For some time, I have wanted to post about “crises are natural preludes to wars”. I am definitely not that qualified to say that, so I am glad these guys (LEAP experts) are. They predicted quite well the crisis, they invented the word “global systemic crisis” back in 2006. What they say is very scary. Even if they do their best not to mention “war”, they speak about “global geopolitical dislocation”, “tragic consequences” and say “the world will look more like Europe in 1913 rather than our world in 2007”. However, as I am an optimistic guy, let me remind you that I have good news about the crisis and that controls and that genius can save us.
In case I am not clear about why controls can save the world, here is the short version: uncontrolled systems, like natural systems are almost always unstable and chaotical. Chaotical systems (1) are ‘worse’ than unstable because they look like they are stable, like they are converging to a limit but actually at about any time they can diverge. So nothing is worse than “no control”. At worst a bad control leaves us in an uncontrolled situation.
Therefore, the world needs more control at all scales from “personnal self-control” to “World control” going through cities, regions, states, or countries control systems. In case you wonder, I am really not speaking of some kind of a Big Brother, fascist, centralized control system. I am more speaking of a democratic, distributed (decentralized) control system. If you are a computer scientist think about the Git Distributed Version Control System, (intro to git here, graphical explanation here). I will explain more in details what I am thinking about in a later post. Remember my point for today. There is no real choice it is either control or war. War, being the expression of the natural divergence of an uncontrolled human system; WWIII would be a ‘game over’ for the world. However, once you choose control, there are plenty of possibilities, stay tuned.
(1) Climate or Volcanoes are good examples of chaotical systems. For a long time they look quiet, and all of a sudden they explode. So yes, they should be controlled. CO2 control is an attempt for climate. Not sure it will work, not sure it is really useful but it is definitely worth trying it. I have a humoristic post about a volcano control system in preparation.
PS If you are interested in controls questions, please join the control theory group on Facebook.
PPS If you wonder what ThinkoSphere is doing in all that, I will speak about it in a later post. But you are definitely right, it is related.
He is from a minority. He is American, lives in the US but has a dual culture. He studied in the best universities. He is one of the smartest guys on Earth. He had many awards for his outstanding work along his long and brilliant career. He has always fought received ideas. He is not afraid of complexity but knows to recognize simplicity in the middle of intricated systems that most people consider as infinitely complex. He is not afraid of telling people when they are wrong. He is not afraid of telling them what to do. He does not hesitate to fight alone against the majority but definitely prefers to be with the majority. If listened to earlier, many casualties would have been avoided. He wants to change the world and he has a plan.
No, I am not speaking about Barack Obama. Let me continue. He is Franco-American. He studied aeronautics. He deserves a Nobel prize in all categories: economy, physics, medecine (biology), chemistry, and even litterature and peace, because his work helped describing and understanding the geometry of nature. His work can indeed be applied to stock market, natural borders, lungs description, fluid mechanics, animal population evolution, clouds. He wrote many inspiring books. If more listened to the world would be way more peaceful because better understood and less submitted to crisis.
Yes, I am speaking about Benoit Mandelbrot and the good news is: his work on finance is slowly being recognized by the media and by economists.
Listen to Mandelbrot and global warming, crisis and wars will just be bad memories. OK I am exaggerating, but I am not sure how much ;-).
PS If you know which conferences Mandelbrot is going to attend this year, please let me know in the comments because he is definitely the celebrity I would love most to meet.
We are in the eye of a stock market cyclone. How did we get there ? One humoristic explanation of the subprime crisis can be found here. Another way to say it is that the financial world completely inverted the roles by lending a lot of money (I am not speaking about microcredit) to the weaker classes and by speculating on them instead of lending money to strong companies.
When I was a child, I was always surprised when hearing the French proverb “people lend only to the rich”. As many, I was surprised because the first reaction is to think rich people do not need money, poor people do need it. So the logical thing seems indeed to lend to the poor. However, to lend is not to give. In fact, lending money is not only a time exchange. I transfer you this money now, you will transfer it back to me later. But it is even a sale. I am selling you this money for this price (interest rate). So some of our great financial engineers sold expensive products (home and loans) to people who could hardly afford them. Worst of all they speculated on these products, resulting in destroying the value of both the home and the loan. While they did that they GAVE money to the rich. Lehman Brother’s CEO made 500 million dollars in eight years and he was already rich before being CEO. More generally, the whole finance world created crazy wages.
At the same time, companies in the industry got troubles borrowing money and went on a harder pressure to make profits whatever it takes. One such extreme solution is offshoring. On the paper, it seems to generate profits, but globally it destroys value because it destroys the experience acquired by the workers, engineers and management teams (about everyone is impacted by offshoring). This experience is something totally concrete which has a high value. Unfortunately, this value might not be easy to fit in the math models our finance guys came up with.
So let’s summarize : the poor got a money they could never reimburse, companies did not get a money they could reimburse, the rich were given a real part of a money virtually created by speculation. These last ten years, finance seemed to work with this motto in mind : Lend to the poor, give to the rich. Therefore, it looks like this remainder is not superfluous : LEND to the rich, GIVE to the poor (not the opposite). With this crisis, there will sadly be plenty of new poor people and there will be plenty of companies desperately needing credits.
Thus, now is the time to actually apply this advice. And finally, if you hear again the proverb “people lend only to the rich”, just think back to the 2008 great crisis to remind you what it precisely means.