The goal of evolution is not survival. Rocks survive much better, longer, and more consistently than biological entities. This should be patently obvious. Survival is a tailing of evolution and achieves a level of false importance probably because those of us doing the observation are so short lived and thus value survival above almost everything else.
In biology as in any other system, evolution is not concerned with nor particularly interested in individual instanciations of a scheme. A being is but a carrier of scheme. And even that is unimportant to THE scheme which can only be one thing – the race towards ever faster and more complete degradation of structure and energy.
To this (or any other) universal end, schemes carry competitive advantage simply and only as a function of their ability to "pay attention to", to abstract, the actual physical grammatical causal structure of the universe. And why is this important? Because a scheme will always have a greater effect on the future of the universe if it "knows" more about the future of the universe. Knowing is a compression exercise. Knowing is two things. 1. acquiring a description of the whole system of which one is a part, and 2. the ability to compress that description to its absolute minimum. A system that does these things better than another system has a greater chance of out-competing its rivals and inserting its "knowledge" into future versions of THE (not "its") scheme. To the extent that an entity pays more attention to its survival (or any other self-centered goal) than to THE scheme, is the extent to which another entity will be able to out-compete it.
Darwin was a great man with an even greater idea (his grandfather Erasmus even more so). But neither had the chops or the context to see evolution at a scope larger than individual living entities or the "species" within which they were grouped competing amongst each other over resources. There was very little understanding of the concept "resources" during his lifetime – certainly not at the meta or generalized level made possible by today's understanding of information and thermodynamics and as a result of Einstein's work its liberation of the symmetry that separated energy, time, distance, and matter. However, Darwin's historically forgivable myopia has out lasted its contextual ignorance and seems instead to be a natural attribute or grand attractor of the human mind. His sophomoric views are repeated ad nauseum to this day.
Randall Reetz
Showing posts with label future. Show all posts
Showing posts with label future. Show all posts
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
Complexity is Self-Limiting… Evolution Says "So What!" But At What Cost?
Complex systems tend towards greater complexity. That is one way, in fact, of defining evolution. But complexity is also self-limiting in obvious and unavoidable ways. What gives?
How, specifically, does an understanding of complexity's natural limits, recast an assessment of where human society is, where it might be going, and what of this potential do our own limitations in understanding complexity and its limits… well, limit?
We tend to gravitate towards a rather cleaned-up image of the future, all stainless steel and gleaming glass, and sexy robots that can't say "no" (puffy clouds, white wings, and lutes?). To be fair, this sparkly and perfect view of the future is something we reserver for "The Future". Excepting for Sunday mornings, we are refreshingly realistic about the process of getting through all of the calendar-able pedestrian futures to the final "The Future"… sometimes even positing an apocalypse or two along the way. Its as though we understand that things of great complexity and stability must be constructed, and that building is a messy and chaotic process, our self-delusion begins and ends with the absolutely fatal assumption that there is some end to the construction process, after which everything will be grand and glorious and perfect in the sense that no major construction will ever again mar the sublime and pristine quite and elegance we have built.
Right. OK.
In light of the magnitude of our self delusion, it seems down right naive to apply the phrase "drink the Cool-Aid"… in some very real sense, we must, each of us, have Cool-Aid factories right smack in the middle of our brains!
The actual future, the sober future, the one we seem hell-bent on ignoring, is a future of greater and greater and more and more constant change. A future we can never get to. A future that will surely go on one day without us. There were after all, a whole bucket-load of futures before we existed, before we declared ourselves the supreme center of everything, the final future. Ultimately, of course, there is a final and absolute future to any system. If you paid attention during your thermodynamics or information science lectures, you know that there will come an ultimate future which can not support any complexity at all.
For now, we will ignore that final future-of-all-futures (heat death)… there are "miles to go before we sleep".
As complexity marches forward and "upward", evolving systems are increasingly characterized by construction and change. A static system, one that can't react to its own constantly increasing experience, is a system that isn't as complex as one that can learn and adjust itself to accumulated knowledge. The romantic vision of a completed and peacefully static future is as laughable as it is understandable.
