Posted by
Phil Henshaw-2 on
URL: http://friam.383.s1.nabble.com/MIT-experts-analyze-financial-crisis-debate-cures-tp1364627p1372212.html
Gosh, I don't know why it's so hard to convey, but it's important to
understand.
The error in planning on things working as if responding to a normal curve
distribution (i.e. admirably designed for all the usual problems) is relying
on it if there is a growing 'fat tail' of abnormal events (the black swan).
That situation is sure to develop when trying to regulate a system for
producing ever more unusual and complex events. That is precisely what we
were, and have always been, and still are trying to do.
A bubble pops at it's weakest point, not it's strongest. When the
'containment' is a regulatory design, the certainty is that the breach will
occur at the most critical place that no one checked. By definition it's a
small error that multiplies to an irreversible point before anyone quite
realizes it. The CAUSE of that is not the rare event (the pin prick).
It's not the weak point in the containment that no one checked (patches of
poor design or regulation or greed, etc). It's not the size of the bubble
(how big the gradient is from high to low). It's the pump.
The cause is pumping the bubble of complications in an accelerating way that
guarantees people will miss the problems developing. It's operating an
growth system and making the first regulatory error, accepting the learning
curve of exploding complication required to stabilize it forever.
There are a lot of 'why' answers, and some of them circular. I think the
correctable reason why is the common scientific error of reading the future
in the past. We plan on the future behaving like the past by trusting old
stereotypes and patterns for changing things. We plan on the future being
like the past EVEN for systems we design for the purpose changing at
continually multiplying rates. The solution is to notice the cognitive
dissonance... you could say, and just ask the dumb questions.
Phil Henshaw
> -----Original Message-----
> From:
[hidden email] [mailto:
[hidden email]] On
> Behalf Of Phil Henshaw
> Sent: Thursday, October 23, 2008 12:06 PM
> To: 'The Friday Morning Applied Complexity Coffee Group'
> Subject: Re: [FRIAM] MIT experts analyze financial crisis, debate cures
>
> Of course!, the reason they fooled everyone so completely was that they
> were
> designed to be completely sensible. That's what is meant by the
> "black
> swan".
>
> Phil Henshaw
>
>
> > -----Original Message-----
> > From:
[hidden email] [mailto:
[hidden email]] On
> > Behalf Of Owen Densmore
> > Sent: Wednesday, October 22, 2008 12:11 PM
> > To: The Friday Morning Applied Complexity Coffee Group
> > Subject: [FRIAM] MIT experts analyze financial crisis, debate cures
> >
> > This seemed to be a pretty sound analysis of the current crisis:
> >
http://techtv.mit.edu/file/1448/> > In particular, I was surprised to see how reasonable several things I
> > had thought to be "bad" were. For example, the "securitization" of
> > mortgages arose from a very reasonable desire to "smooth out" risk.
> I
> > hadn't understood their function before.
> >
> > -- Owen
> >
> >
> >
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Meets Fridays 9a-11:30 at cafe at St. John's College
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