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Musings Report 2018-46 11-17-18 Uncertainty, Instability, Crisis, Breakdown--or a Better Destiny (my new book)
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Uncertainty, Instability, Crisis, Breakdown--or a Better Destiny (my new book)
We all sense the global economy and geopolitical order feel increasingly precarious. Uncertainty / insecurity can lead to instability which leads to crisis which leads to either resolution or breakdown.
The conventional view of this process is that better policies and/or leadership can right the ship, and so the debate centers around policies and leaders.
In my new book, Pathfinding Our Destiny: Preventing the Imminent Fall of Our Democratic Republic, I take a different approach, one that focuses on systems and the principles of natural selection / adaptation.
The core idea here is all complex systems, natural and human, operate by the same general rules: changes generate feedback, organisms and organizations optimize capabilities that enhance their success, and so on.
Not all crises are merely matters of policy and leadership. What if the crisis is the result of the system breaking down or failing due to being the wrong kind of system?
That's the kind of crisis that's unfolding in real time: the dominant centralized systems of our socio-political-economic order are failing on the most basic systemic level.
In other words, it's the structure of centralized hierarchies that are the source of crisis and breakdown, not the policies or leadership.
This means we need an entirely new organizational structure, one that optimizes adaptability and resilience as the pace of change gathers momentum.
I titled this book Pathfinding Our Destiny because we're exploring new territory: the old conceptual solutions have failed because they all share the same systemic points of failure.
I'm offering the book to you, my Inner Circle, at a 47% discount on the digital/Kindle edition ($2.99, compared to the retail price $6.95), and 47% discount on the print edition ($6.95, compared to the retail price $12.95).
The print edition is still in review but will ship early next week. These discounts end Wednesday, November 21.
I've prepared a free PDF of the first section to give you a taste of the book:
Here is the book's Introduction:
The Problem
The United States is on the crumbling precipice between linear, orderly change and non-linear, disorderly change.
When a change in output is not proportional to the change in input, this is called a non-linear system. In linear change, an input of 1 that yields an output of 2 continues to yield an output of 2 until the input increases to 1.5, at which point the output increases to 3. In non-linear change, an input of 1 yields an output of 2, then an output of 4, then of 8, then of 16 and so on in a rapid snowballing. In the first case, moving 1 unit of snow clears a modest path. In the second case, moving 1 unit of snow soon unleashes an avalanche.
Our economic and political structures are optimized for linear, gradual adjustments. In the non-linear era we are now entering, this means they are effectively designed to fail.
To prevent the fall of United States and other democratic republics, we must radically transform the structure of our current economy and society. This requires a comprehensive strategy, what some call a National Strategy (or in previous eras, a Grand Strategy). In the past, such plans were drawn up and put into action by political elites, and millions of citizens obeyed the dictates of authority. This is the model that has been dominant not just in the modern era but for imperial eras stretching back thousands of years.
In the non-linear era just ahead, the citizens will have to lead the elites, who as always will cling to their concentrated wealth and power even as the era demands the adaptability and resilience of decentralized power and capital.
The Current Strategy
The implicit assumption underpinning America’s current state-market economy is that everyone’s best interests are served by a winners-take-most market built on advocating for state favors—in effect, a state-cartel system that has greatly enriched the few at the expense of the many. (The vast majority of the past decade’s gains in wealth and income have flowed to the top 5%, and within that class, most of the gains have flowed to the top 0.1% of households.)
Markets only factor in real-time demand, supply and price, and ignore everything beyond this narrow calculation: lifecycle and social costs, externalities, etc. Markets have no mechanisms for pricing value that isn’t based on price alone (for example, resilience, positive social roles, self-reliance, etc.) The implicit strategy of markets is to maximize personal gain, make decisions based solely on price, and ignore everything that isn’t factored into price.
Everything valued by other metrics is ignored, devalued or destroyed by this strategy-of-no-strategy. Biological diversity, for example, isn’t included in the price discovered by markets because markets have no mechanism for valuing biological diversity. In the logic of the market, an ecosystem that’s been destroyed by profiteering is of no consequence; the market will provide a substitute for whatever is no longer available.
According to this logic, the market solution to the destruction of air quality is to sell cans of fresh air, a recent innovation in heavily polluted cities in China. That what’s truly valuable has been destroyed doesn’t register in the logic of winner-take-most, price-is all-that-counts markets. Those claiming markets solve all problems are willfully blind to the perverse deficiencies of markets’ price discovery mechanisms.
