{"id":3074,"date":"2009-04-10T05:10:05","date_gmt":"2009-04-10T05:10:05","guid":{"rendered":"http:\/\/zenpundit.com\/?p=3074"},"modified":"2009-04-10T05:12:19","modified_gmt":"2009-04-10T05:12:19","slug":"excess-complexity-is-the-route-to-extinction","status":"publish","type":"post","link":"https:\/\/zenpundit.com\/?p=3074","title":{"rendered":"Excess Complexity is the Route to Extinction"},"content":{"rendered":"

\u00a0<\/strong><\/p>\n

Nassim Nicholas Taleb<\/a><\/strong>, author of The Black Swan: The Impact of the Highly Improbable<\/strong><\/a>\u00a0and <\/strong>Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets<\/strong><\/a>, had an op-ed in FT.com<\/strong> <\/a>entitled “Ten principles for a Black Swan-proof world<\/a>” (Hat tip to John Robb<\/a><\/strong> and Pundita<\/a><\/strong>). Taleb was addressing the global economic crisis, but\u00a0I was particularly drawn to Taleb’s fifth principle, which has a more general implication:<\/p>\n

5. Counter-balance complexity with simplicity<\/em>. Complexity from globalisation and highly networked economic life needs to be countered by simplicity in financial products. The complex economy is already a form of leverage: the leverage of efficiency. Such systems survive thanks to slack and redundancy; adding debt produces wild and dangerous gyrations and leaves no room for error. Capitalism cannot avoid fads and bubbles: equity bubbles (as in 2000) have proved to be mild; debt bubbles are vicious<\/strong>.<\/p><\/blockquote>\n

Taleb has encapsulated\u00a0many important concepts\u00a0very well here. Up to a certain point, increasing complexity represents a\u00a0advantage for an evolving system (biological, financial, physical etc.)\u00a0by increasing efficiency through adding\u00a0specialization, interconnection, diversification, redundancy and checks\u00a0for mitigation of risks. Complexity, in the earlier part of a development curve\u00a0can add to a system’s overall resiliency – to a point.<\/p>\n

Superfluous complexity, that which goes\u00a0beyond the minimum required for additional gains in systemic efficiency or productivity, is a net drag on the system, an economic waste, a source of\u00a0friction, a cancer, \u00a0a useless eater of resources and the earliest sign of the system’s inevitable decay. Worse,\u00a0excess complexity\u00a0represents an increasing probability of systemic failure<\/u><\/strong> by multiplying the number of variables involved in the normal process of the system. There are more things that can go wrong and more choke points where a catastrophic failure can occur. Increasing the degree of complexity moves the system away from simplicity and reliability and toward chaos and the creativity of\u00a0emergent <\/a>properties, but like an ice skater seeking ever greater range, go too far and the ice\u00a0will crack under one’s feet.<\/p>\n

This is an effect familiar to engineers and scientists but one that appears to escape the majority of politicians, corporate executives\u00a0and economists. My co-blogger at Chicago Boyz<\/a><\/strong>, Shannon Love<\/strong>, \u00a0took GE to task for trying to get on the Federal dole by advocating needlessly complicating the nation’s power grid:<\/p>\n

If Your Grid Had a Brain<\/a><\/p>\n

<\/a>GE is advertising to build political support for Obama’s plan to purchase billions of dollars of GE tech in order to make the power grid “smart”.\u00a0 After all, who would want a “dumb” anything when they could have a “smart” something?\u00a0<\/strong><\/p>\n

The reason we should keep things dumb is that in engineering the word “dumb” has a different connotation. In engineering, “dumb” means simple and reliable.\u00a0<\/strong><\/p>\n

Increasing complexity in any networked system increases possible points of failure. Worse, the more interconnected the system, i.e., the more any single component affects any other randomly selected component in the system, the faster point-failures spread to the entire system. Power grids are massively interconnected. Every blackout starts with a seemingly trivial problem that, like a pebble failing on a mountain side, triggers an avalanche of failure.\u00a0<\/strong><\/p><\/blockquote>\n

In the social and political domain, back in the 1990’s Philip K. Howard<\/strong>\u00a0wrote a book called The Death of Common Sense: How Law is Suffocating America<\/strong><\/a><\/strong>\u00a0in which he detailed example after example of how the overlawyering of regulatory systems in America by an emerging and\u00a0hyper-aggressive\u00a0legal class was producing neither restraint on government abuses nor fine-tuned social outcomes but instead created a state of paralyzed rigidity, risk aversion, perverse incentives and general dysfunction; in other words, chaos instead of order.<\/p>\n

The Obama-ites in the White House are not “socialists” ( at least not most of them) but there is a great love\u00a0of liberal-minded technocracy there, and a seemingly boundless self-confidence\u00a0in the ability of high-minded,\u00a0upper-middle class, progressive, wonks and lawyers from the “good schools” (or investment houses – in some cases, both) to micromanage not just our lives for us, or even the United States of America but the global economy itself. Sort of a Superempowered Oligarchy of Good Feelings<\/strong>.<\/p>\n

The ancient Greeks had a word for that: hubris<\/a>. More importantly, the Obama-ites are wrong here – adding endless amounts of regulatory complexity is not going to give them the kind of granular control or positive\u00a0returns that they seek to obtain from the system. Counterintuitively, they should be radically simplifying where and to the degree\u00a0they safely\u00a0can\u00a0instead.<\/p>\n","protected":false},"excerpt":{"rendered":"

\u00a0 Nassim Nicholas Taleb, author of The Black Swan: The Impact of the Highly Improbable\u00a0and Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, had an op-ed in FT.com entitled “Ten principles for a Black Swan-proof world” (Hat tip to John Robb and Pundita). Taleb was addressing the global economic […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[360,361,46,420,531,323,327,9,346,332,456,425,78,336,549,376,183,377,187,104,155,32,381,13],"tags":[],"class_list":["post-3074","post","type-post","status-publish","format-standard","hentry","category-21st-century","category-america","category-analytic","category-authors","category-barack-obama","category-black-swans","category-complex-systems","category-complexity","category-connectivity","category-economics","category-globalization","category-government","category-ideas","category-intellectuals","category-markets","category-network-theory","category-obama","category-physics","category-politics","category-reform","category-resilience","category-science","category-society","category-theory"],"_links":{"self":[{"href":"https:\/\/zenpundit.com\/index.php?rest_route=\/wp\/v2\/posts\/3074","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/zenpundit.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/zenpundit.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/zenpundit.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/zenpundit.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=3074"}],"version-history":[{"count":0,"href":"https:\/\/zenpundit.com\/index.php?rest_route=\/wp\/v2\/posts\/3074\/revisions"}],"wp:attachment":[{"href":"https:\/\/zenpundit.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=3074"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/zenpundit.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=3074"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/zenpundit.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=3074"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}