Wake-up Calls

The financial meltdown shows few signs of stopping right now. It is certainly a wake-up call to warn us of danger to our financial health. Because we depend on our money resources for almost our entire well-being these days, it has triggered a very painful and often depressing feeling. But like so many crises, it is an opportunity as well as a calamity.
The opportunity is not to focus on the outcome, although it is very hard not to read the tea leaves that we call the Dow. Somehow we take the Dow as the measure of our financial health. And thereby we fool ourselves into thinking that the free financial market is nothing more than a money machine, with emphasis on the word, machine. Driven by computers programmed to locate tiny chinks in the rational model of a market, and by the tool of risking other people’s money to multiply your own meager capital manyfold, it seemed like a foolproof system for those owning the computer’s while holding other people’s money.
But somehow on the way to the bank, the bubble and illusions collapsed. We should not be surprised, but we are. The machine model very briefly described here is simply not correct. The system is much more than a mechanistic assemblage of parts. It has human beings involved at many places in the system, from those who put money in, those that pulled the strings and levers–like the Wizard of Oz, and those that took money out. It is in the world of scholars that study such systems, a complex system.
In complex systems, the interrelationships matter more than the workings of the individual parts. And when you have so many such interrelationships as in the financial system, you cannot stand back and describe the whole system by the same kind of behavioral laws we use, for example, for the solar system. But even more critical to the case here is that you cannot predict the future. There is no Farmer’s Almanack or ephemeris to tell you what to expect tomorrow or next week. Systems like these often exhibit climactic changes-not climate change, although there is a close relationship here. Over night, they move from one state to another far removed and possessing very different qualities and structure.
The wake-up call is that the planetary system on which we depend absolutely for life itself is such a complex system. Even parts of it are themselves complex. The climate system is one. The economic system is another. So are fisheries and forests. In most cases, the systems can and do adapt to changing circumstances. They change under these perturbations, but only in degree, producing a little more or a little less of what we want. For several years, the Dow grew or fell just a little each day, fooling us into believing that the financial market was predictable and mechanical.
We believed our models were right until the evidence proved us wrong, and we suddenly had to change the fundamental way we humans interacted with the system. I am not competent to make an assessment about the efficacy of the new rules and a massive injection of new food, as capital is the food of financial systems. I believe that those who shaped this response do not know either. They probably are the best equipped to design a new set of tools and rules, but that is not the point. Nobody can know exactly how a complex system works. The first lesson here is to take smaller steps, keep your eye on the ball, and be prepared to adjust the tools and rules as you slowly do begin to understand how the system works, but always remembering that it is enshrouded in mystery and can do unpredictable things.
The second lesson is to accept that the planetary system is just the same, only much more highly interconnected. The behavior of the climate, which was for eons moderated and governed by natural phenomena, is now coupled to human cultural activities, but in ways we do not and, perhaps, cannot know. The interrelationships among nations, tribes, and individuals comprise another complex system joined together by trade, warfare, travel, the Internet, and other linkages. We have started to see signs that these systems are getting brittle, losing the adaptability to cure themselves, but we are still trying to govern and control them with a set of practices based on the only ones we feel comfortable with. Metaphorically, that is only those we can program into a computer; we always try to model the parts and the linkages by formulas.
Whoa, these systems are far too important to treat this way. Our lives do, not may, depend on them. We cannot afford to wait until the crash comes. It is prudent to start to act in a way that we hope will not upset the system and bring it to the point of collapse. It may mean that we may not be able to run at the speed we have been or may have to change something else that affects the current cultural expectations. We cannot proceed holding the same expectations and believe we can meddle with the system without limits. Maybe the crisis will never come say the optimists and technologists, and. even if does, we can clear away the debris and fix up the system.
We should all go back and read Voltaire’s Candide. Remember Dr. Pangloss’s unbridled optimism,”all is for the best in the best of all possible worlds” Candide, coming from a naive view of complexity, saw otherwise and said, “we must cultivate our garden.” Viewed as an enigma by many literary critics, his aphorism is not so mysterious in the world of complexity. We live in a vast unruly world. But gardeners come to understand their patch of Earth, not through mechanistic formulations, but by engaging with it, watching it and learning from their interactions with it. We must all become gardeners.