Some fantasies drive us towards success and influence, and others towards catastrophe and insignificance.
The difference between these two forms of fantasy are, to my mind, the difference between paying attention to the greater reality that is the whole universe (its physical laws, material properties, and configuration), and paying attention instead only to the reality hacked together within our own emotionally contorted and narrowly self-centered minds. The distance that separates the two is probably a good measure of the speed with which nature will replace us with some other form of complexity generating scheme with a more accurate natural mapping of reality to abstraction of reality.
A self-centered and locally weighted perspective is both expectable and self defeating. What works in the short term often gets in the way of what works in the long run. This is one of two oxymoronic misreading of process clouding our understanding of evolution that increasingly threatens our potential as a species. The other (related) self-obfuscation we don't seem to be able to avoid, and central to the thesis of this essay, is the dream-like way we tend to imagine the future as some silicone-enhanced sexed-up version of some glazed-over and romantic version of a past that never was.
What we know, how we comprehend what is around us, is a function of the iterative process of matching the stream of incoming sensation to what we have stored as experience. What comes to be known is always heavily effected by what was known before. Leaning is a local affair. Systems always end up knowing more about the things closest to them. The closest thing to a system is itself! This is a topologically and causally unavoidable fact, leading to difficult to circumnavigate self-centered understandings of the universe around us. I am convinced that evolution ultimately (in the longest run) favors systems that can overcome this local-centrism…though to to this, a system must literally work against itself in the short term. Success in the long run is dependent on the development and protection of genetic structure that frustrates success in the short run. This big-picture learning must be accomplished through the development of an ever more accurate internal analogue (process-able map) representing the most inclusive and location agnostic understanding of the entire universe. This too is an ever receding target, we can chase but never completely capture. Evolution is this back and forth dance between what matters to a system in the hear and now and the capacity to pay attention to, model, and process that which is salient about the entire universe… context in the largest sense.
I don't want to veer too far away from the thread of this essay, but it is important to keep in mind the counter-indicated admixture defined both by the immediate local needs of any given individual and the larger, decidedly non-individual scope of evolution. A decidedly cooperative mixture that is, none the less, achievable exclusively through the lives of and genetic/cultural information carried forward exactly and only by individuals.
In any given population of individuals at any given locality, there exists a range of differences that enable some individuals to make more efficient use of the resources in their surroundings, and some individuals to be better equipped to contend with and exploit the resources of their children's inherited environment. Those better matched to the current environment will out-compete those with a better match to the environment of the future. Ultimately, of course, what matters is the capacity of the entire mélange to both survive in the present and present morphotypes that meet the demands of the future. The demands of the present vs. those of the future are often at odds with each-other. A successful evolutionary scheme must "waste" a sizable chunk of its structure and energy on strategies that may have no immediate positive effect on fitness (and might in all actuality hinder success in the moment). Maintaining a long range understanding of evolution itself, and our place in it, is the example of this dangerous opposition that best fits the scope of this essay.
It seems obvious to me that the amount a system must "waste" anticipating changes in the future of its environment is inversely relational to the accuracy of its internal mapping of the universe in total. Systems that know nothing of the universe, must produce a great variety of random solutions. A very expensive prospect that best fits very very very simple individuals produced in absurd numbers. Atoms, molecules, single celled organisms.
Understanding the process, "THE" process, evolution, is probably the most salient predictive mechanism an organism might seek to internalize. We seem to have limited capacity as a species to model and abstract and then effectively navigate an abstraction of this "THE PROCESS". Especially when it comes to understanding the limitations and usefulness to "THE PROCESS" of any one scheme, species or individual.
The spirit of this essay isn't Nietzschein pessimism or a catastrophist's Cassandra; "I told you so!". I am an eternal optimist, so these words are intended instead as a wake-up call, and offered up as a Windex Wipe to the foggy lens through which we view reality… in the hope that we use it, adjust our behavior, and rectify the self-defeating distance between what is and what we want to see.
Nature doesn't stand still. Not at least until the very end. Heat death isn't at all like my fantasy of an endless Mediterranean resort vacation. Any system that bets its future on stasis, no matter how advanced, is betting against its longevity or influence on the real future.
