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Friday, November 27, 2009

The Life And Times Of Your Average Paradigm

Systems are in constant state of flux, they change all of the time, over time, and even when they don't or can't, the environment around them changes in response to their behavior or simple presence.

Systems evolve. The super-systems in which they live, evolve. It's what happens, it is the only thing that can happen. Stuff constantly adjusts its behavior in response to the stuff around it. And things can not help but mess with the things near them. Change is inevitable. But more than that, change has pattern that can be teased out, measured and described.

These patterns are generalizable and can be found in all systems regardless of domain. All systems evolve. All evolution is similar. What Darwin described in biology, once generalized, can just as accurately describe the interaction of gases or the layered persistent structure of ocean currents, or the way I came to these thoughts and decided to write them down.

An interesting aspect of systems is the way they are made up of layers of subsystems each bound by unique structural and behavioral rules, and all of this can exist simultaneously across many dimensions. These 'layered grammars' are perhaps easiest to see in language, where symbols are assembled in ever more complex aggregates (phonemes, words, phrases, sentences, paragraphs, themes, sections, volumes, collections, etc.), each governed by its own rules of construction.  Of course an utterance can be parsed by the layered rules of symbolic grammar (as above) or any other set of layered grammars… take for instance it's semantics or meaning.

But what interests me today is the life span of a system. Though it is problematic to do so, it is often useful to define, at least loosely, the beginning, middle, and end of a system's life span, the arch of its development through time. Individual humans have life spans of course, and from a more distant vantage, so too does a culture, and though the arch of of these classifications hasn't run its course, the human species. From ever wider vantages, one can talk of the stacked life span of hominids, great apes, primates, mammals, chordates, multi-celled animals, eukaryotes, and biota itself.

What interests me here are the patterns can be teased from any life span? More to the point, the patterns that are universal across all life spans. What, for example, is there that can be accurately, and predictively said, of the difference between the first half and the second half of any life span? What is it about the beginning of an individual human's life that is similar to the beginning of the life span of the human species or the beginning of the life span of life itself?

A reasonably robust set of these life span meta-patterns might work well as a way to better define the boundaries that give meaning to the most general concept; "system" ("category", or "thing").

But what I find most valuable about this strategy, is the possibility of predicting the relative age of a system without ever having witnessed the full arch of a life span, as example. Is the system of focus in its infancy, is it a teenager, or is it middle aged, old, or nearly dead? Are there reliable parameters that can be mapped over a system to help us determine such things? I am convinced there are. My confidence in this guess stems from the dramatic symmetries that have been exposed over the past century and a half in the fields of information theory, thermodynamics, classical physics, and quantum dynamics, linguistics, and logic. What this work has exposed is equivalence transforms that show causal connections between energy, mass, time and distance, and importantly, information. This overarching symmetry hints at symmetries in systems themselves and in stacks of systems, and the way systems change through time.

It is this knowledge these profound symmetries, uniting such apparently separate systems, that best describes the most important contributions of the last century of scientific exploration. Wielding this knowledge, we can use the same language and logical tools to examine any system, be it physical, behavioral, or descriptive, or cognitive.

The slippery and ghostly similarities we have noticed across domains, the ones we previously chocked up to metaphor, have been shown in fact to be causal and real (and we have the math to prove it!).

It is frustrating, that the topics I am most interested in, require the assembly of so much preliminary conceptual scaffolding. All these words, and I haven't even gotten to my main point. Here goes.

I talk often of what I call "productivity paradigms". They are ethereal and mercurial economic entities defined by some factor that gives rise to previously unachievable levels of the value of an average hour of labor.

As systems, productivity paradigms should avail themselves to the kinds of 'life span' parsing we would apply to any system. So, we can ask things like: can we determine the relative age of a given productivity paradigm?
And, is it possible to can we know this from the rising or falling rate of growth resulting from that paradigm?

Are these questions, addressed as I have, to a subset of systems, or are all systems productivity paradigms, making my questions universally applicable? Is there such a thing as a non-productivity paradigm? Can a system ever become a system if it doesn't follow some sort of life-span arch? Is productivity, as I suspect it is, a perquisite for the existence and persistence of a system?

