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Nothing is as permanent as we imagine–especially super-complex, super-costly, super-asymmetric and super-debt-dependent systems.

Check which signs of Imperial decline you see around you: The hubris of an increasingly incestuous and out-of-touch leadership; dismaying extremes of wealth inequality; self-serving, avaricious Elites; rising dependency of the lower classes on free Bread and Circuses provided by a government careening toward insolvency due to stagnating tax revenues and vast over-reach–let’s stop there to catch our breath. Check, check, check and check.

Sir John Glubb listed a few others in his seminal essay on the end of empiresThe Fate of Empires, what might be called the dynamics of decadence:

(a) A growing love of money as an end in itself: Check.

(b) A lengthy period of wealth and ease, which makes people complacent. They lose their edge; they forget the traits (confidence, energy, hard work) that built their civilization: Check.

(d) Loss of any sense of duty to the common good: Check.

Glubb included the following in his list of the characteristics of decadence:

— an increase in frivolity, hedonism, materialism and the worship of unproductive celebrity (paging any Kardashians in the venue…)

— a loss of social cohesion

— willingness of an increasing number to live at the expense of a bloated bureaucratic state

Historian Peter Turchin, whom I have often excerpted here, listed three disintegrative forces that gnaw away the fibers of an Imperial economy and social order:

1. Stagnating real wages due to oversupply of labor

2. overproduction of parasitic Elites

3. Deterioration of central state finances

War and Peace and War: The Rise and Fall of Empires

To these lists I would add a few more that are especially visible in the current Global Empire of Debt that encircles the globe and encompasses nations of all sizes and political/cultural persuasions:

…click on the above link to read the rest of the article…

Time For Some Climate Honesty

August 4, 2018

kienyke.com

Time For Some Climate Honesty

Half-truths are doing no good

Let’s assume that you have doubts about ‘global warming’.

Some people do and, truthfully, we utterly lack the ability to accurately model how much warming will happen, where and by when (emphasis on accurately).

The reason is not for lack of trying or continual learning and model refinement, but centers on the complexity of the task.

Even seemingly simple systems that are actually complex are impossible to predictively model. An example is a pile of sand growing grain by grain that will finally slump at some unpredictable time and in an unpredictable way. You would think that such a simple system could be accurately modeled, but that’s not the case. Exactly when the pile will finally slump is unpredictable. Exactly how large the resulting slump will be is also unpredictable. The “when” and the “how much” are unknowable (using current modeling techniques).

All that can be calculated for certain is that a higher pile with steeper sides/areas (a.k.a. “fingers of instability”) is more likely to slump sooner and more catastrophically.

Now consider the tasks laid out before the global climate modelers where feedback loops abound, unknown variables still lurk, and the final result is the summation of multiple interacting complex systems. It’s not a pile of sand granules, it’s a gigantic interconnected system composed of heat flows, cloud formation, wind and oceanic patters and currents, variable solar and cosmic radiation, volcanoes and dust and jet trails and a thousand other inputs all interreacting with and influencing each other…in unpredictable ways.

It’s chaos theory (i.e. the butterfly effect) which means it’s way beyond anything we can currently model with any accuracy or confidence.

…click on the above link to read the rest of the article…

Population growth and food: A systems perspective

July 12, 2018

Population growth and food: A systems perspective

In this age of the Anthropocene, it is necessary to look inward as well as outwards to find systemic solutions. People may or may not be “a plague on earth” as David Attenborough has stated, but we are without doubt the dominant force on this planet. Some introspection is needed if we are to use our power ethically.

As Organisational Outreach Officer for Population Matters, my task is to contact ethically-oriented organisations (from faith organisations to environmental NGOs) and suggest ways in which the issue of population growth could be covered on their website and integrated into their ethos. Many organisations I approach agree that population size contributes to climate change, conflict and malnutrition, but they frequently respond by saying that the issue lies outside of their remit. Population Matters’ patron Jonathon Porritt talks about the reasons why organisations avoid referencing population growth in this 14-minute video, debunking a few myths along the way.

To be truly systemic, one has to include all aspects of the problem. So what is ‘systemic’ or ‘systems thinking’? In simple terms, it is an approach for analysing complex issues by viewing them holistically, as purposeful systems containing interdependent variables, stakeholders and perspectives. This allows an awareness of one’s own bias and limitations. Systems practitioners use simplified diagrams to uncover key issues and when this is done comprehensively they are able to see the interwoven social, economic, political and environmental dimensions.

