If you want to understand how an old monetary system worked, the first place to look is the coins. They are durable and typically stored in secured locations, perfect for preservation. Yet, if you only study what survived, you’ll never get the full picture. You must also study the stuff that burned, decomposed and disintegrated. Imagine future historians studying the Great Recession by only looking at nickels and euros. They must examine online banking statements, read economic papers, research mortgage backed securities and junk bonds. “Coinage may have been only the very tip of the monetary iceberg,” Felix Martin concludes in Money: The Unauthorized Biography.
Below is my philosophical notebook. Everything here is a work in progress; I welcome and encourage comments. This is my thinking at it’s roughest (expect but ignore typos). The “Articles” tap contains articles I’ve written as a “science writer.” They are much less philosophical and represent an earlier period of my thinking.
Nature understands size much better than humans. Nature penalizes size. An elephant will die from small injuries (a broken ankle) while a mouse with the same injury will survive. The eco-system will not perish when an elephant dies. Many more mice than elephants.
The removal of large species (whales, elephants, hippos) would impact the eco-system much, much less than the removal of small species (mosquitoes, flies, plankton). Banking is the opposite. One failure brings the entire system to a grinding halt. Nature is bottom-up; man-made systems are, generally, top-down. Nature is robust and we are fragile.
We tend to confuse long-term stability within man-made systems with permanent stability, and thus conclude (falsely) that we are smarter than nature. No empire lasts forever, yet at their peaks, its citizens predicted just that. No fortune lasts forever; money runs out. Long-term stability makes us complacent, in fact. So the longer a man-made system has existed (not a physical thing or a rule or a law) we should be more and more worried.
This is an early draft of a 250 essay. I’m posting it here so I don’t forget some of the ideas that were cut from the final draft.
Main concern: Are there two types of gray swans? 1) Conceivable, Unpredictable but forecast-able and 2) Conceivable, Unpredictable in the long-run but predictable in the (very) short term. Earthquakes are in the first category. Terrorist attacks are in the second category. 9.0 Earthquakes and 9/11 are both conceivable (and NOT unknown unknowns) but intelligence analysts had enough info to predict 9/11. Earthquakes are inherently unpredictable.
Terrorist attacks and earthquakes have a lot in common—at least to Aaron Clauset. In The Signal and the Noise, Nate Silver explains that according to Clauset, earthquakes and terrorist attacks both follow power-law distributions. If you don’t have a mathematics degree, that means that small earthquakes (0-4.9) are common, medium-sized earthquakes are less common (5.0-7.9), and large earthquakes (8.0 or greater) strike a few times a century. Terrorist attacks, in terms of total fatalities, behave similarly.
Of course, we can control terrorist attacks, and that’s one reason why they are different than earthquakes. However, I’d rather be a seismologist than an intelligence analyst. While there are only a few different types of earthquakes, there are thousands of ways a terrorist could strike. The challenge for the intelligence analyst is to scrutinize a large number of hypotheses—hijackings, chemical attacks, bombings, shooting sprees.
National security disasters in the United States are often the result not of a dearth of information but imagination. That is, no one considered the correct hypotheses. For instance, at Pearl Harbor analysts never reviewed the possibility of a full blow aerial attack even though evidence suggested that it was possible—even likely. According to the 9/11 Commission, we had enough information to anticipate September 11th, but the C.I.A and F.B.I never seriously examined the idea that terrorists would hijack four planes and crash them into high-profile buildings. As the Nobel-Prize winning economist Thomas Schelling put it, we tend “to confuse the unfamiliar with the improbable.”
What can earthquakes and terrorist attacks teach us about business? More than you think. Technology also follows power-law distributions. In history, a few revolutionary inventions (the wheel, the printing press, the steam engine) are surrounded by thousands of less groundbreaking inventions (thermometers, zippers, CD-Rom), which are surrounded by millions of small inventions (snuggies and post-it notes). Revolutionary inventions disproportionally affect the economy in the same way that large earthquakes and terrorist attacks inflict a disproportionate amount of damage. The wheel was a 9.0 magnitude invention.