Lets assume it is. Now what? How can we extend this assumption in order to acquire something salient to say about a system?

Wednesday, November 18, 2009

Productivity Stalemate: Post Industrial World Caught With Its Pants Down

If a hundred trillion dollars* falls down in a forest, and nobody has anything to spend it on, does it make a sound?

In what might be the most embarrassing moment ever completely ignored, the post-industrial west is missing the greatest opportunity… ever.

It snuck up on us, yes. But that doesn't make it any less embarrassing. It still hasn't been acknowledged, sure. But that doesn't mean it hasn't (isn't) happening. What happened? Well, while we weren't looking, the so called second and third world made some money, a lot of money, and they came running to the west to spend it. Why wouldn't they? We're the experts. We know how to put big money to work… right?

Unfortunately, and at the same time, we, the west, the so-called 'first world', well, we slammed into what I call the productivity wall. Sure we were (are) way ahead of the rest of the world. But we aren't moving forward, and haven't for about 15 years. The lack of upward motion has caused the unthinkable to happen – we ran out of things to productively spend money on. We don't have reasonable investments in which to sink new capital. We ran out of ways to ingage new forms of production at the pace demanded by all of the new capital finding its way into our securities and investment markets. It's as if we never in our wildest dreams anticipated the second and third world adding significantly to the global capital pool. We outsourced. We ran up unheard of trade imbalances. We sold bonds by the trillions to China. The world changed. It was right in front of our noses, yet we never saw it, never bothered to model its implications to our increasingly outmoded economic models.

Pants well down. The whole world watching. Just standing here. Clueless.

Money flowing in. Unprecedented quantities of new capital. Accelerating. And here we sit – without any 'shovel ready' places to invest it.

What? you ask. How can this be? Surely there are people who would love to use someone else's money to build something and sell it. Right? And yes, the demand for capital is always there. There is always someone with some big plan and a need to go out an buy some parts, a factory, and the right people to run it. But what if nobody on the other end of the assembly line has any money to buy that new thing you just spent capital to produce? Or more to the point, what if there is nothing about the resultant goods or services that catalyzes the production of other goods and services? What if the only remaining places to spend capital don't make it easier and cheaper and faster to make other things. What if in effect, the existence of your factory and the widgets it produces, doesn't result in any real growth in consumption or wealth? What if you just spent good money to make things that the economy simply can not afford to purchase?

Unthinkable. Or is it? The value of currency, the purchasing power of the people who earn it, these are determined by productivity. Productivity is just the value of an average hour of labor. Productivity changes over time. Usually it increases. Sometimes, as when a new and powerful infrastructure is established – mechanized farming, electricity, telephonic communication, global integrated transportation – it increases in grand leaps. In between these technology driven epochs of growth, there are periods in which the full landscape of opportunity within that domain are exploited. Growth during these in-paradigm epochs slows as the possibilities made possible by that advancement approach its limits.

We in the west have not jumped productivity paradigms in a while. We are running out of productive ways of exploiting the current set of infra-structural advantages. As a result, an odd thing happens, an unintuitive thing happens, we find that throwing more fuel in the economic fire no longer buys greater productivity.

Sure, we can continue to spew out ever greater quantities of goods and services, but if things we spew do not increase the value of that all important average hour of labor, there will not be more money available to consume to our new levels of production.

Production does not equal productivity. Consumption does not equal productivity. Production plus consumption does not equal productivity. Productivity, the value of that average hour of labor, is determined by the effectiveness of the infrastructure.

The classic example of a productivity jump is the introduction of mechanized farming. Mechanized farming has allowed such yield (per hour of labor) that we can afford to feed all of the people with less than 4 percent of us spending our labor on food production. This single fact freed up the remaining 96 percent of us to do other things.

Unfortunately, just as the rest of the world got to the point where it could contribute capital fuel to our economic engine, we ran out of ways to put that capital to productive use.

Holly crap! China and Brazil and India and the Philippines and, and, and, they all have some extra money to pour into global capital markets, and just when they do, we run out of productive ways to spend it!

Has any greater opportunity ever presented itself to a people unprepared to take advantage of it?