The issue under investigation here is the global food system, the purpose of which is to feed humans (and to a certain extent livestock) over a sustained period of time. It is embedded in and dependent on ‘macro’ systems as shown in the diagram below.

…click on the above link to read the rest of the article…

Systems Thinking and How It Can Help Build a Sustainable World: A Beginning Conversation

July 11, 2018

Systems Thinking and How It Can Help Build a Sustainable World: A Beginning Conversation

In Brief

Humanity stands at a precipice. Overpopulation, resource scarcities, degraded ecosystem functioning from pollution and biodiversity loss, and anthropogenic climate change are damaging the life-supporting capacity of the planet. Diminishing returns on fossil fuel energy investments, combined with their dwindling availability and environmental harm, threaten industrial civilization. Many people recognize the need to transition to sustainable, resilient ways of living, but the prospect of such a transition is daunting, not only from a logistical perspective, but also because it requires new ways of thinking about and addressing complex problems. Widespread adoption of systems thinking represents one of society’s best bets for making real progress towards this daunting transition, but few actually understand what it is. This article is intended to introduce systems thinking into our common lexicon – to explain what it is at a basic level, how it can be used, and why it may very well be the key to humanity’s survival over the long run.

“For some, the development of systems thinking is crucial for the survival of humanity.” – John Sterman

“The light begins to twinkle from the rocks:
The long day wanes: the slow moon climbs: the deep
Moans round with many voices. Come, my friends,
’Tis not too late to seek a newer world.”
– Alfred Lord Tennyson, Ulysses

Let’s start at the very beginning. What is a system?

A system is a set of things interacting in a way that produces something greater than the sum of its parts. Systems can range in complexity. Compare, for instance, a car, which is relatively easy to understand and even diagnose when something goes wrong, to a tropical rainforest, which contains so many living and nonliving components that we’re only just beginning to understand how they work.

…click on the above link to read the rest of the article…

The Most Intolerant Wins: The Dictatorship of the Small Minority

July 9, 2018

The Most Intolerant Wins: The Dictatorship of the Small Minority

(Chapter from Skin in the Game)

How Europe will eat Halal — Why you don’t have to smoke in the smoking section — Your food choices on the fall of the Saudi king –How to prevent a friend from working too hard –Omar Sharif ‘s conversion — How to make a market collapse

The best example I know that gives insights into the functioning of a complex system is with the following situation. It suffices for an intransigent minority –a certain type of intransigent minorities –to reach a minutely small level, say three or four percent of the total population, for the entire population to have to submit to their preferences. Further, an optical illusion comes with the dominance of the minority: a naive observer would be under the impression that the choices and preferences are those of the majority. If it seems absurd, it is because our scientific intuitions aren’t calibrated for that (fughedabout scientific and academic intuitions and snap judgments; they don’t work and your standard intellectualization fails with complex systems, though not your grandmothers’ wisdom).

The main idea behind complex systems is that the ensemble behaves in way not predicted by the components. The interactions matter more than the nature of the units. Studying individual ants will never (one can safely say never for most such situations), never give us an idea on how the ant colony operates. For that, one needs to understand an ant colony as an ant colony, no less, no more, not a collection of ants. This is called an “emergent” property of the whole, by which parts and whole differ because what matters is the interactions between such parts. And interactions can obey very simple rules. The rule we discuss in this chapter is the minority rule.

…click on the above link to read the rest of the article…

Why do we need to think and act more systemically?

June 26, 2018

Why do we need to think and act more systemically?

The power and majesty of nature in all its aspects is lost on one who contemplates it merely in the detail of its parts and not as a whole.

— Pliny the Elder

An increasing number of people are beginning to understand that the world we participate in is too complex, magnificent and changeable for any single perspective to do justice to its diversity and complexity. There is more to life than a ‘theory of everything’ that reduces the awe-inspiring diversity, creativity and beauty surrounding us to a series of abstract mathematical equations.

We live in networks of relationships defined by qualities that make life worth living. Most qualities escape quantification and mathematical abstraction. We need to acknowledge and value multiple perspectives and find ways to integrate their different contributions into a framework of thinking that can inform wise action.

