard College president Debora Spar,
Smith College's president Carl Christ, MIT is Massachusetts Institute of Technology. President Susan
Hockfield.
This cluster of people controls the incentives (scientific
papers) and reputations of the network of academics.
Ferguson argues that going against these influencers' [&
their sponsors'] positions will limit: Advancement, Grants,
Access to primary journals, Positions at think tanks etc.
Not surprisingly he suggests young academics focus their
research and its conclusions to limit these constraints.
This has widely skewed academic positions regarding: Executive
pay, Conflict-of-interest, Industrial organization, The
Financial crisis, Antitrust analysis; (Dec
2016)
America as a rigged
game
In 2000 the US is the United States of America. stood
pre-eminent with no significant competitors, a peace dividend
and low unemployment. But, Ferguson argues that over the
last 30 years of Democratic and Republican administrations the
US political-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.
system has lost its way. The dominant trend is severely
negative with declining: Economic
competitiveness, 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.
Basic fairness,
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, Politics; and
concentration of power in: Financial services, Energy,
Telecommunications, Media, Retailing, Agribusiness
and food; with no increase in efficiency. Small numbers of
households have gained most of America's financial 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. .
Ferguson suggests these trends have resulted in the US being
controlled by an amoral oligarchy that has progressively
corrupted the Federal government and the political system.
Better and better for the super-rich. For the bottom
hundred million people the situation is not nice.
Ferguson laments America's deterioration is now systemic and
structural. He sees both political parties focused on the
wealthy few. He notes the Obama administration adopted the
same personnel and policies used by the Bush and Clinton
administrations ensuring protection and privileges for the
financial sector, while ignoring the plight of the Americans
whose mortgages are still under water. In consequence
nothing has been done about addressing the long-term
decline.
Ferguson assumes America still has an open democratic society
and change is still possible when the majority decide they have
had enough. He can't believe that the 50,000 people in the
financial and political elite can hold the majority in
check. However he notes there are two difficult hurdles:
- The political parties and machinery have been high jacked
in a way that will be difficult to recapture. Both
parties have the same agenda and are looking to limit the
rise of other competitors or true reform efforts.
- The corruption goes far beyond the financial services
sector. There are allies in: Telecommunications,
Energy, Media,
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,
Agribusiness/food. And all these powerful groups
benefit from the status quo.
Ferguson presents a model
of national decline - a small company or nation develops a
superior capability and becomes enormously successful defeating
all rivals. But then it begins to decay from within and
collapses or is defeated by an aggressive new competitor.
He sees corruption as a complacent response to internal
threats. Complacency built from global dominance after
world war II. And corruption that feeds on its
self. Ferguson compares General Motors and Toyota in 1984
to illustrate the effects, but he notes the Japanese were twice
as productive in many industries: Steel, Computers. He
suggests other countries financed new entries into these
industries stimulating innovation is the economic realization of invention and combinatorial exaptation. Keynes noted it provided the unquantifiable beneficial possibility that limits fear of uncertainty. Innovation operates across all CAS, being supported by genetic and cultural means. Creativity provides the mutation and recombination genetic operators for the cultural process. While highly innovative, monopolies: AT&T, IBM; usually have limited economic reach, constraining productivity. This explains the use of regulation, or even its threat, that can check their power and drive the creations across the economy. .
Ferguson notes that the rise of China, India and other Asian
nations offered American industry the option to outsource jobs
and cost. He argues that should have caused the US to
improve 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 and skills within
its work force but the reverse occurred. Ferguson argues
that this failure to respond was due to a lack of changes
required in the US government. He asserts this is due to
corruption of government being a cheaper and easier way for
companies to protect and enhance their markets.
He laments that the Obama administration exemplified the
problematic situation. Not one reformer: Simon Johnson,
Nouriel Roubini, Paul Krugman, Sheila Bair, Joseph Stiglitz,
Jeffrey Sachs, Robert Gnaizda, Brooksley Born, Senator Carl
Levin; got a significant position. Obama went with Larry
Summers, Gene Sperling, Tim Geithner, Mark Patterson from
Goldman
Sachs, Gary Gensler from Goldman Sachs, Mary Shapiro, Ben
Bernanke, Eric
Holder & Lanny
Breuer from Covington,
Michael Froman & Jacob Lew from Citigroup,
Thomas Nides of Morgan
Stanley etc. The Obama administration resisted:
reform of corporate governance, breaking up of the largest
banks, closing legal loopholes; and when reform of financial
services finally arrived, Ferguson asserts, it was the weak and
hugely complicated Dodd-Frank is the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. Its titles include: - Financial Stability creates the FSOC and OFR.