So what did the west do instead? We faked it. We gladly accepted the money and spent it on crazy layered real estate loan stocks and layered stock schemes that were nothing but new plays on the same age-old shyster speculation scheme that has substituted for capital investment every time real productivity is elusive. And the real estate boondoggle isn't the first of our fakes. We started with energy deregulation and when the inevitable crash happened there, we moved quickly on to the dot-com boondoggle, and when that crashed, we faked it again with real estate and "mortgage backed securities". And now that this crash caused a global economic shock wave leaving double digit unemployment in the strongest economies and a fallout into the third world we are only now beginning to acknowledge.

And how did we respond to the mortgage securities crash? By faking it again of course. We said, "Sure we acted like shysters, but that was the past, we have changed, give us your money and we will spend it wisely this time!" And what wise thing did we do with that money? Did we go looking for the root of the problem? Did we attempt a wholesale rethinking and scientific understanding of the economy and what makes it work? Hell no! We sent quants back to their million dollar basements and told them to be better, bigger, and faster shysters! And what they came back with was a thing called "micro-second trading".

Micro-second trading is stock trading like any other stock trading, except that it is done and can only be done by high speed computers with exclusive access to the main trading computers operated by the various trading firms (NYSE, NASTEC, NIEKO, etc.) under the auspices of the Federal Trade Commission and other international policy bodies. Micro-second trading exploits a loophole in trading regulation that allows certain exclusive trading organizations access to trading data before the trades are made. Yes you read that correctly. Insider-trading on steroids. The loophole allows this peak into the future before it happens but only for a fraction of a second and only of course to those few companies who have somehow gained physical access to space in the computer server farms that operate the stock exchanges. Imagine what kinds of profits on futures trading you could make if you knew exactly what the future was?

When you read that the trading firms that lost the most money at the end of the real estate fiasco are currently giving out hundreds of millions of dollars in bonuses to their employees, and you wonder how they are doing it, where they are getting the money, well now you know.

And all of it, each of these fake investment schemes, one after the other, happened exactly and only because we, the most powerful, most educated, most economically potent people who have ever lived… well, we ran out of ideas. We came to a wall. We hit the end of the current paradigm and either couldn't figure out how to jump to the next one or weren't as a culture prepared to think in paradigm jumping terms.

I suspect that humans are just not very smart, that in mass, we are limited in the exact ways that the current circumstance and our reaction (or lack there of) so dramatically illuminates. That so many of us exist. That all of us are so well educated. That we live in and by so protected and fecund an infrastructure, and that not one of billion of us were not in a position to see this happening and plan around it tears at credulity.

Or maybe we are all of us so greedy and shortsighted that misfortunes like this happen despite the obvious cognitive capacity of our species? Either way, whether we are more in it or of it, we have to react to it. We have to do something to get productivity up and running again. And to do this we have got to build an understanding of economic systems big enough to include and predict the foibles of which we have recently been apart. Until we have such an understanding, we will not be able to avoid the future missteps as destructive and anti-productive as the bubble/bust cycles that have so plagued the last 15 years.

And what would it have looked like if we had been prepared to productively spend this windfall of new investment money rushing towards us? What, capitalization opportunities, had they been in place, would have allowed us to avoid the malevolently inventive 'creative financial products' that led directly to the string of bubble/bust cycles that have so devastated the global economy? What, one might reasonably ask (though few have) would or should the next (and long overdue) productivity paradigm look like?

I have invented a word, "productclivity" to describe a general framework of a scaffolding of a shadow of a description of an outline of the criteria that might be used to judge a new productivity paradigm. Productclivity is the propensity of a system to produce productivity. It is to economics what fitness is to evolution. In the longest run of time, it doesn't so much matter if you have a good set of legs as it matters that you have a good set of leg building algorithms… a good set of adaptation optimization algorithms, even better. Same goes for economic systems. Any successful scheme (mechanized farming, electric power grid, broadcast television, general purpose personal computing, cell phones, etc.) pales in productclivity comparison to things like public education and national or international research and development programs. Such systems tend to produce a continuity across productivity epochs.

