The World Is Too Complex (Guest essay by Subuddh Parekh)

Guest essayist Subuddh Parekh is the proprietor of the honjaku.com blog.

So Dubai has fallen, another one bites the dust. What to make of this latest fall? The same old story of greed and excess? Perhaps. But it is also worth considering the role of technology in these financial collapses. Simply put, our technological prowess has far outstripped the capacity of our institutions and social systems that form the framework of our financial and social life.

Consider the joint stock company that is at the heart of our economic arrangements. The original intention of a stock as ownership of an organization where you could go vote on its governance seems antiquated, almost laughable now, drowned out in the trillions of trades made electronically not just in the purchase and sale of the stock but in the purchase and sale of an infinite variety of agreements about the stock, all those derivatives.

Look at AIG or Dubai World. Yes AIG made bad bets, but the scale and volume of their bets were possible only because of the technology they had at their disposal. So too did Dubai World. Imagine if AIG was still selling its insurance, in whatever form, through paper contracts? Would they have been able to process the volumes of contracts that they did?

As the scale of what we can do increases so too does its impact and ripple effect and so too does the scale of the fallout when what we do falls apart. Firms take the leverage they do because they can. Leverage is often justified by risk analysis. Lots of very brilliant Phds crank out sophisticated technical risk models to assess exposure and risk. These allow great profits in the short run and great bonuses that go with that.

They do it because they can, the computing power allows it and the institutional system designed for a different skill set and behaviour pattern is easily usable in this way. It’s difficult to see where restraint will come from. Even if nine people declined the tenth would and then the others would have to follow would they not? These people are not necessarily people with any moral defects or such. Go to a quant hedge fund and you will most likely find very single minded mathematicians.

Controls, more laws, more regulations are like band aids on a dam that is bursting. They may patch up a few things but they will not address the main issue. The more complex a system is the more complex and incomprehensible the control system required and in any case it is impossible to design a perfectly controlled system.

The world is simply becoming too complex for most people to comprehend, even many who are operating the levers of power. We seem to be in a historical transition phase where our new abilities to do things has changed our behaviour but our social systems are based on older behaviour patterns creating a big disconnect.

These transition phases have appeared in history before. While technological prowess can grow very quickly, social systems take much longer to change. This often leaves people in intermediate spaces. They must adapt to new behaviour patterns while still living with the conditionings and expectations of older social systems.

As it is much of the world has been struggling, especially in the developing world, with living in an industrial society while being raised with the social systems of an agricultural one. Now there is a new requirement thrown on top of that, that of living in a technological information society.

The world of displaced people in intermediate spaces is growing and it will only get much worse. It is hard to see how the tide will be stemmed, there is no stopping it. Someone somewhere will grab the baton and run with it, and no laws, no policing is going to be enough. It is simply not possible to ask people to become less competent.

When there was a major displacement of people in Europe because of industrialization and the enclosing of the commons people then had an outlet. They could go to America or Australia. Today where will the displaced people of the world go? There is no free space left on the planet. Well, perhaps Antarctica will beckon. (http://us.imdb.com/title/tt1093824/)

So what are the 'solutions'? There aren’t any as yet. We just have to deal with this complexity in whatever way we can. Some will choose to tune out, others will see if they can find a way to grab a piece of the pie, yet others will just have to limp along as best they can, some will experiment with new living arrangements, new community styles. After all, we can’t stem the tidal wave of technological know how but we can appreciate how it affects us, how to use it to our advantage and find a niche for ourselves as best we can.

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