- Orderly Liquidation Authority
- Section 619 is the Volcker Rule: prohibitions on proprietary trading and certain relationships.
- Transfer of Powers to the Comptroller, the FDIC, and the Fed
- Regulation of Advisers to Hedge Funds and Others - which updated the powers of the Investment Company Act.
- Insurance
- Improvements to Regulation
- Wall Street Transparency and Accountability
- Payment, Clearing and Settlement Supervision
- Investor Protections and Improvements to the Regulation of Securities
- Bureau of Consumer Financial Protection
- Federal Reserve System Provisions
- Improving Access to Mainstream Financial Institutions
- Pay It Back Act
- Mortgage Reform and Anti-Predatory Lending Act
- Miscellaneous Provisions
- Section 1256 Contracts
bill. And the Obama justice department showed 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.
no interest in prosecuting banks or
bankers.
Ferguson explains that the:
Ferguson concludes that America is developing a 'caste' system
where the circumstances of one's birth determine life
outcomes. He argues that improving educational
opportunities and achievement could turn this around but public
school finance being based on local property taxes constrains
any response. Inequality is amplified by the education
funding mechanism.
He laments that the incentives and corruption in the system are
self-reinforcing.
What should be done?
Ferguson lists his reform proposals:
- Improving
educational opportunity and quality
- Bring the financial sector under control
- Control the impact of money on US politics
- Reform the individual and corporate tax structures
- Strengthen antitrust and regulatory infrastructure
- Create a universally accessible, high speed broadband
Internet.
Ferguson sees a future where American elites fight to retain
their power but mass frustration and a major crisis will
undermine them. He judges Europe as unstable and
fragmented. But he concedes that frustration has so far
led to the rise of Michele Bachman, Rick Perry, Ron Paul, Herman
Cain, Newt Gingrich, and Sarah Palin. He concedes in 2012
that President Obama appears the least troubling of the
candidates for President. He hopes that somewhere in the US is the United States of America. is a courageous young leader now aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group. Pinker notes the evolved pressure of social rivalry associating power with leadership. Saposky observes the disconnect between power hierarchies and wisdom in apes. John Adair developed a modern leadership methodology based on the three-circles model. in the making,
someone who can persuade the American people to rise up and
throw the rascals out.
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 views the US nation state as a CAS. Ferguson argues
parasites have taken control
of this system. Parasitism is a long term relationship between the parasite and its host where the resources of the host are utilized by the parasite without reciprocity. Often parasites include schematic adaptations allowing the parasite to use the hosts modeling and control systems to divert resources to them or improve their chance of reproduction: Toxoplasma gondii.
is a general problem in CAS. When infected systems
persist, competition and internal responses will have limited
and stabilized the level of such activity to be bearable by the
system. But the transitions Ferguson describes are too
recent to ensure stability. America could:
- Shift 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. back to
the majority, as it has done previously during FDR is President Franklin Delano Roosevelt. He is notable for his contributions to the US CAS:
- New Deal strategies including:
- Lend-lease which pushed the US and Japan into World War 2 and helped the US to become the world's predominant military power.
- Bretton Woods's agreement which economically constrained any politically driven collapse of the world economy after the war and helped the US to become the world's predominant economic power.
's New Deal was FDR's political platform to help the poor, support the economy and reform the banking system. The architects included Henry Morgenthau, Harry Hopkins, and Frances Perkins, who leveraged Al Smith's social welfare reform program plan. The New Deal: - Included liberal legislation: Emergency Banking Relief Act, Banking Act, SSA, Securities Act, Securities Exchange Act, National Housing Act, NIRA, National Labor Relations Act, FLSA, RTAA, Wealth Tax Act;
- Used Presidential executive orders,
- Enhanced the role of federal government in promoting economic growth with programs supporting:
- Reformed trade policy with the RTAA.