Pop-economists and economy pun-dents are fond of terms like "the multifier effect", which is meant to describe investment and business activity that causes an out-fall of other investment and business activity. Investments in transportation and education and communication infrastructures are said to have this special something that produces productive systems that could not have been anticipated and would not have existed in their absence.

So lets look at the current paradigm. We already have mechanized farming. We have a decent communication system. We have a world class materials market and the transportation system to get those materials anywhere in the world in less than a week (a day if you are willing to pay for air freight). We have a decent data network (the internet) and the gateways, switchers, data storage and servers to make it all zing. We have programmable computers built into the fabric of every part of our daily lives and the things that make our lives long and rich. Through trickier and trickier programming we have automated our manufacturing, factories have become robots in them selves. The result has been a level of productivity unheard of in human history. It has given us time to screw around and the products and services to upgrade our "down time" to the level of "entertainment" and "leisure". What is left? What more could there be? The simple fact that the question seems so reasonable is evidence that we are in this particular problem for the full count.

But there are hints and there is hope that more might come, that there is still something of worth, something, "Not unbecoming men that strove with Gods" (Tennyson). We have the machines, the communication channels, the materials, the transportation, the manufacturing and materials, the educated labor, the social infrastructure (or, um, a bill of rights anyway), and the standard plumbing, mini-malls, and big box stores… everything one might need if one was packing for a trip to next-paradigm land. Which is another way of saying that we know and can list all of the things that make up the current infrastructure, all of the things that work, all of the things that brought us this far, all of the things the next productivity paradigm will need, and won't be.

And this is where I am obligated to insert a cautionary explanation. New paradigms do not, though they are frequently accused, replace that which came before them. But wait, you might say, everyone can come up with with a counter-example or two. Horse drawn carriages were replaced by automobiles… right? Paper mail has been replaced by email (or is doing a good job trying). The computer has replaced ledger sheets. Yes, yes, and yes. But none of these qualify, in my estimation, as paradigm shifts. The fact that they look like paradigm shifts, only results in confusion. In all three cases, the introduction of a new tool, process, or technology expediates or in some other significant way, improves a solution that already existed before. The car, like the buggy, accepted human passengers and transported them from one site to another. Same transform can be applied to most so-called "paradigm shifts". Better, ain't different. Paradigm shifts then, are caused by solutions to problems more fundamental than the problems that structure current solutions. If, for instance, an affordance was invented that gave people all of the benefits of being somewhere else, without actually being transported there, well that technology would qualify as a true paradigm shift.

Does double digit growth in second and third world economies mean they have jumped paradigms? Scooped the first world? Beat us at our own game? N0. Not even close. Lets not loose perspective. No need for hysteria or blame. Non-western economies don't have to jump paradigms, they have only to adopt the paradigms the west had already defined and refined. Their economies are growing fast, true, but this is the simple result of the efficiencies and advantages of moving their production and infrastructure up to modern industrial levels and then amortizing these advantages across the huge number of people (hours of labor) at their disposal Nothing magic, just productivity gains multiplied across huge populations.

In the west, we face a task far more complex. We can not play the same catch-up game being played in the 'rest of the world' (ROW). We already played that game… played it to the limits possible within this paradigm. No, now have to invent the next one, the next (productivity exploding) paradigm. Nothing else will work. This should be obvious by now. Even the notion that we could tap into old paradigm gains in that part of the world with rapidly growing populations of consumers is wrong headed and won't work. Yes, the global consumer base is expanding, yes this is happening in the second and third world. Yes the numbers are astonishing. But in order to sell to the rest of the world, we have to produce at efficiencies only allowable through the use of discounted ROW labor and materials rates. The only way we can get back to growing the rate of growth in the first world, our world, is by playing the paradigm-shift game.

And what does that mean? Given the current state of the first world, what are the parameters that would define a true paradigm shift? We start with the obvious statement; the next paradigm can't be anything we already have or do. More than that, it can't be an extension of or improvement on what we already have or do. It has to solve problems that are more fundamental to, that actually cause, the problems that provide the market and demand upon which the current economic paradigm feeds.

