Complexity Catastrophe

Simple idea, complex problems. Human systems face very 21st century stresses...

WHAT do we mean by the term complexity catastrophe? asks Dan Denning in The Daily Reckoning Australia.

Well, ironically, it's an easy term to explain. Any organization or institution is really a network of interactions between people. The larger an organization or institution gets, the more trouble it has in adapting to sudden, even existence-threatening changes.

Anyone from a large family knows this intuitively. The more people involved in a decision, the less likely you are to get any decision at all, much less one that pleases everyone and actually works. As the youngest in a family of 12 children, I know this as an iron law of the Universe: bigness defeats adaptability.

But bigness isn't automatically a liability in all instances. In evolutionary terms, bigness bestows upon an organization or organism certain advantages. You can eat everything smaller than you, for example. That which you choose not to eat you can crush under your foot for amusement.

In nature, however, big things don't adapt well to catastrophic changes in their environment or ecosystem. They are fit for purpose so long as things remain in a relative equilibrium. Throw a meteor strike or two into the mix and you've got yourself a die-off. The whole food chain gets rearranged. This kind of creative destruction was great news for mammals. It was last rites for dinosaurs.

Now, applying a natural world metaphor to the realm of politics and government is tricky, but let's do it anyway!

The European Union is a union of separate States. Those separate states are themselves unions of smaller regions, cities, and municipalities. And those municipalities are loosely organized networks of people that live in towns, villages, and neighborhoods. The whole thing is a network, or a network of interconnected networks. There are over 500 million people in the network.

This is where the complexity comes in, because everyone is connected to everyone else. That sounds like some people's version of a better world. But in terms of evolution, that kind of interconnection, or interdependence, can lead to catastrophic paralysis and death for a complex system.

Interconnection might be nice at an interpersonal level, but it does not promote survival at a Superstate level. This all becomes clearer when you put it in terms of financial connections.

The connections between people, in financial terms, are the nodes in the financial system. These connections are the stakes European banks have in sovereign. Or the connections European governments have with banks. And the connections investors have with banks and debt. Or the connection between depositors and banks. Everything is connected to everything.

So when Jin Liqun of the China Investment Corporation – China's sovereign wealth fund – complains of frail leadership in Europe, he may be ignoring a more basic fact: highly interdependent complex systems cannot be led. Yes, they are frail, but not for lack of leadership. They are systems that have evolved to a point where any further change could be fatal.

When these highly interdependent systems become too complex (as Europe's financial system is now) – when taking one action has unpredictable or undesirable consequences for other actors in the network – the only stable state is paralysis, which is not exactly a survival strategy either.

So perhaps Europe is holding very still because it's afraid that if it moves – in any direction at all – everything may come apart. At the very least, the organism/organization that is Modern Europe cannot survive radical change. It cannot adapt. There is no way to cut Greece out of the Euro without having some negative consequence for other 'stakeholders'.

But maybe that's the real issue here: the reluctance to admit that there's no such thing as a free lunch.

The notion of a riskless society – with a generous social welfare net – is that nobody ever has to fail or suffer the consequences of their failure, and that all human suffering and misery will be outlawed and eradicated. This is like saying that lunch is free for everyone, every day.

This philosophy (utopian and beautiful in the abstract) has been extended to capitalism, where the State increasingly guarantees the losses while the profits are private or for shareholders. The idea of a riskless society is that everyone can and should be protected from everything all the time, including themselves.
Sooner or later someone is going to have to pay in Europe. And in Japan. And in America. The respective political systems in each region have tried to pass that cost off on to future generations by racking up debt. But the buyers are drying up.

We are reaching the end game. Currency is being perverted and corrupted by the hour. The whole edifice is built on unsound money. It's cracking. It will fall.
The spoiled children of the Welfare State can march and chant all they want, but something can't come from nothing. Somebody is going to have to pay. It will be an object lesson for a whole generation of humanity. But that's a good thing.

The more we dilute or dull our sense of risk, the less safe the world becomes. Awareness of risk promotes survival because it teaches us how to manage danger without being eaten by a predator. The political-banking elite have tried to create a world in which there are no predators save the State. Now we are all in danger of being eaten

Not that we're hoping for a meteor strike. But have you ever seen a T-Rex's arms? They're tiny! If you can stay nimble, adapt, and mind your surroundings, you have a fighting chance. What else can you ask for?

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