Earthquakes are not predictable. Are inventions like the wheel predictable like 9/11 was? Yes and no. We cannot predict inventions (or terrorist attacks) that will occur in the distinct future. But we might be able to predict an invention that will emerge within the next 2-5 years (if there is one). For instance, all of the components of the iPod existed for a few years before Steve Jobs fit them into your pocket. According to Scott E. Page, all of the components of the steam engine existed for two decades before the steam engine. There was a small window in which someone had enough information to predict the iPod and the Steam Engine.
But remember the lesson from Pearl Harbor and 9/11. They were failures of the imagination and not failures of information. “The signals just weren’t consistent with our familiar hypotheses about how terrorists behaved, and they went in one ear and out the other without our really registering them,” says Silver.
A conversation is like playing catch (and we never learn learn how to listen)
Mortimer Adler & Charles van Duren (How to Read a Book):
The reader or listener is much more like the catcher in a game of baseball. Catching the ball is just as much an activity as pitching or hitting it. The pitcher or batter is the sender in the sense that his activity initiates the motion of the ball. The catcher or fielder is the receiver in the sense that his activity terminates it. Both are active, though the activities are different. If anything is passive, it is the ball. It is the inert thing that is put in motion or stopped, whereas the players are active, moving to pitch, hit, or catch.
Instead, just as in a ball game the catcher must move and change position in a rhythm which responds to that of the thrower, so in the case of speeches there is a certain harmonious rhythm on both the speaker’s and the listener’s part, if each of them makes sure that his own conduct is appropriate.
This is what you will see skilful ball players doing also. None of them is concerned about the ball as being something good or bad, but about throwing and catching it. Accordingly, form has to do with that, skill with that, and speed, and grace; where I cannot catch the ball even if I spread out my cloak, the expert catches it if I throw.
Yet if we catch or throw the ball in a flurry or in fear, what fun is there left, and how can a man be steady, or see what comes next in the game? But one player will say “Throw!” another, “Don’t throw I ” and yet another, “Don’t throw it up!” That, indeed, would be a strife and not a game. In that sense, then, Socrates knew how to play ball. How so? He knew how to play in the lawcourt. “Tell me,” says he, ” Anytus, what do you mean when you say that I do not believe in God. In your opinion who are the daemones? Are they not either the offspring of the gods or a hybrid race, the offspring of men and gods?” And when Anytus had agreed to that statement Socrates went on, “Who, then, do you think, can believe that mules exist, but not asses?” In so speaking he was like a man playing ball. And at that place and time what was the ball that he was playing with? Imprisonment, exile, drinking poison, being deprived of wife, leaving children orphan.These were the things with which he was playing, but none the less he played and handled the ball in good form. So ought we also to act, exhibiting the ball-player’s carefulness about the game, but the same indifference about the object played with, as being a mere ball.For a man ought by all means to strive to show his skill in regard to some of the external materials, yet without making the material a part of himself, but merely lavishing his skill in regard to it, whatever it may be. So also the weaver does not make wool, but he lavishes his skill on whatever wool he receives. Another gives you sustenance and property and can likewise take them away, yes, and your paltry body itself. Do you accordingly accept the material and work it up. Then if you come forth without having suffered any harm, the others who meet you will congratulate you on your escape, but the man who knows how to observe such matters, if he sees that you have exhibited good form in this affair, will praise you and rejoice with you; but if he sees that you owe your escape to some dishonourable action, he will do the opposite. For where a man may rejoice with good reason, there others may rejoice with him.
“Riches do not exhilarate us so much with their possession as they torment us with their loss.” – Epicurus
“Men feel the good less intensely than the bad.” – Livy
“For most people, the fear of losing $100 is more intense than the hope of gaining $150. We conclude from many such observations that losses loom larger than gains and that people are loss averse.” – Daniel Kahneman