But before we go there, let's add another few items to the "how to tell a real paradigm shift in productivity from simple extension of the current paradigm" list.

First way to tell if what you are doing isn't a true solution is when you notice that the more you do the less you get out… this is the law of Diminishing Returns. When gains in productivity become more expensive, even while the energy or investment required by a new scheme increase. Shale oil, right-now manufacturing, team building exercises, on-line shopping, hybrid drive technology, cloud computing, web 3.0, ultra-sized wind turbines, commuter freeway lanes, customer relations management software, etc. These are all great examples of what I would call skimming; finding ingenious ways eek out the last few percentage point gains available within the current paradigm. Where a new paradigm should result in fold increases in productivity, skimming only yields percentage gains. These drop off to nothing as the full potential of that paradigm reaches its natural zenith.

And then there is the law of scales. This happens as a paradigm matures, when all the easy problems have been solved, and the only remaining solutions end up being solutions that work in ever smaller and ever more isolated domains. Come to think of it, scale is a good criteria upon which to compare true paradigm shifts with the range of lesser influencers. A true paradigm shift will expose entirely new markets, new sources, new methods, new materials, new activities and uses… solutions that scale both vertically and horizontally without apparent limit (at least at first). Stove-piping, the tendency of solutions to only work vertically and for these vertical markets to become narrower and more isolated over time… these are good indicators that the current paradigm is greying, robust, reaching maturity… that all of the easy to reach has been picked, that the investment in taller ladders can not be amortized across any other markets (fruit picking ladders have become so specialized that they are useless to firemen and painters).

In converse, true paradigms tend to be expansive, to open things up, and as I have suggested earlier, they tend to result in what many call a "multiplier" effect; from their seed, other opportunities bud and grow and multiply simply because the paradigm provides such a rich foundation for effective novelty.

OK, back to guessing. What will the next paradigm be? If it has to rooted at a deeper foundational level than current solutions, how much deeper? What does deeper mean?

In science, the trend has been towards theories (understandings) of the laws of nature, and for ways these laws are inherited from yet deeper and more general layers of meta-laws. Work in pure information theory is providing what might eventually work as the foundation of all, indeed any, natural system. Understanding the deepest layer(s) of nature allows one to predict, indeed derive, all of the laws above it (and show why they are the only possible laws). In business, this deeper understanding is phrased "knowing your market". Same thing. The deeper you tap into the causal strata that supports a system, the more control you have over and knowledge of the whole system. The deeper you tap into the causal strata, the more of that system's complexity becomes salient and controllable. In science this phenomenon is called "elegance". A theory is elegant to the extent that it can comfortably inform and predict the behavior of a large number of other theories or theories of theories. Elegance it is argued is a basic attribute of any evolving system. The universe has evolved, therefore it is fundamentally elegant. Any physics, any any descriptive abstraction of the universe will therefore be accurate to the extent that it is an accurate analog of the elegance of the system it describes, the universe itself, and by extension, the evolutionarily stacked layers that describe its history. But getting to elegance isn't easy. The deeper one digs into any historical or causal strata, the less like today do things appear. The promise though, is that an understanding gets more useful and profound the more deeply it is rooted. It might be easier to study legs, but you can get more information faster if you study the DNA snippets that propagate appendages across all of biology. Not only that, but an understanding of DNA in general will allow you to know things about legs that allows you to know things about ears and hearts and intestines and the production of enzymes and metabolism and growth and reproduction and evolution and information and energy and ultimately the topology of causality itself, the arch of possibility.

But digging deeper comes at a cost. Armed only with a good ruler and notebook, you can learn lots of stuff about legs, if you want to go the next bit and understand genetics, you had better build yourself a bunch of awesomely fast computers connected to some awesomely big data storage devices. And you had better find more and more robust ways of handling greater and greater amounts of complexity. The end result might be elegant descriptions but that elegance comes at great cost. The cultural and physical armature humans have had to build, in order to reach back into the causal structure of elegance is anything but elegant. Look for instance at the Large Hadron Collider. This machine is so complex that some theorists have questioned the likelyhood that it will ever actually work or work long enough for to acquire any reliable or demonstrable and supportable data. A whole branch of logic is likewise concerned with the limits of knowledge and thus the limits of abstraction. The data stream flowing from the fully operational LHC will exceed 300 gigabytes per second. Just mastering the technology and logic to store a stream that fast and wide is a challenge no previous generation could have met. Sifting through the resulting mountain of data requires logic armature of unprecedented complexity.