- Blocked deflation by limiting economic competition with the NRA.
- Rural standard of living through electrification with the REA and TVA.
- Reduced unemployment with the WPA and CCC.
- Made taxation progressive through the Wealth Tax Act, capturing private wealth and allowing income to flow to the emergent middle class.
, and cohere
so that the US can control foreign threats, but it can
also
- Experience the
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.
cliodynamic replacement
of its current power elite with the leadership now aims to develop plans and strategies which ensure effective coordination to improve the common good of the in-group. Pinker notes the evolved pressure of social rivalry associating power with leadership. Saposky observes the disconnect between power hierarchies and wisdom in apes. John Adair developed a modern leadership methodology based on the three-circles model. of a
focused band of war-like
outsiders
- Become too weak to maintain its
control of the
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.
global economic
network or
- Suffer collapse
like the
UK after the second world war,
CAS This page reviews the implications of reproduction initially
generating a single initialized child cell. For
multi-cellular organisms this 'cell' must contain all the germ-line schematic
structures including for organelles and multi-generational epi-genetic
state. Any microbiome
is subsequently integrated during the innovative deployment of
this creative event. Organisms with skeletal
infrastructure cannot complete the process of creation of an
associated adult mind, until the proximate environment has been
sampled during development.
The mechanism and resulting strategic options are
discussed.
organisms utilize a development is a phase during the operation of a CAS agent. It allows for schematic strategies to be iteratively blended with environmental signals to solve the logistical issues of migrating newly built and transformed sub-agents. That is needed to achieve the adult configuration of the agent and optimize it for the proximate environment. Smiley includes examples of the developmental phase agents required in an emergent CAS. In situations where parents invest in the growth and memetic learning of their offspring the schematic grab bag can support optimizations to develop models, structures and actions to construct an adept adult. In humans, adolescence leverages neural plasticity, elder sibling advice and adult coaching to help prepare the deploying neuronal network and body to successfully compete. phase to
align the genetically defined system with the proximate
environment. The US financial network leverages 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. , in a flexible
process that aligns the current legal Plans emerge in complex adaptive
systems (CAS) to provide the
instructions that agents use to
perform actions. The component architecture and structure
of the plans is reviewed.
schematic
framework with the global environment. Private equity is the pooling of commitments from fund investors, to: buy assets that are not publicly traded: companies, real estate, and debt; improve their acquisition's value and sell them again, returning the sale cash to the fund investors. Private equity companies gain competitive advantage from being lightly regulated, and wealth from the fees and special tax privileges. Private equity companies were initially corporate raiders. (Jun
1016, Dec
2016, Dec
2017, Oct
2018), hedge funds 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.
and VC is venture capital, venture companies invest in startups with intangable assets s can dynamically extend
the strategic constraints framed by the legislators.
CAS require
significant regulation to operate effectively. They
are Plans emerge in complex adaptive
systems (CAS) to provide the
instructions that agents use to
perform actions. The component architecture and structure
of the plans is reviewed.
specified memetically and always
apply 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.
constraints to the memetic and
phenotypic is the system that results from the controlled expression of the genes. It is typically represented by a prokaryotic cell or the body of a multi-cell animal or plant. The point is that the genes provide the control surface and the abstract recipe that has been used to generate the cell.
processes. It should be no surprise that removing the
regulatory constraints causes dramatic amplification effects
including damaging positive feedback.
- By Jun
2017 financial regulators were seeing indications
that they needed to increase protections, but were
responding to political pressure to relax the regulations
setup after 2008. (Dec
2017)
Ferguson argues
that American ascendency was waning by the 1980s.
Certainly the operation of the global 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.
economic
network was allowing the This page reviews Christensen's disruption
of a complex adaptive system (CAS).
The mechanism is discussed with examples from biology and
business.
disruption
of American 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. 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 by Japanese and
Europeans. But President Carter's appointment of
Paul Volcker to the Federal Reserve ensured the execution of the
Warwick Lecture detailed Paul Volcker's strategies for sustaining the US centric post Second World War economic network, once the US became a deficit generator & Bretton Woods could not be sustained. Volcker's goal was to enable the US to use other country's surpluses to support the network's operation under US control, in place of the disappearing US dollar surplus. The strategies included: - Push American interest rates up much higher than those of other linked economies, attracting global free capital to the US dollar.