I've compiled a list (below) of some of the most obvious side effects that haunt complexity, that push back against its growth. If we illuminate these barriers we might be better equipped to consider ways to get around them, and we might discover something of how systems get better and better at finding cheats in the march towards greater complexity.
For a system to be complex, it must have structure and difference within that structure. A crystal has structure, but its lack of capacity for internal differentiation means it can never be complex. But differentiated structure isn't enough, it has also to have some way of protecting and maintaining that structure, that shape or behavior over time. Shit happens. A complex system must employ some set of mechanisms in a constant fight against entropy. Without which, a system's complexity will be short lived, and short lived complexity isn't very complex at all.
Which brings up an important and much ignored aspect of an evolving system. We have a tendency to over emphasize the moment, the present situation or system. Nature on the other hand doesn't care about the individual or the moment except as a vehicle for the transmission of structure into the future. What matters isn't how complex a system is today, but the potential of a given configuration to influence the greatest complexity in the longest future across the widest expanse of the material universe. Many aspects or measures of complexity cross over between the here and now and the deepest future… but not all and not always.
Back to our list.
1. One way to maintain structure is to build yourself out of stuff of great material integrity – say titanium, stainless steel, or diamond.
2. Another is to adopt a vigilant and obsessive Mr. Fix-It program of self maintenance. Yet another option is to replace yourself with a pristine copy before you dissolve into an entropic heap.
3. A simple cousin of this replacement scheme is playing the numbers game… make sure there are so freak-n many copies of you in the first place that one or two of you make it into the distant future by virtue of the dumb luck of large number.
4. Or, you can choose to live a life of extreme isolation – limit your interaction with other systems and you limit the deleterious effects the second law dictates.
5. Then there is wall building. Wall building is a self-made form of the isolation scheme… instead of finding a place to hide in a pre-existing landscape, dig yourself a tunnel or build yourself a wall or a mote or a shell or a nest or fast legs or wings with which to run away with.
And then there is the problem of resource acquisition. Anything of value to a complex system tends to be reactive. Reactive things are destructive. Installing your self within a reactive environment means you have more access to energy and materials, but it also means you have to spend more energy and structure just to protect yourself from your environment. As your energy demands increase so too does your need to locate yourself closer and closer to more and more reactive and ever changing environments. A cave full of grain is great at first, but as you eat your way through it, its original attractiveness decreases. Better to install yourself at the mouth of a river, next to a mid-ocean vent, or on the floor of a flood plane. As your complexity increases, so to does your appetite for energy and materials. Access means proximity. Proximity to greater and greater concentrations of energy demands protection. Protection is expensive in terms of the self-protective physical structure and its maintenance.
Worse still is the negative feedback that metabolic waste presents. The more you eat, the more you go. The more you go, the harder it is to find food. As complexity increases, guess what happens to the magnitude of this problem and the need therefore to spend more and more energy on waste removal schemes?
The focus of this essay are the aspects of complexity (and complexity's demand for energy and structure) that put counter-productive limits on strategies that would otherwise allow for greater and greater complexity… and how evolving systems find work-arounds. The fact that we are here at all is proof that evolution finds a way.
What interests me is the way increases in complexity puts increased demand on energy and material resources, and how these processes are self-limiting and at the same time actually define the purpose that drives evolution.
In the particular, real systems manifest great creative variety in the fight for the extension of structure and integrity over time. For instance, once brains appear, trickery and guile become the standard approach to wall building. You don't need to go the long and arduous course of developing poison and some specialized hollow teeth through which to deliver it, if you can just tweak your skin coloration or shape to mimic those who have. Or you can become invisible by adopting a color and texture scheme that mimics your less vulnerable or edible surroundings. In essence, trickery schemes are the same as isolation or wall building except the wall you are hiding behind is within the brain of another creature (either it's already there or you build it in your foe's brain through behavioral conditioning).
But here is the rub. No matter which scheme a system adopts in the maintenance of structure… that scheme hardens their structure, making it more difficult and expensive to adapt to an always changing environment. In a very real way, what makes you stronger in the present makes you vulnerable over time.