All of the low hanging fruit has been picked. We have measured all of the easy to measure stuff. We have stored and organized all of the easy to measure, store and organize measurements. We have built all of the equipment that that is easy to build. Even most of the stuff that is hard to build. We are increasingly, as a species, up against a complexity wall that keeps us from progress in almost every field of human endeavor.

The next productivity paradigm will have to have something to do with breaking through this wall, something to do with finding some understanding of the very shape of complexity and using that understanding to build a stable tunnel under, ladder over, or door through the complexity that vexes progress today.

Among the myriad of discoveries made over the past century, three of the most profound are the standard physical model, information theory, and evolution. Together these describe the relationship of matter to energy and to space and time, the limits of information, the equivalency of energy and information, the way both degrade over time, and how this guarantees the direction of time. All of which puts bounds around and relates reality and our abstractions of reality. Physics and cognition. The territory and the maps we can make of it. And, importantly, the physicality of maps themselves. But the complexities involved in the manipulation of this level of understanding pushes humans to the limits of their capacity (and beyond). Fewer and fewer of us have the cognitive wherewithal to make effective use of what is known.

What is needed, what is desperately needed is an automation of discovery and cognition. We need machines that do more than just help us acquire and organize the measurements we take. We need machines that work along side of us, extend cognition into realms beyond the easy reach of human minds. We've automated everything else. Cognition is all that is left to automate.

This is the next productivity paradigm. Like it or not, and from personal experience introducing these topics, most people decidedly don't, we have to push forward towards the automation of cognition.

Until then, and in the event we just can't stomach the idea of machine cognition, our only viable choice is to redirect the capital we can't viably spend – and spend it on infrastructure projects in the second and third world where in-paradigm solutions still result in productivity gains. Not to make money mind you, but to accelerate the flattening the world's markets and ready them for the eventual global jump to the next paradigm (when we can stomach it). This is especially true when that money is mostly from the emerging world in the first place. We can't fake it any more, the fake we've been doing is killing the world's economy, the fake is destroying our hard won reputation as innovators and capitalists, the fake is defacing the very idea that is capital.

Randall Reetz

* The International Monetary Fund estimates current Gross International Product (the annual sum of all human labor) at about 71 trillion dollars and rising rapidly. The greatest growth in relative wealth comes of course from the third world, where wealth building is more rapid. Because the vast majority of the world's population hails from the second and third world, small increases in individual wealth result in huge changes in gross wealth. As a result, the new money in the global investment system is coming from the third and second world. The question, the problem, the crisis is the first world's inability to make productive use of this new money.

Tuesday, November 17, 2009

Ford Doing Better Than Expected (Thanks GM)

I have been watching and reading the news about Ford's better than expected financials. Each of these reports compare Ford's success to the demise of GM, but none of them link the two. Look, people still need to drive around, and cars still wear out. Which means new cars need to be built and sold. Cars not being sold by GM are cars being sold by other manufactures. It is that simple. Hydraulic really.

In the 1940's an economist named A.W.H. (Bill) Phillips built a hydraulic computer that pumped colored water through system of tubes and reservoirs, controlled by metered valves, and cams to simulate national and international economic monitory flow. It was called the "Moniac".

Less than twenty Moniacs were built, but they were purchased and put into active service by some influential organizations including the British and U.S. governments, international banks, and research institutions like Harvard and the London School of Economics (which subsequently hired Phillips as a professor). It was built as a teaching tool, but found to be an accurate enough predictor of actual economic activity that it looks as if it was employed by governments to play "what if" simulations and inform monitory, fiscal, and tax policy.