- Ensure that Wall Street offered a more lucrative market for investors than London, Frankfurt, Tokyo, or Paris.
- Support US business that was impacted by this costly high interest rate environment by supporting the reduction of wage costs. Once Volcker became chairman of the Federal Reserve in 1979, he executed the strategies.
's
strategies. And President Reagan responded
effectively to the immediate threat with the Plaza accord,
replacing Japanese sub-network based supplies with far less
competitive Chinese ones. 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
this 'fix' helped China build its export 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. so that by 2000 its
network of agents was disrupting the US agents. George W.
Bush attempted Reagan's solution, telling the Chinese to raise
the value of their currency. But China is a nuclear armed
nation which refused to submit. Subsequently the
derivative weapons the US trained on China backfired on the US
mortgage network.
The disruptive amplifier restructured under President Reagan
continued to disintermediate is the shift of operations from one network provider to another lower cost connected network provider. The first network provider leverages the cost benefits of the shift to increase its profitability but becomes disrupted. The lower cost network provider gains revenue flows, expertise and increases its active agents. Over time this disruptive shift will leave the higher cost network as a highly profitable shell, but the agents that performed the operations that migrated to the low cost network will be ejected from the network. For a company that may imply the costs of layoffs. For a state the ejected workers imply increased cost impacts and reduced revenue potential which the state are trading off for improved operating efficiency.
businesses which supported middle and working class jobs in the
US. A politically expedient fix for this stress was found
in the 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 amplifier that Reagan
and President George W. Bush both leveraged. It
substituted housing 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).
growth for stagnating wages. For a time the ploy
worked politically.
Ferguson is critical
of the management of US firms. Christensen's
analysis of This page reviews Christensen's disruption
of a complex adaptive system (CAS).
The mechanism is discussed with examples from biology and
business.
disruption shows
that it is a system property that will affect companies with
great management.
Ferguson makes clear that the core issue with
junk bond catalyzed financing was the lack of regulation,
including constraints on incentives. But to RSS is Rob's Strategy Studio other details are also key:
- The abandonment of the fixed exchange rate mechanisms of
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 by
President Nixon released the constraints on 'hot 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). flows' which
pushed power and 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.
capture to the private financial 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.
evolved
amplifier.
- The 1974 ERISA is the Employee Retirement Income Security Act of 1974 signed by President Ford. It regulated both pension and health benefit plans once an employer had established one. It setup the PBGC to support voluntary private defined benefit pension plans. Where self-funded health plans under ERISA are exempt from a state's insurance regulation there will be no solvency or consumer protection in place to support providers that do business with ERISA plans. States may consequently require provider networks that do business with employer self-insured ERISA plans be licensed as an insurance company (an HMO, medical insurance plan, preferred provider arrangement or general casualty insurer). ERISA section 404(a)(1)(B) defines the prudent person rule associating prudence with portfolio theory allowing pension funds to invest in stocks (index funds). The labor department's interpretation of an ERISA employer has been modified to support President Trump's executive order to enable more use of AHPs (Jan 2018).
Integration of pension fund assets with stock investing was
a powerful 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.
evolved amplifier
putting retirement funds in play.
- Another major problem was with the
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.
global
regulatory system which Reagan and Prime Minister
Thatcher were keen to dismantle. The UK had already
thrown off the constraints on its financial services with
the Big Bang. New York must have watched with despair
as its major investment banks setup subsidiaries in London
to leverage 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).
into 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
expanding them, extracting profits and then moving on as the
induced bubbles burst. Following Das's key points the
complex adaptive system (CAS)
aspects are highlighted.
derivative product offers.
