Monday, July 25, 2022

What's Truly Important? The Global Revaluation Is Accelerating

How much gold will you trade for a few eggs? It depends on how hungry you are.

Two ideas will help us understand the rest of this tumultuous decade: core-periphery and the revaluation of what's truly important: systemic adaptability, transparency, accountability, risk, capital and resources. I recently discussed the core-periphery model in a blog post, Crash Is King:

"Crashes reveal what's core and what's periphery because the core controls the destiny of the periphery. In systems terminology, the initial conditions set the parameters of options and the efficacy of various choices. The core's initial conditions are considerably more constructive than the initial conditions of the periphery.

In network terms, the critical connections between nodes run through the core. This is not the case for the nodes. The dependency chains are asymmetric: each node looks stable and independent until push comes to shove. Everyone is dependent but some are less dependent than others."


My point was that crises strip away what's actually essential from claims of what's essential, and reveal what assets are core and which are peripheral.

For example, vast tracts of fertile soil and fresh water river systems are key assets for growing and transporting food and providing fresh water. Long borders with potential enemies is a geopolitical liability.

These initial conditions set parameters that are difficult to overcome.

There are also parameters set by cultural, social, economic and political systems. Those which encourage adaptability and transparency are irreplaceable assets, those that impede adaptability and transparency are liabilities.

The other point about the core-periphery model is that dependencies abound in the global system but when push comes to shove, the core has the means to survive the breakdown of global supply chains while the periphery does not.

Global scarcities are reminding us that what's truly important is the means to grow and distribute food, energy and fresh water to immense human populations.

Growing / raising food and distributing it on an industrial scale requires enormous inputs of energy. Even largely self-sufficient regions depend on fertilizers derived from hydrocarbon inputs.

Water is also energy-intensive as it generally requires massive investments in infrastructure to supply not just the daily needs of the human populace but agriculture and industry.

Civilizations that fail to provide sufficient food and fresh water to their populations collapse. The collapse may start with political turmoil but it soon unravels the entire socio-economic system.

As we revalue what's truly important, a significant percentage of complexity will be revealed as not only non-essential but a huge drag on a system struggling to deliver essentials. A recent article illuminates the systemic weaknesses in complex, centralized, opaque hierarchies--weaknesses I have discussed in many of my books.

Why Complex Systems Collapse Faster
"When Ostrom examined the decision-making methods of successful social systems, she found that they operate as a network in which all the decision-makers in a certain sector are also stakeholders in that sector, and that decisions are always made by negotiated agreements."

In other words, rigid, military-style hierarchies in which the decision-makers do not suffer personal consequences from their decisions are especially prone to collapse.

Perhaps Ostrom's advice is not so different from what the ancient Chinese philosopher Lao Tzu wrote in the Tao Te Ching: "rigidity leads to death, flexibility results in survival."

In sum, a lack of transparency, skin in the game and accountability doom top-down complex systems to collapse.

Nassim Taleb of Black Swan and Antifragile fame recently noted the critical role of transparency in systemic resilience. He observed that "a system seems all the more dysfunctional when it is transparent."

In other words, when we see all the petty squabbling, the clash of competing self-interests and the conflicts arising from advocacy, we reckon that system is dysfunctional and doomed.

But that is the healthy system, for what's at stake is visible to all, as is the process of all the stakeholders negotiating some agreement on how to proceed.

Corruption requires opacity: backroom deals, insider trading, bribery, etc. cannot occur in the bright light of transparency, i.e. all critical information is available to all stakeholders.

We can add to Lao Tzu's dictum on flexibility: Opacity leads to death, transparency results in survival.

Opaque hierarchical systems appear tranquil and well-managed because the conflicts, self-interest and corruption are hidden. But opacity and rigid hierarchies are systemic weaknesses. These systems cannot compete with transparent, more decentralized, adaptable systems in eras of crisis.

What is core to a system's survival is two-fold: it must have the transparency, accountability (skin in the game) and flexibility described above, and the real-world resources to provide its own essentials.

This is scale-invariant: it describes households, villages, counties and countries.

How many times have we heard: "They broke up? But they were the perfect couple." Indeed. It's so much easier to hide problems and dysfunctions behind a happy-face facade of suppression.

The couple that is open about their negotiating difficult situations is the healthy relationship. The couple that hides their dysfunctional lack of communication and inability to find solutions that work for both people is the unhealthy relationship.

This is as true of nations as it is of couples. Systems that are transparent, accountable and adaptable have insurmountable selective advantages over opaque centralized hierarchies.

One important aspect of transparency is establishing value, which is reflected in the cost / discovery of price. If supply, demand, inputs, friction, insider dealing and risk are all opaque--hidden, misrepresented, manipulated --then it's impossible to value anything properly.

Decisions made on inaccurate valuations cannot possibly be good decisions.

A global revaluation of systemic adaptability, transparency, risk and resources is accelerating. Those with the essentials of systemic adaptability (decentralized, accountable, antifragile, transparent) will survive and those without these essentials will collapse.