In order to achieve a collaborative way of acknowledging, integrating and evaluating multiple perspectives, we need to move beyond dualistic either-or logic which suggests that, if two perspectives seem to contradict each other, one of them must categorically be wrong in order for the other perspective to be right. Yet, at a time when our cultural belief in the ability of science and technology to fix all our problems is beginning to wane, we also need ways to evaluate and compare different perspectives.

Science might not offer us the ‘objective’ picture of reality we were taught in school, but it remains a powerful method of inter-subjective consensus-making and constitutes a fairly reliable basis upon which to act — more so, say, than the opinion, intuition or spontaneous insight of a single individual — in most but certainly not all cases. We should neither exclusively favour inter-subjective ‘rational’ reasoning nor only rely on individual insight and intuition, but let ourselves be informed by both, as and when appropriate.

…click on the above link to read the rest of the article…

Why Systems Fail

April 7, 2018

Why Systems Fail

Since failing systems are incapable of structural reform, collapse is the only way forward.

Systems fail for a wide range of reasons, but I’d like to focus on two that are easy to understand but hard to pin down.

1. Systems are accretions of structures and modifications laid down over time.Each layer adds complexity which is viewed at the time as a solution.

This benefits insiders, as their job security arises from the need to manage the added complexity. The new layer may also benefit an outside constituency that quickly becomes dependent on the new layer for income. (Think defense contractors, consultants, non-profits, etc.)

In short order, insiders and outsiders alike habituate to the higher complexity, and everyone takes it for granted that “this is how things work.” Few people can visualize alternatives, and any alternative that reduces the budget, payroll or power of the existing system is rejected as “unworkable.”

In this set of incentives, the “solution” is always: we need more money. If only we had another $1 million, $1 billion or $1 trillion, we could fix what’s broken.

But increasing the budget can’t fix what’s broken because it doesn’t address the underlying sources of systemic failure.

Those benefiting from the status quo will fight tooth and nail to retain their jobs and benefits, and so deep reform is essentially impossible, as the insiders and constituencies of each layer resist any reform that might diminish their security/income.

As a result, new layers rarely replaces previous layers; the system becomes more and more inefficient and costly as every new layer must find work-arounds and kludgy fixes to function with the legacy layers.

Eventually, the system becomes unaffordable and/or too ineffective to fulfill its mission.

…click on the above link to read the rest of the article…

The Worst Threat We Face Is Right Here At Home

February 17, 2018

The Worst Threat We Face Is Right Here At Home

The Federal Reserve is ruining us

Last week, volatility made a long-overdue return to the US and global equity markets.

It began with a 2-day back-to-back violent drop. Day 3 saw a big rebound, swiftly followed by two more days of gut-wrentching losses. And then finally, last Friday, the day saw massive swings both high and low, ending with a huge upside run.

During this period the S&P 500 lost more than 300 points. Since then, though, the market has been steadily rising.

Is the danger past? Are the markets safe once more?

And if so, did the markets recover organically? Or were they rescued by The Plunge Protection Team (PPT)?

The answer matters.

If such intervention was rare we could almost justify it, if it took the form of simple, pre-arranged circuit breakers that shut the market down for a “cooling off” after they’ve moved too far, too fast. Indeed, these already exist, and are sufficient in our view.

But if such market interventions are routine, persistent, and generally depended on by the major market participants, then they’re highly destructive over the long term.

Sadly, we live with the latter.

Insiders get stinking rich by front-running the scheme (check). Normal adjustments are prevented (check), allowing dangerous bubbles of extreme overvaluation to form (check), while fostering malinvestment (check).

Do this long enough and you end up with a deformed economy, an eroded social structure, and markets that no longer function as appropriate mechanisms for capital distribution and economic signaling.

This is where we find ourselves today.

Modern-Day Soviet Crop Reports

In the former Soviet Union, the communist method of assuring economic progress was to set targets for production. Famous among them were the crop reports.

…click on the above link to read the rest of the article…

Carmot Capital: “The Next Crisis Won’t Be A Flash Crash; It Will Be A Flash Flood”

February 5, 2018

Carmot Capital: “The Next Crisis Won’t Be A Flash Crash; It Will Be A Flash Flood”

THE STRAIGHT FLUSH CRASH

AN ILLUSION OF SIMPLICITY, AN ENTANGLEMENT OF COMPLEXITY

Lately, there has been talk of so-called “elevated” markets. Equity markets, real estate markets and bond markets are indeed reaching new highs regularly. But how long will this last? Can it last indefinitely? Or as is often said, “It’s different this time,”; is it really? We posit that it is not different this time. In fact, there are very real parallels that should concern every investor. What could catalyze the next global financial crisis (“GFC II”)? We suggest that it won’t be a “Flash Crash.” Instead it will be a flash flood that could be caused by very real systemic risk. In other words, the system will flush itself of the market detritus accumulated over the last 8-9 years. We are calling it The Straight Flush Crash. This paper will explain why.