As for lobbying the state to maximize private gains: this pay-to-play institutionalizes perverse incentives and regulatory capture, a process that’s already reduced our democracy to a self-serving oligarchy.
Ill-defined national interests guide a foreign policy of military force and commercial interests that lacks strategic coherence, predictably leading to catastrophically misguided policies that have enriched the well-connected few at the expense of the many.
Markets and advocating for state favors are not substitutes for strategy. Markets and lobbying must be guided by incentives and goals established by an explicit strategy that serves sustainability, adaptability and the common good. Anything less dooms us to decay and collapse as non-linear storms arise and envelope the world.
The Required Strategy
To pathfind an alternative destiny, we must create new structures optimized for resilience and adaptability, not for centralized wealth and control. Rather than rely on the dysfunctional incoherence of narrow self-interest and force, we need a national strategy based on evolutionary principles and systems dynamics—i.e. a system based on an understanding of the structural differences between systems doomed to collapse and those with the flexibility to adapt successfully to non-linear disruption.
This is neither an easy subject nor a breezy read. While the basic ideas are simple, understanding how they manifest in complex systems can be challenging. It may also be difficult for many of you to embrace the disconcerting and possibly bewildering idea that the entire status quo is untenable and will disintegrate not from policy errors or poor leadership but simply as a consequence of its current structure.
Thank you for your support the past two years that it took me to write this book. I hope it adds value to your world view and decision-making in the years ahead.
Highlights of the Blog This Past Week
The Political Rebellion Gathers Momentum 11/17/18
Does Any of This Make Sense? 11/16/18
The Implicit Desperation of China's "Social Credit" System 11/14/18
Understanding the Global Recession of 2019 11/12/18
Best Thing That Happened To Me This Week
My new book is finally available to you.
Musings on the Economy: Risk and Hedges
A number of major hedge funds suffered spectacular losses over the past month as oil plummeted and natural gas soared. Apparently this "smart money" was long oil and short natty gas. The trade went against them and they had to buy natty, i.e. cover their short positions, which sent natty higher, increasing the losses of those forced to cover.
The whole idea of a "hedge" is that you buy some protection against being wrong about an investment (i.e. a gamble). But it's not always easy to find a hedge, or one that's big enough to truly compensate significant losses.
The vast majority of participants (owners of assets) don't have any hedge at all: if the asset they own drops in value, they don't own some other asset which rises in value as a result.
Some assets are fairly easy to hedge--stocks, for example, can generally be hedged by buying options that rise in value if the stock drops. But options are expensive, and so few players maintain a full hedge.
Other assets such as real estate are essentially impossible to hedge, though very sophisticated traders might be able to construct an instrument that rises in value as mortgages default.
The one defense against declines in asset prices available to everyone is to not own the asset at all.
From Left Field
Artificial Intelligence & Images of the Real World -- humans have to tag all those images...
The Facebook "Cleaners":"I've seen hundreds of beheadings".... yikes...
How to Avoid Going Broke After Making $650 Million -- Johnny Depp seems to have blown his Pirate fortune...
Capitalism Is Killing Patients... And Their Physicians -- more like state-cartel extortion is killing everyone...
Scientists are trying to bottle solar energy and turn it into liquid fuel (via Chad D.) "A solar thermal fuel is like a rechargeable battery, but instead of electricity you put sunlight in and get heat out."
These Men Ate Poison So You Could Have the FDA
Wonder How Long You'll Live? There's One Surprising Factor We Haven't Thought About (via Steve K.) -- it matters who you marry....
Have Americans become too fragile for their own good?
Beyond trigger warnings and safe spaces lies an entire population that espouses victimhood in all walks of life.
Why the Industrial Revolution didn’t happen in China (via Iris K.) -- well worth a read....
China’s ‘Giant Infants’ -- almost nothing in the western media about this trend, probably because it reflects so poorly on China... "giant infants" seems to be a global phenomenon....
Taking the train in China is like stepping into an episode of ‘Black Mirror’ (via GFB)
Almost all of the Earth’s land and ocean wilderness has disappeared-- and few even notice...
The Earth is in a death spiral. It will take radical action to save us (George Monbiot)
"Living in the lap of luxury isn't bad except that you never know when luxury is going to stand up." Orson Welles
Thanks for reading--
charles |
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