Those with the means to supply their own food, energy and water (what I call the FEW essentials) will survive, those who live or die on long dependency chains snaking through global rivals will not.

As I explain in my new book Global Crisis, National Renewal, the nation that downsizes its consumption to what's available will survive, those which attempt to live beyond their means via financialization will collapse.

When there's plenty of everything, it's easy to confuse what's essential with what's not essential but perceived as valuable. When what's truly essential is scarce, then what's essential becomes clear and is repriced accordingly. What's non-essential is also repriced accordingly.

Gold was plentiful in the early boom years of the California Gold Rush. What was scarce was eggs. How much gold will you trade for a few eggs? It depends on how hungry you are.




Recent podcasts/videos:

Tectonic Shift of Mercantilism Revalued (Gordon Long, Macro-Analytics, 42 min)

My new book is now available at a 10% discount this month: When You Can't Go On: Burnout, Reckoning and Renewal.

If you found value in this content, please join me in seeking solutions by becoming a $1/month patron of my work via patreon.com.



My recent books:

Global Crisis, National Renewal: A (Revolutionary) Grand Strategy for the United States (Kindle $9.95, print $24, audiobook) Read Chapter One for free (PDF).

A Hacker's Teleology: Sharing the Wealth of Our Shrinking Planet (Kindle $8.95, print $20, audiobook $17.46) Read the first section for free (PDF).

Will You Be Richer or Poorer?: Profit, Power, and AI in a Traumatized World
(Kindle $5, print $10, audiobook) Read the first section for free (PDF).

Pathfinding our Destiny: Preventing the Final Fall of Our Democratic Republic ($5 Kindle, $10 print, ( audiobook): Read the first section for free (PDF).

The Adventures of the Consulting Philosopher: The Disappearance of Drake $1.29 Kindle, $8.95 print); read the first chapters for free (PDF)

Money and Work Unchained $6.95 Kindle, $15 print)
Read the first section for free


Become a $1/month patron of my work via patreon.com.




NOTE: Contributions/subscriptions are acknowledged in the order received. Your name and email remain confidential and will not be given to any other individual, company or agency.

Thank you, Scot M. ($XXX), for your beyond-beyond-outrageously generous contribution to this site -- I am greatly honored by your longstanding support and readership.

 

Thank you, Mike M. ($50), for your magnificently generous contribution to this site -- I am greatly honored by your steadfast support and readership.


Thank you, George S. ($5/month), for your gloriously generous pledge to this site -- I am greatly honored by your support and readership.

 

Thank you, Christin S. ($50), for your monstrously generous contribution to this site -- I am greatly honored by your support and readership.

Terms of Service

All content on this blog is provided by Trewe LLC for informational purposes only. The owner of this blog makes no representations as to the accuracy or completeness of any information on this site or found by following any link on this site. The owner will not be liable for any errors or omissions in this information nor for the availability of this information. The owner will not be liable for any losses, injuries, or damages from the display or use of this information. These terms and conditions of use are subject to change at anytime and without notice.


Our Privacy Policy:


Correspondents' email is strictly confidential. This site does not collect digital data from visitors or distribute cookies. Advertisements served by a third-party advertising network (Investing Channel) may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative). If you have other privacy concerns relating to advertisements, please contact advertisers directly. Websites and blog links on the site's blog roll are posted at my discretion.


PRIVACY NOTICE FOR EEA INDIVIDUALS


This section covers disclosures on the General Data Protection Regulation (GDPR) for users residing within EEA only. GDPR replaces the existing Directive 95/46/ec, and aims at harmonizing data protection laws in the EU that are fit for purpose in the digital age. The primary objective of the GDPR is to give citizens back control of their personal data. Please follow the link below to access InvestingChannel’s General Data Protection Notice. https://stg.media.investingchannel.com/gdpr-notice/


Notice of Compliance with The California Consumer Protection Act
This site does not collect digital data from visitors or distribute cookies. Advertisements served by a third-party advertising network (Investing Channel) may use cookies or collect information from visitors for the purpose of Interest-Based Advertising. If you do not want any personal information that may be collected by third-party advertising to be sold, please follow the instructions on this page: Limit the Use of My Sensitive Personal Information.


Regarding Cookies:


This site does not collect digital data from visitors or distribute cookies. Advertisements served by third-party advertising networks such as Investing Channel may use cookies or collect information from visitors for the purpose of Interest-Based Advertising; if you wish to opt out of Interest-Based Advertising, please go to Opt out of interest-based advertising (The Network Advertising Initiative) If you have other privacy concerns relating to advertisements, please contact advertisers directly.


Our Commission Policy:

As an Amazon Associate I earn from qualifying purchases. I also earn a commission on purchases of precious metals via BullionVault. I receive no fees or compensation for any other non-advertising links or content posted on my site.

  © Blogger templates Newspaper III by Ourblogtemplates.com 2008

Back to TOP