Christmas, quants and the collapse of civilisations
There’s nothing like a week of indolence and overindulgence to clear out the old brain pipes. The holidays are an important opportunity to reconnect with scattered family members and friends – in the pre-Facebook, marketing-data-point, human-advertising-vector meaning of the word.
On my way back from the country, (via the excellent Smashing Telly) I entertained myself with this interview with Niall Ferguson – presenter of the Channel 4 series The Ascent of Money and author of a book of the same name:
One of the interesting things to come out of the interview is the fact that many of the senior executives that were or are running the major banks and other players involved in the sub-prime meltdown had no experience of a major financial crisis or property bubble. Certainly none of the modellers, quants and analysts who crunched the numbers and created the models upon which the subprime house of cards was built had ever experienced a serious financial meltdown. Even worse – their models specifically excluded data from such events as being extreme outliers. Is a black swan really black if it turns up reliably time and time again?
More broadly, this illustrates one of humankind’s greatest weaknesses – that every individual has to learn how the world works for themselves. Media to record the thoughts and experiences of others are vital, as is their transmission through education, but there’s no teacher better than direct experience. This is why we continually make the same mistakes, and founder on the same problems. History isn’t so much a circle as a spiral – we move forward in time, but seem to continually cycle through a similar series of events and problems.
Another thought that arises from the meltdown is the idea that the system of derivatives and securities became so complicated that few if anyone involved could understand it (though the smart ones – like Buffet – on seeing this, understood enough to stay the hell away from the entire mess).
What if you apply this idea to societies and civilisations? Do civilisations advance and become so complex that the people that comprise them no longer understand the critical factors that underpin the system, and lose control of it. This leads either directly to the civilisation’s collapse, or at least leaves the populace helpless to counter an incipient collapse.
If you look at the course of civilisations in the past, they too show a saw tooth of rise and collapse, though like the financial system, there seems to be a long-term rising trend. While you might assume that a global civilisation – like a global market – may be more diversified and able to survive smaller shocks. However, our increasingly global civilisation is also increasingly complex, while the people who make it up are as reliant as ever on education and experience to make sense of it all.
I wonder if the rise of pseudo-science, fundamentalist religions, and various virulent denialisms (from HIV/AIDS, to vaccines, to global warming) are a sign of people beginning to lose the sense of the system of the world? Whether failed by education, confounded by personal circumstance, preyed upon by ideologues, or simply baffled by the complexity of the modern world, these people have turned away from understanding the world as it is, and instead are trying to impose their own flawed rationalisations. It doesn’t matter whether it’s “the market will always rise” or “safe as houses” or “humans aren’t causing global climate change” or “the end times are upon us”, delusions lead only one way – over a cliff (or as Orwell had it – onto a battlefield to an encounter with a hard reality). And in a complex system like a market or a civilisation, the deluded often take a lot of other people with them.
One thing that isn’t (or shouldn’t be) in doubt is how vital science and education are. Only by understanding our world can we shape it. Science gives us a clear lens to see the world. Education ensures that the image the lens shows us is projected for us all to see. And that us needs to be everyone – not just an educated elite. Everyone must understand their circumstances of being on the Earth if they’re to make a meaningful difference to their lives and to the world.
