Re: [FRIAM] MIT experts analyze financial crisis, debate cures
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: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] 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: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] 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 FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org
Re: [FRIAM] MIT experts analyze financial crisis, debate cures
Phil, You speak of causality and why answers as if they ought be deterministic in some scientific paradigm. Uncle Occam cautions that may be one assumption too many. Therefore, I sense that the underlying assumption in your observation is that science is supposed to be the search for truth from events of the past. I refer you to Henry Pollack's book Uncertain Science, Uncertain World, and Michael Lynton's observation that the purpose of science is to separate the demonstrably false from the probably true. I would add that probably true actually means probably not false, so even that logical state is approached asymptotically. This is an artifact (meaning a residual error or inaccuracy) from a Newtonian era paradigm of science that has long been shown erroneous yet still permeates most peoples thinking. The problem caused by planning on things working is what I call The Sunny Day Paradox - usually faced by those who believe in a deterministic scientific paradigm. In other words, in spite of successful surgery, the patient died. One last point, by pump do you mean probabilistic wavefunction? Ken -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of Phil Henshaw Sent: Friday, October 24, 2008 8:17 AM To: [EMAIL PROTECTED]; 'The Friday Morning Applied Complexity Coffee Group' Subject: Re: [FRIAM] MIT experts analyze financial crisis, debate cures 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: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] 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: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] 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 FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures
Re: [FRIAM] MIT experts analyze financial crisis, debate cures
Ken Phil, You speak of causality and why answers as if they ought be deterministic in some scientific paradigm. Uncle Occam cautions that may be one assumption too many. [ph] Ah yes... but the value of deterministic answers does not remove the value of closely focused anticipatory questions. One needs to be careful not to waste one's time, but there really are some clear actionable signs of change that are every bit as useful as deterministic answers. Therefore, I sense that the underlying assumption in your observation is that science is supposed to be the search for truth from events of the past. I refer you to Henry Pollack's book Uncertain Science, Uncertain World, and Michael Lynton's observation that the purpose of science is to separate the demonstrably false from the probably true. [ph] Yes, and of course what science is is whatever scientists do and that's a quite broad spectrum of things. Some habits scientists consistently return to over and over, include coming up with new questions when the patterns of what we're looking at just don't fit... I'm just pointing to a better methodology for identifying that 'cognitive dissonance' in the environment that prompts the need for new questions. It's a way of scanning the environment for signs of impending systems change, and things like that. Relative to *that* point of view the purposes of science seem to be to describe only what is changeless, and to distract us from many of the exciting new questions all around us. I would add that probably true actually means probably not false, so even that logical state is approached asymptotically. This is an artifact (meaning a residual error or inaccuracy) from a Newtonian era paradigm of science that has long been shown erroneous yet still permeates most peoples thinking. [ph] Well, from an anticipatory science view probably true mean worth checking out, so even if past data is inconclusive at the moment, the progression observed may suggest future data will become so. As we build an ever more complex and rapidly changing world, the probably true expectation that the system will expose ever larger errors we didn't see is, in my estimate, worth looking into. The problem caused by planning on things working is what I call The Sunny Day Paradox - usually faced by those who believe in a deterministic scientific paradigm. In other words, in spite of successful surgery, the patient died. [ph] Well that is also aptly pointed out with the statistical world view of the turkey in the month before Thanksgiving... He's being treated unusually well and feeling fit as a fiddle... statistically speaking he has great prospects for a long life. One last point, by pump do you mean probabilistic wavefunction? [ph] No I don't mean equations. I mean a reciprocating process of accumulation. The simple handle pump for water in a farmyard or the spritzer of a lady's perfume are analogous in various ways to the complex processes that systems use to accumulate changes. If the spritzer worked the way a growth system does, starting with an almost imperceptible discharge and then using some output to multiply the output, a person patient and persistent enough to get it to operate at all is likely to be suddenly drenched with perfume and feint to the floor if they don't pay very close attention to just when to stop it. It's the relation between the doubling rate of the pump and lag time in the control system responses that displays the range of outcomes. The big lag time to watch, of course, is the time it takes to switch it off automatic. It's actually a quite useful question.The wonder to me is why science has not yet seemed to acknowledge that systems of change change things. Phil Ken -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] On Behalf Of Phil Henshaw Sent: Friday, October 24, 2008 8:17 AM To: [EMAIL PROTECTED]; 'The Friday Morning Applied Complexity Coffee Group' Subject: Re: [FRIAM] MIT experts analyze financial crisis, debate cures 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
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: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED] 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 FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org
[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 FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org
Re: [FRIAM] MIT experts analyze financial crisis, debate cures
In the video I sent out below, there were several buzz words that I found here: http://en.wikipedia.org/wiki/Structured_finance -- Owen On Oct 22, 2008, at 10:11 AM, Owen Densmore wrote: 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 FRIAM Applied Complexity Group listserv Meets Fridays 9a-11:30 at cafe at St. John's College lectures, archives, unsubscribe, maps at http://www.friam.org