Example: When Teflon was developed it was obvious to its creators that its extreme inert-ness, its aversion to chemical interaction, would make it an ideal lining for any reaction container (including frying pans and irons). But this same property made it almost impossible to figure out how to affix Teflon to the surface of a container (it took over 10 years to solve this problem).
On the opposite end of the isolation spectrum is metabolism. When a system seeks a means of extracting and drawing energy or structure from its environment, it needs to maximize its reactive interface to that part of its environment that has the most entropic potential. In earth biology, this usually manifests as an active interface to oxygen and or sunlight – both of which are highly corrosive to structure. In order to both exploit the energy of these highly reactive sources, biology has adopted a myriad of selectively self protective (and expensive) mechanisms. Playing with fire is an attractive AND expensive proposition. Simple systems have no option but to hide from highly reactive environments – to dig themselves into deep cracks in the earth. Only a system of great complexity has the structural and behavioral leeway to adopt the complex and selective mechanism necessary to both use and avoid concentrated reactive resources.
As a system becomes more complex it reacts faster to internal and external change. It evolves faster. This is a circular definition of "complexity"… configurations that facilitate faster development of configurations that facilitate faster development of configurations… ad infinitum. The capacity to do things faster always comes at a cost. To mitigate that cost, the system must learn to be efficient and effective in its environment. This means going with the flow. This means fitting in. This means doing what the environment is already doing. This means not fighting the system. To work with a system (instead of against it) means internalizing and abstracting a model of the environment's most salient structures. If you have some knowledge of what a lion will do when you enter a clearing it is sitting within, you have a better chance of surviving the encounter. If you have legs and eyes, your very structure is an acknowledgment of the physical constraints of your environment.
An accurate assessment of this whole concept becomes increasingly complex as we realize how system and environment blend in a co-evolutionary super-system.
In science fiction, the future is presented in one of two ways. Either the world has devolved into some filthy post-appocolyptic entropic mess, or it is a perfectly complete stainless steal and glass uber-infrastruture with everything in its place and everything perfectly maintained. Both projections are impossible, but the hermetically sterile one is the most problematic as it seems to resonate more completely with human emotional projections.
The problem is this; the more complex a system becomes, the faster is its capacity to change, leading to a system that is constantly in flux, constantly reworking itself, constantly under construction. Try to find a day in a modern city devoid of numerous construction cranes marring its skyline. This situation will only become more intense as human society evolves.
Biological systems have learned to accommodate the constancy of change, deterioration, ware and tear, construction, etc., through complex molecular mechanism of growth and repair played out at the (largely microscopic) cellular level. Furthermore, these anti-entropic mechanisms are largely automatic and do not therefore overly burden the larger and more overarching consciousness and behavioral control mechanisms (our mind).
Though humanity has reached a level of complexity that supersedes the capacity of its infrastructure to effectively carry its own complexity demands, we don't seem, as a species to be able to see this problem as systemic.
[more to come…]
Viewing Our Open Economy Throgh A Closed Economy Lookingglass
And have an idea. Plot the ratio of the total number of dollars in the stock market vs. the total number of dollars in the US economy sans the market (all over the same 100 year history).
My guess is that there have been spikes in this stock vs. M. ratio that correspond with new money entering the market, either shifted from other domestic segments (real-estate, retirement accounts, etc.) or from international influx of investments (rapidly rising wealth of Asia and rest of world, sudden collapse of a large industry, commodity, or governmental or regional stability). Very few of standard economic metrics measure true macro or global interaction between geo-scale segments.
Comparing the Dow Jones against itself over time, or rarely, against other metrics like the GDP is different than reifying this and other comparisons as named metrics in and of themselves. But completely missing is geo-scale metrics that track the shifting values across regions and segments, in effect treating economic entities as markets competing for the maximum percentage of the total global value or geo-M.
