complexity

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Too Much Complexity Is Killing Us

Why the decline is accelerating from here
Wednesday, January 18, 2017, 11:13 PM

There’s a line of thinking -- one that we ascribe to here at PeakProsperity.com -- that says today’s problems are far more complex and numerous than those we've dealt with in the past. In fact, some of them are actually predicaments -- meaning they have no solutions, only outcomes that we'll need to manage.  Moribund economic growth is only as high as it is due to massive debt binging. Ecological and energy issues are accelerating, and will for sure rear their heads at inopportune times not of our choosing.

Said another way: Eventually we're going to have to pay the bill. » Read more

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Why the Bullwhip Effect All But Guarantees Another Poorly-Handled Liquidity Crisis

Complex systems break under stress
Monday, July 1, 2013, 11:54 AM

One of my more memorable moments in business school came during an Operations class. The topic for the day was the Bullwhip Effect, a very real and vexing phenomenon that occurs in forecast-driven distribution systems.

Essentially, when there are multiple parties in a distribution system, the imperfections in each player's forecasts (no forecast is consistently perfect) compound to wreak increasing havoc over time, even if demand stays relatively stable.

Grasping how this works is somewhat non-intuitive... » Read more

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America the Vulnerable

History warns we're sleepwalking towards collapse
Monday, May 27, 2013, 8:13 PM

For most people, the collapse of civilizations is a subject much more appetizingly viewed in the rearview mirror than straight ahead down whatever path or roadway we are on.

Jared Diamond wrote about the collapse of earlier civilizations to great acclaim and brisk sales, in a nimbus of unimpeachable respectability. The stories he told about bygone cultures gone to seed were, above all, dramatic. No reviewers or other intellectual auditors dissed him for suggesting that empires inevitably run aground on the shoals of resource depletion, population overshoot, changes in the weather, and the diminishing returns of complexity.

Yet these are exactly the same problems that industrial-technocratic societies face today, and those of us who venture to discuss them are consigned to a tin-foil-hat brigade, along with the UFO abductees and Bigfoot trackers. This is unfortunate, but completely predictable, since the sunk costs in all the stuff of daily life (freeways, malls, tract houses) are so grotesquely huge that letting go of them is strictly unthinkable. We’re stuck with a very elaborate setup that has no future, but we refuse to consider the consequences... » Read more

Podcast

Keith Fitz-Gerald: The Perils of Underestimating Complexity & Mispricing Risk

Magical thinking is dangerous
Saturday, August 25, 2012, 11:16 AM

"If you’re rich you get a bailout. If you’re poor you get a handout. And if you’re middle class you get left out. " That's not a sustainable way to run the system, exclaims investment strategist Keith Fitz-Gerald.

A cancer at the core of our current economy is the magical thinking, "no pain, all gain" philosophy, pursued by those running it. They are doing all they can to remove the consequences of failure from the system -- not realizing that failure plays an essential 'waste-clearing' function of a healthy free market.

Without the discipline of Darwinism, the individual actors in the system make all sorts of malinvestments that would never make sense in an efficient marketplace. But since the losses from these inane pursuits are socialized, there's no incentive to stop making them. At least, up until the point where the class who's back is burdened with paying for the socialized messes finally breaks. » Read more