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?

A Plan To Re-Invigorate Long-Term Capital Markets

Human behavior favors the immediate. Nobody willingly chooses to wait when an option allows instant or near-term gratification. This tendency naturally results in imbalanced systems. The recent investment market crash is evidence of what happens when short-term behavior is at odds with the medium and long term needs of a healthy economy.

To make matters worse, our tools evolve naturally in directions that mimic human proclivities, catalyzing the very natural and human obsession with the immediate. As investment securities markets are more and more influenced by and accelerated through the use of automation technologies (the computer and global communication networks), they trend naturally towards an over-valuation of short-run returns and under value long-run returns. Even if traders or fund managers start off with long-range, future-looking, wide-perspective goals, the competitive pressures placed on them simply for sharing trading facilities with companies that make money by trading on shorter and shorter time frames forces them towards similar behavior. When you are competing for money, and that money is changing hands in shorter and shorter cycles, money available for long range investments and the types of businesses and infrastructure plays becomes scarce. You either join the race towards the immediate, or you go without.

However, a thriving economy absolutely depends upon the continuous and long-range capitalization that actively supports basic science and the steady infrastructure improvements that build, promote, and maintain complex supply chains that constantly evolve towards greater productivity.

Though a healthy and vibrant economy profoundly depends upon capital fluidity, upon responsiveness to investment demand, the recent trifecta of market boom/bust cycles (energy, dot-com, and real estate securitization) has shown that revenue schemes that do nothing more than move money around can exert too much influence on the entire market landscape that shapes our national and international economies.

Three times in a row we have witnessed first-hand how second tier capitalization (business that make their money by repackaging investment risk) tend to quickly and fatally overwhelm the total investment market. These securitization schemes do better in the short term than standard capital markets because the value they trade is not directly tied to the success of the actual businesses and infrastructures that they capitalize. In market competition for investment dollars, abstraction schemes provide an artificial advantage that is impossible for real businesses to overcome.

If investors have the option of making a quick bet against market stability, an option that is not in and of itself dependent upon actual consumer or business to business demand for actual product or service, of course the capital will follow the quick and the fake over the slow and the real. This is a natural and predictable attribute of the behavior of capital markets.

So what is to be done?

There are many potential solutions and solution categories. Greater regulation of markets. Tariffs and taxes that are then redirected through government advisory boards that seek to determine the areas of funding that will have the greatest impact on future productivity. New kinds of markets and financial products that somehow reword long range investments. Public education directed towards society-wide changes in social morality and long range responsibility to future technologies and infrastructures. Switching to a benevolent dictatorship and appointing exactly the right leader with exactly the right understanding of productivity building economic mechanisms, and the will to make it so. Each of these options has deep potential for failure. Most are simply impossible or entirely romantic.

After some thinking, I came up with a plan that just might work.

Lets say the government set a Target Average Investment Period (TAIP). This TAIP (for sake of argument, lets say it is set at 'two years') would be the time delay before any investment you make could be evaluated, cashed in, or traded. It is an "Average" because you can make any number of investments but the average duration of your securities each time you invest has to be at least as long as the current TAIP setting. Some algorithm or official committee (Fed Board?) sets the value of the TAIP at some set interval (every year?) or, as is true of the Fed Rate, whenever the governing body decides the economy demands an adjustment.

In practice, what it means is this: If you purchase a thousand dollars in 1 year stock (one year 'less' than 2 year TAIP) you must offset this purchase with investments worth at least one thousand dollars in a 3 year stock (1 year 'more' than the current TAIP). An investor can offset securities purchases with periods shorter than the TAIP with any combination of investments longer than the TAIP so long as the total average of all purchases made at that time is equal to or greater than the the current TAIP setting.

In this way, securities are not simply tied to a company or fund or product, but also to the duration of the investment. If you want to partake in microsecond trading, cool, just as long as you offset those short run investments with an investments of equal value at the opposite end of the TAIP.

You don't just buy IBM, you buy IBM at duration. An investor can choose any combination of purchases (all of IBM or short term in IBM and long term in Intel). Alternatively, financial entities can be as creative as they want to be in designing investments products so long as the end result conforms to the current TAIP setting.

The government would fine-tune the TAIP the way it now fine-tunes the prime lending rate. Hell, if it works like I think it will, this adjustment will be more important and more reliable than prime rate manipulation.

Mostly, this scheme has the benefit of promoting the types of long-range investments that a strictly free market tends away from. And, it does so without restricting short range trades or the full range of trading period fluidity or investment products.

Randall Reetz