What I am getting to is some way to accurately read the total global M and total labor L and total energy use E and to track the motion in real time of the density of these values geographically, or geopolitically, or by production or consumption segment. Once a true global economic sandbox tracker/simulator has been built, we will have the ability to read the economy as it is, in real time, and find the factors that sit at the base of the actual influence hierarchy that drives and causes economic flux.
My suspicion is that actual economic growth is equivalent to, always and only the result of increases in the means and use of tools and infrastructure that can build more for less labor... productivity, and that, in the absence of true growth in productivity, a market responds through acts of trickery which are ultimately not supportable and always culminate in crashes or "adjustments" which tend to pull market values into closer alignment with actual M and productivity values.
When new money comes into a market, standard supply and demand metrics are no longer accurate predictors or models. When new money comes into a market, standard supply and demand metrics will tend to say that the value of a product has risen. In a closed system this evaluation would most often be accurate In an open system, where money can stream into a market not to chase a product for consumption or industry, but just because that market seems a more attractive place in which to speculate than others, it throws the whole system into instability. Producers under such conditions are want to make more shoes, even though people are not growing more feet or walking more holes into their souls. End-consumers begin at inflationary times like these, to speculate with their purchases, buying products and commodities not because they need them, but because it seems foolish not to. Products and commodities take on a currency-like property, and through over-valuation supersaturate the market... leading to an inevitable value crash. If a large enough percentage of an economy's value has been suckered into such a bubble, the crash will bleed over into the economy as a whole... hitting the financial and banking markets first and hardest.
Over the past two decades, three fundamental factors have made large markets in the west especially sensitive and vulnerable to these new-money boom/crash cycles.
First, the undeveloped economies of the world have experienced exponential growth as they adopt tools and infrastructures borrowed from the first world. Importantly, because the third and second world represented the vast majority of the world's population and geography, this explosion in wealth (though still on average only bringing the third world slightly out of poverty) began to represent (by shear size) a larger and larger segment of the global economy. Remember that this "rest of world" economy represents roughly six times the population of the first world. Even smallish changes to a segment of this relative multiple have huge effect on the total global economy. And the actual changes have not been small. Second and third world economies have absolutely exploded! Much of this new money has of course been reinvested into the local economies from which it sprung. But, increasingly, larger and larger chunks of this new money have gone searching for boutique markets like the New York Stock Exchange and its equivalent in Japan, Germany, England, France, and the EU.
The second factor has to do with the paucity of true growth in productivity experienced in western and first world economies during this same twenty or thirty year period. In post-industrial economies, regions that have secure and constant access to reliable transportation of goods and services (shipping, highway, rail, and air transport), ready and secure capital (through investment banking and business and consumer credit), private property ownership (as a means to secure capitalization), education (to steadily feed highly skilled workers into labor markets), and governments that protect and promote the well being and promote the success of their citizens en-mass, and who have built a dependable infrastructure to create, extract, and distribute energy, and the means to grow and process foods cheaply on industrial scales... these rare segments of global marketplace... have had these capabilities for some forty years. Excepting of course for incremental gains made in efficiency of the above systems as a result of new knowledge and tools that result from better understanding of nature through advances in the sciences productivity has largely leveled off and remained level for the better part of a quarter century. What of the computer? you say. Surely the computer and the World Wide Web have had a huge positive impact on first world economies. But interestingly, the net net economic effect of computation and the digital networks it creates, has been surpassingly neutral. We do pump a larger and larger percentage of first world moneys into computation and its infrastructure that consume and use computers.
Real productivity metrics have yet to precipitate outward from the large success of computing as a market and into the larger first world economy. Ironically, the computer industry's success in the west may have impacted second and third world economies the most. It may be that money made in the computing industry flowed more deeply and directly into the rest of world economies where much of the computer industry does its manufacturing, assembly, and customer support. That computing has not resulted in measurable increases in first world productivity has computer industry insiders scratching their heads. During the Dot Com boom, pro-industry annalists creatively sidestepped this uncomfortable truth by inventing the idea of a "new economy" or "cyber economy", famously proclaiming, "The old rules and metrics don't apply". They were wrong, in the short term, but maybe, just maybe, in the long term they will be correct.
