Market Curiosity: Exploring Markets And Systems

May 14, 2011

Bruce Schneier: All complex systems contain parasites. (Healthy systems have friction [choices])

Filed under: Systems — Tags: , — Jeff Fitzmyers @ 9:04 pm

“Why security exists in human societies”: In any system of cooperative behavior, an uncooperative strategy will be effective — and the system will tolerate the uncooperatives — as long as they’re not too numerous or too effective. Thus, as a species evolves cooperative behavior, it also evolves a dishonest minority that takes advantage of the honest majority. If individuals within a species have the ability to switch strategies, the dishonest minority will never be reduced to zero. As a result, the species simultaneously evolves two things: 1) security systems to protect itself from this dishonest minority, and 2) deception systems to successfully be parasitic.

… The basic mechanism can be modeled simply. It is in our collective group interest for everyone to cooperate. It is in any given individual’s short-term self-interest not to cooperate: to defect, in game theory terms. But if everyone defects, society falls apart. To ensure widespread cooperation and minimal defection, we collectively implement a variety of societal security systems.

Two of these systems evolved in prehistory: morals and reputation. Two others evolved as our social groups became larger and more formal: laws and technical security systems. What these security systems do, effectively, is give individuals incentives to act in the group interest. But none of these systems, with the possible exception of some fanciful science-fiction technologies, can ever bring that dishonest minority down to zero…

… Power struggles over who controls the mechanisms of societal security are inherent: “group interest” rapidly devolves to “the king’s interest.” Societal security can become a tool for those in power to remain in power, with the definition of “honest majority” being simply the people who follow the rules.

The term “dishonest minority” is not a moral judgment; it simply describes the minority who does not follow societal norm. Since many societal norms are in fact immoral, sometimes the dishonest minority serves as a catalyst for social change. Societies without a reservoir of people who don’t follow the rules lack an important mechanism for societal evolution. Vibrant societies need a dishonest minority; if society makes its dishonest minority too small, it stifles dissent [change?] as well as common crime.

Why you only need a “good enough” trading system, not a perfect one. 100% at a complex system level usually means something is messed up. This headline is a sign that the financial system is cancerous (uncontrolled division of abnormal cells): Bank of America Joins Goldman Sachs, J.P. Morgan with No Trading Losses in First Quarter

The Architect: The first matrix I designed was quite naturally perfect. It was a work of art. Flawless. Sublime. A triumph only equaled by its monumental failure…

The Architect: … As I was saying, [the Oracle] stumbled upon a solution whereby nearly 99% of all test subjects accepted the program as long as they were given a choice, even if they were only aware of that choice at a near-unconscious level. While this answer functioned, it was obviously fundamentally flawed, thus creating the otherwise-contradictory systemic anomaly that if left unchecked might threaten the system itself. Ergo, those that refused the program, while a minority, if unchecked would constitute an escalating probability of disaster.

The Oracle: “You and I may not be able to see beyond our own choices, but that man can’t see beyond any choice.”
Neo: “Why?”
The Oracle: “He doesn’t understand them, he can’t. To him, they are variables in an equation. Each one must be solved and counted. That’s his purpose. To balance the equation.”
Neo: “And yours?”
The Oracle: “To unbalance it.”

The Architect does not understand that, in the human arena, a bit of friction (choice) actually denotes a perfect system — the ability to be: (origins: ‘sum’, ‘est’, ‘remain’, ‘I was,’ ‘I become’, ‘bring forth, cause to grow.’). Too much friction (no choice) and nothing grows; too little friction (too much choice) and there is no way to stop growth: cancer, no psychological boundaries.


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