The tie-in to Ford should be obvious. Fluids are incompressible – no mater how much pressure you apply, they always take up the same volume. Push a little over here and the fluid has to compensate by leaking out somewhere where the system offers the least resistance. When people hear that a car company is struggling to such an extent that they are shuttering entire devisions (Saturn), they wonder who will honor their new car's warrantee, and they go elsewhere to do their car buying. That elsewhere is foreign manufactures and if it isn't, it is the other domestic manufacturer, Ford.

GM consumers are probably more "buy American" than other auto buyers. Additionally, US reporters are not as likely to track GM exodus to Toyota, Nissan, or Volkswagen.

The comparison of Ford to the other big US manufacturer is too seductive a sound bite, especially considering the government bailout of GM.

But wouldn't be nice to at least ask the question… Is there a connection perhaps, between GM's troubles and Ford's (comparative) success?

Come to think of it, wouldn't the monetary-flow-as-hydrodynamics also work just as well as an explanatory model when applied to the last three boom/bust bubbles (energy speculation, dot-com evaluation, and the securitized real estate boondoggle)? All three came in rapid and linked succession as the investment pressure flowed from the failure of the previous to the "success" of the next. All three can be traced to brand new second and third world money being invested for the first time in first world markets… markets without the requisite productive machinery to support the value of the investment being heaped at them.

And that my friends is as salient an explanation as you will ever find for the reason that booms both happen and why they go bust. New money coming unannounced into an old market that can not effectively scale its productivity to the demands of the new capitalization levels.

A boom/bust event is indication of the need for a new production paradigm. A boom/bust cycle says; the present system can not be scaled beyond its current level… adding capital beyond this current level will not yield commensurate growth.

At such times, the whole system is vulnerable and this vulnerability will not go away until a new technology or infrastructure usurers in a bridge to a new paradigm in which new capital will effectively yield new productivity.

Randall Reetz

Some background info on the Moniac.

Monday, November 2, 2009

How Engineers Get Thermodynamics And Information Theory All Wrong

There is probably no other area of higher education where what is taught is so out of step with what is in fact valid. Engineering programs the world over, in the interest of simplicity and practicality, teach thermodynamics and information theory towards practicality and real-world solutions. What could be wrong with that? What is the negative side of practicality?

Well, usually, nothing. In most cases, cutting corners doesn't invert the causal bedrock upon which engineering is based. The field equations used to abstract relativity, do not usurp or demand a reformulation of E=mC^2. Neither do feynman diagrams mess with or disrupt an accurate understanding of quantum electro-dynamics. But in thermodynamics and information theory, the practical methods taught and used by engineers are based on assumptions that have resulted in an almost universal and wholesale misunderstanding of the base meaning and the causality that animates the bedrock of energy and information dynamics.

In thermodynamics, the problem is probably best described by the idea of "the perfect wall". To cut corners, engineers are taught arithmetic tricks that work in the usual atmospherically-dense and energy-conductive environments in which human's live. Unfortunately, these computational short-cuts do far more then introduce the usual errors of computational fidelity, they actually reverse the meaning of thermodynamics as a science. Thermodynamics as a science is about the way systems interact with the systems they are embedded within. But more than that, thermodynamics asserts the absolute necessity and inevitability of interaction and transference of energy that will result from ANY change within or without a system.

It should therefore be obvious that the teaching and use of practical methods that sidestep the central tenet of a field of science will have an unusually strong an adverse effect on the understanding of that science. Whole generations of engineers are being unleashed into the world with an absolutely backwards understanding of the very dynamic that universally informs all other dynamics. This is more than unfortunate. The growing population of scientists and engineers that march forward from universities with a backwards understanding of thermodynamics interferes with progress in all fields of science.

Same can be said of thermodynamics' sister, information theory. Because everything we do is increasingly keyed to progress in computation, the miss-map between the causal truths that inform information theory and the practical methods taught in their stead, may potentially have a much larger and deleterious impact on our potential as a species.

Where thermodynamics dictates the way energy leaks across the spacial dimensions, information theory dictates how information leaks across time. Purists will say that energy and information are equivalent. Ultimately, this is true. So when energy is measured in its more general form, as information, as bits, then information theory also dictates the lossy transfer of energy across time.

Because the two disciplines show how no system exists independent of other systems, we must concern ourselves with how systems are related through this leaking of energy and information. What can be said absolutely about the way information and energy set up directional relationships between systems with regard to space and time?