I suspect that the true economic benefits or potential benefits caused by the computer and computing upon global productivity have yet to be realized. The computer industry has spent the last 30 years largely learning how to get computers to do what we did (though slower and more awkwardly) before we had computers (writing, printing, telephony, accounting, payroll, data processing, advertising, point of purchase, audio and video broadcast, mathematics, graphing, market tracking and trading, banking, news and reporting, information sharing, post and mail, libraries, process control, etc.). This conversion has been expensive, and time consuming. Much of the time, we have proceeded as an industry (and a society) without a clear goal. Let me restate; neither the computing industry or the consuming public has had a clear idea where computing has been or ought to be going. Much of the time, both industry and market have been happy just to see what new (old) thing the computer can be taught to do... blindly building and consuming our way into the future just because it is "cool" or "fun" or "neat" or adds some strange and intoxicating "immediacy" to our daily lives (even when that immediacy does not equate effectiveness or lead us to deeper and more efficient infrastructure's necessary to cause the kinds of profound increases in productivity we expect from new technology paradigms).
I am a big believer in the future of computing, or the future that computing could build towards, but this belief is contingent upon society getting to a deep clarity of understanding about what computing is and why it matters. We have got to work hard at determining the difference between that which is cool and that which is profound. That which we want and that which will change the world. Until then, we are simply designing and producing towards consumption which will make segments of the industry rich and will bring money from the consuming west into emerging economies, but it will not ultimately support real growth, the kind of growth that is supported by knowledge, tools, and infrastructure that have the capacity to catapult productivity to the next level (the way the tractor pulled plow, germ theory, general education, the steam engine, and electricity have done in the past).
[to be continued...]
My guess is that there have been spikes in this stock vs. M. ratio that correspond with new money entering the market, either shifted from other domestic segments (real-estate, retirement accounts, etc.) or from international influx of investments (rapidly rising wealth of Asia and rest of world, sudden collapse of a large industry, commodity, or governmental or regional stability). Very few of standard economic metrics measure true macro or global interaction between geo-scale segments.
Comparing the Dow Jones against itself over time, or rarely, against other metrics like the GDP is different than reifying this and other comparisons as named metrics in and of themselves. But completely missing is geo-scale metrics that track the shifting values across regions and segments, in effect treating economic entities as markets competing for the maximum percentage of the total global value or geo-M.
What I am getting to is some way to accurately read the total global M and total labor L and total energy use E and to track the motion in real time of the density of these values geographically, or geopolitically, or by production or consumption segment. Once a true global economic sandbox tracker/simulator has been built, we will have the ability to read the economy as it is, in real time, and find the factors that sit at the base of the actual influence hierarchy that drives and causes economic flux.
My suspicion is that actual economic growth is equivalent to, always and only the result of increases in the means and use of tools and infrastructure that can build more for less labor... productivity, and that, in the absence of true growth in productivity, a market responds through acts of trickery which are ultimately not supportable and always culminate in crashes or "adjustments" which tend to pull market values into closer alignment with actual M and productivity values.
When new money comes into a market, standard supply and demand metrics are no longer accurate predictors or models. When new money comes into a market, standard supply and demand metrics will tend to say that the value of a product has risen. In a closed system this evaluation would most often be accurate In an open system, where money can stream into a market not to chase a product for consumption or industry, but just because that market seems a more attractive place in which to speculate than others, it throws the whole system into instability. Producers under such conditions are want to make more shoes, even though people are not growing more feet or walking more holes into their souls. End-consumers begin at inflationary times like these, to speculate with their purchases, buying products and commodities not because they need them, but because it seems foolish not to. Products and commodities take on a currency-like property, and through over-valuation supersaturate the market... leading to an inevitable value crash. If a large enough percentage of an economy's value has been suckered into such a bubble, the crash will bleed over into the economy as a whole... hitting the financial and banking markets first and hardest.
Over the past two decades, three fundamental factors have made large markets in the west especially sensitive and vulnerable to these new-money boom/crash cycles.