- Robert
Sapolsky notes
that banking, unlike other professions, was found to
be undermine the morals provides rules for identifying right from wrong. It develops in stages with children using play to work out rules of appropriate behavior. Kohlberg's 1950s experiments using children led him to conclude moral judgement is a cognitive process that develops in three stages. Sapolsky raises issues with the framework: Its a model, It does not apply to other cultures, Intuition & emotion are as significant as cognition, Moral reasoning doesn't predict moral actions; and notes the capacity of the frontal cortex to regulate emotions and behavior is far more predictive. The marshmallow test, performed on three to six year olds, actually predicted their subsequent SAT scores at high school, social success and lack of aggression, and forty years on more PFC activation during a frontal task and a lower BMI! Jonathan Haidt argues people's moral decisions are rationalizations rather than using reasoning.
of its employees.
As Ferguson stresses, the Clinton Administration was
philosophically New
Democrat. Hence it brought together the Southern Democrat
views of the US nation with leverage of information
technology, Globalization and Wall Street funding. RSS
suggests the administration learned a lesson from President Reagan's
plunge protection team: Financial services 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
expanding them, extracting profits and then moving on as the
induced bubbles burst. Following Das's key points the
complex adaptive system (CAS)
aspects are highlighted.
provide powerful weapons in the
competition with other nations. The administration could
partner with Wall Street to capture the resources of other
nations while weakening them.
Ferguson describes a simple
life cycle of a nation state. RSS views the 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.
cliodynamic model as more
predictive. Each new Federal administration brings a new
'generation' of experiences which often means that awareness of
prior traps is forgotten over three generations and so mistakes
are repeated. After LBJ is President Lyndon Baines Johnson.
lost the South to the Democratic Party it was likely that
electoral defeat would embolden external members of the former
Democratic political elite to fight their way into power.
When the 'New Democrats' captured control of the central
democratic party processes for developing a presidential
campaign they cleared the way for a new set of 'southern' memes
expressed through, then Arkansas governor, Bill Clinton.
President Clinton responded to the collapse of the Soviet Union
by reducing the funding for the military-industrial
complex. At a deeper level, Democrats and Republicans
could redirect agency from combating major external threats to
fighting internal ones. To RSS this process is analogous
to the collapse of external threats to the Roman Republic, which
enabled the warrior aristocracy to focus inwards, transforming
the republic into the Roman Empire, as described by Mary Beard.
Ferguson notes academics supporting
the corruption of the state. His focus is on
academic links to the financial network, but public health is the proactive planning, coordination and execution of strategies to improve and safeguard the wellbeing of the public. Its global situation is discussed in The Great Escape by Deaton. Public health in the US is coordinated by the PHS federally but is mainly executed at the state and local levels. Public health includes: - Awareness campaigns about health threatening activities including: Smoking, Over-eating, Alcohol consumption, Contamination with poisons: lead; Joint damage from over-exercise;
- Research, monitoring and control of: disease agents, reservoir and amplifier hosts, spillover and other processes, and vectors; by agencies including the CDC.
- Monitoring of the public's health by institutes including the NIH. This includes screening for cancer & heart disease.
- Development, deployment and maintenance of infrastructure including: sewers, water plants and pipes.
- Development, deployment and maintenance of vaccination strategies.
- Development, deployment and maintenance of fluoridation.
- Development, deployment and maintenance of family planning services.
- Regulation and constraint of foods, drugs and devices by agencies including the FDA.
is also
of value
if it down plays the problems and costs of goods and services
including: processed foods, beverages, alcohol, and
cigarettes.
Ferguson proposes goals that
will turn back the parasitism is a long term relationship between the parasite and its host where the resources of the host are utilized by the parasite without reciprocity. Often parasites include schematic adaptations allowing the parasite to use the hosts modeling and control systems to divert resources to them or improve their chance of reproduction: Toxoplasma gondii.
he describes. Catalytic, an infrastructure amplifier. methods to
improve educational opportunity have been 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?
demonstrated by Sal Khan.
Charles Ferguson's Predator Nation describes the alignment of
the major US political parties with Wall Street. This
alignment has supported the development of a powerful financial
services industry. The resulting inequality and corruption
are highlighted in his insightful but disturbing book.
.
 Politics, Economics & Evolutionary Psychology |
Business Physics Nature and nurture drive the business eco-system Human nature Emerging structure and dynamic forces of adaptation |
 |
integrating quality appropriate for each market |
|
 |