The Butterfly Effect; Isn't
In the none academic world, causality suffers a different abuse altogether. It is tempting for people to take notions of system interconnectedness to ridiculous and self-defeating extremes. We loose ground when the perfectly valid logic showing why a system can never act in isolation is illogically extrapolated to, "All systems effect all other systems equally". Making exceptions for speed of light (event cone) isolation, it can indeed be shown that all gravitational systems effect all other gravitational systems… the movement of a butterfly in South America will indeed effect (however infinitesimally) a dam in Montana. But if one were to rank, by degree of effect, all of the systems effecting the gravity fields surrounding a dam in Montana, a butterfly in Argentina would be very very low on the list. Even if one is butterfly obsessed, wants to ignore the one dog on the corner who has more mass than all of the butterfly's in the rocky mountains, there are tens of millions of butterflies closer, each of whom's infinitesimal gravitational pull would none the less have a larger causal effect on our poor dam's future.

This particularly populist breed of cause-and-effect miss-mappings is not the focus of my essay. As wacky as pedestrian notions become, they probably can't significantly derail scientific progress to any great degree. But when entire generations of science students are raised on incorrect understandings of basic science, we are all in trouble. This is especially devastating when the topic of delusion is as fundamental to the causal stack as is thermodynamics, energy and information.

"The law that entropy always increases, holds, I think, the supreme position among the laws of Nature. If someone points out to you that your pet theory of the universe is in disagreement with Maxwell's equations - then so much the worse for Maxwell's equations. If it is found to be contradicted by observation - well, these experimentalists do bungle things sometimes. But if your theory is found to be against the second law of thermodynamics I can give you no hope; there is nothing for it but to collapse in deepest humiliation."

Sir Arthur Stanley Eddington, The Nature of the Physical World (1927)

What determines the causal morphology and behavior of the hierarchy of influence (dictated by thermodynamics and information theory)? If we define the shape of causality we define process itself, and by extension, the shape of reality.

Information Theory specifies ways to measure the capacity of a storage matrix and the reliability of a communication channel. But all of it's metrics are agnostic to the meaning encoded and transmitted. Each bit and each bit pattern are treated as equal. Only frequency and order, not meaning, not saliency, not fidelity of representation.

What would you have to fold into or add to information theory and thermodynamics in order to measure meaning and saliency? Is it there already? Are we missing something in our approach to and use of an already semantically robust set of laws and equations?

Several years ago, the mathematician Stephen Wolfram (founder of the maths software "Mathematica") wrote a book called "A New Kind Of Science". It is a dense and repetitive work over twelve hundred pages long. I tried to get through it and gave up. Feels like a giant fractal, built of some obscure philosophy based on fractals. Not feeling OK with my initial critique, I forced myself to come up with a theory, any theory, that said or not, I could attribute to his work. The best I could do was to suppose that Wolfram was trying to say that science had historically used equations to understand the components of nature that could be accurately described by equations, but the really interesting things about nature were iterative, and open ended, they required logical descriptions that required continuous computation. To bad he couldn't have just said that.

At about the same time, the social biologist Edward O. Wilson wrote a book called "Consilience". He argued for a cross-discipline coming-together of the various branches of scientific exploration, a holism, for the advantages of looking at nature (and those who study it) as the one large and interdependent super-system it is.

Of course dynamic, ever changing, "evolving" systems are systems simple equations (calculated once) will never accurately represent. Traditional thermodynamics and information theory engineering maths and methods work best on simple systems that are or can be thought of as repetitive and isolated. The conditions (input energy, output work) might change, but the conditions of the conditions never do. At any sufficiently salient level, real systems are never that well behaved or that removed from their environments or situations.

Real systems are direction of time dependent. It is more than ironic that the one scientific law that defines exactly why causal systems are non-reversible is used primarily by engineers who choose to use it in ways that ignore the direction of time it demands. I can forgive newtonian or relativistic or quantum physicists for ignoring the asymmetry of time… their maths don't require it. But thermodynamicists? Information theorists?

[more to come…]

Randall Reetz

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