First, the undeveloped economies of the world have experienced exponential growth as they adopt tools and infrastructures borrowed from the first world. Importantly, because the third and second world represented the vast majority of the world's population and geography, this explosion in wealth (though still on average only bringing the third world slightly out of poverty) began to represent (by shear size) a larger and larger segment of the global economy. Remember that this "rest of world" economy represents roughly six times the population of the first world. Even smallish changes to a segment of this relative multiple have huge effect on the total global economy. And the actual changes have not been small. Second and third world economies have absolutely exploded! Much of this new money has of course been reinvested into the local economies from which it sprung. But, increasingly, larger and larger chunks of this new money have gone searching for boutique markets like the New York Stock Exchange and its equivalent in Japan, Germany, England, France, and the EU.
The second factor has to do with the paucity of true growth in productivity experienced in western and first world economies during this same twenty or thirty year period. In post-industrial economies, regions that have secure and constant access to reliable transportation of goods and services (shipping, highway, rail, and air transport), ready and secure capital (through investment banking and business and consumer credit), private property ownership (as a means to secure capitalization), education (to steadily feed highly skilled workers into labor markets), and governments that protect and promote the well being and promote the success of their citizens en-mass, and who have built a dependable infrastructure to create, extract, and distribute energy, and the means to grow and process foods cheaply on industrial scales... these rare segments of global marketplace... have had these capabilities for some forty years. Excepting of course for incremental gains made in efficiency of the above systems as a result of new knowledge and tools that result from better understanding of nature through advances in the sciences productivity has largely leveled off and remained level for the better part of a quarter century. What of the computer? you say. Surely the computer and the World Wide Web have had a huge positive impact on first world economies. But interestingly, the net net economic effect of computation and the digital networks it creates, has been surpassingly neutral. We do pump a larger and larger percentage of first world moneys into computation and its infrastructure that consume and use computers.
Real productivity metrics have yet to precipitate outward from the large success of computing as a market and into the larger first world economy. Ironically, the computer industry's success in the west may have impacted second and third world economies the most. It may be that money made in the computing industry flowed more deeply and directly into the rest of world economies where much of the computer industry does its manufacturing, assembly, and customer support. That computing has not resulted in measurable increases in first world productivity has computer industry insiders scratching their heads. During the Dot Com boom, pro-industry annalists creatively sidestepped this uncomfortable truth by inventing the idea of a "new economy" or "cyber economy", famously proclaiming, "The old rules and metrics don't apply". They were wrong, in the short term, but maybe, just maybe, in the long term they will be correct.
I suspect that the true economic benefits or potential benefits caused by the computer and computing upon global productivity have yet to be realized. The computer industry has spent the last 30 years largely learning how to get computers to do what we did (though slower and more awkwardly) before we had computers (writing, printing, telephony, accounting, payroll, data processing, advertising, point of purchase, audio and video broadcast, mathematics, graphing, market tracking and trading, banking, news and reporting, information sharing, post and mail, libraries, process control, etc.). This conversion has been expensive, and time consuming. Much of the time, we have proceeded as an industry (and a society) without a clear goal. Let me restate; neither the computing industry or the consuming public has had a clear idea where computing has been or ought to be going. Much of the time, both industry and market have been happy just to see what new (old) thing the computer can be taught to do... blindly building and consuming our way into the future just because it is "cool" or "fun" or "neat" or adds some strange and intoxicating "immediacy" to our daily lives (even when that immediacy does not equate effectiveness or lead us to deeper and more efficient infrastructure's necessary to cause the kinds of profound increases in productivity we expect from new technology paradigms).
I am a big believer in the future of computing, or the future that computing could build towards, but this belief is contingent upon society getting to a deep clarity of understanding about what computing is and why it matters. We have got to work hard at determining the difference between that which is cool and that which is profound. That which we want and that which will change the world. Until then, we are simply designing and producing towards consumption which will make segments of the industry rich and will bring money from the consuming west into emerging economies, but it will not ultimately support real growth, the kind of growth that is supported by knowledge, tools, and infrastructure that have the capacity to catapult productivity to the next level (the way the tractor pulled plow, germ theory, general education, the steam engine, and electricity have done in the past).
[to be continued...]
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