For anyone that has studied the sequence of events leading up to the Global Financial Crisis (“GFC”) of 2008-09, it would not be hard to put together the shape of the new crisis. The first GFC began with the New Century Financial bankruptcy that caused the first market hiccup on February 27, 2007 (when the VIX indicator jumped a record 60% in one day) and escalated to Bear Stearns, to Lehman Brothers, then to the whole GFC debacle. In our opinion, the market blip on August 24, 2015 (affectionately known as the ETF Flash Crash) was the first indication of the shape of things to come. During each crisis, a flashpoint has ignited the existing structure, which then toppled and in turn caused enormous losses for investors. For example, in the GFC of 2008-09, subprime lending was a small fraction of lending which ignited the whole structured finance pyramid and caused the liquidity crisis that bankrupted multiple banks.

…click on the above link to read the rest of the article…

Wisdom, Experience and Just-In-Time Thinking

January 30, 2018

Wisdom, Experience and Just-In-Time Thinking

I try to remind myself each generation considers itself smarter than the previous iteration. If you follow the bouncing logic ball, this means the next (younger) generation believes itself smarter than its present day cohort. In essence the millennial generation of today feels superior to those older than them while simultaneously inferior to the pack nipping at their heels.

Call it a superiority/inferiority complex, though admittedly the superior portion leads the inferior since we are all immortal gods at that age. Soon enough that wears off, usually around 30ish when we begin to recognize vulnerabilities already present and obvious to all but ourselves.

Ultimately smartness or intelligence is a relative measuring tool. There is no doubt my nineteen year old college student rocket scientist is much more adept at deciphering mathematical equations or manipulating genomes than I am. But can she determine which way a tree will tend to fall before cutting it, or smell snow in the air long before it begins to fall?

I’ve written before about the tendency of a technological culture to breed, and reward, specialists while dismissing generalists out of hand as the decaying fossils of our time. And while those who pontificate such wisdom are not exactly wrong, neither are they precisely right.

Obviously I understand with complexity comes specialization. I get it. The company designing and manufacturing the latest central processing unit (CPU) essentially the ‘thinking’ brain of a computer, cannot expect one person to understand and execute the thousands of steps involved in creating the finished product. Efficiency and economy demands a better way forward and, for now at least, that way is via specialty.

…click on the above link to read the rest of the article…

Old Age and Societal Decline

January 18, 2018

Old Age and Societal Decline

People grow old and die. Civilizations eventually fail. For centuries amateur philosophers have used the former as a metaphor for the latter, leading to a few useful insights and just as many misleading generalizations. The comparison becomes more immediately interesting as our own civilization stumbles blindly toward collapse. While not the cheeriest of subjects, it’s worth exploring.

A metaphor is not an explanation.

First, it’s important to point out that serious contemporary researchers studying the phenomenon of societal collapse generally find little or no explanatory value in the metaphorical link with individual human mortality.

The reasons for individual decline and death have to do with genetics, disease, nutrition, and personal history (including accidents and habits such as smoking). We are all genetically programmed to age and die, though lifespans differ greatly.

Reasons for societal decline appear to have little or nothing to do with genetics. Some complex societies have failed due to invasion by foreign marauders (and sometimes the diseases they brought); others have succumbed to resource depletion, unforeseeable natural catastrophe, or class conflict. Anthropologist Joseph Tainter proposed what is perhaps the best general theory of collapse in his 1988 book The Collapse of Complex Societies, which argued that the development of societal complexity is a problem-solving strategy that’s subject to diminishing marginal returns. Once a civilization’s return on investment in complexity goes negative, that civilization becomes vulnerable to stresses of all sorts that it previously could have withstood.

There is a superficial similarity between individual aging, on one hand, and societal vulnerability once returns on investments in complexity have gone negative, on the other. In both cases, what would otherwise be survivable becomes deadly—whether it’s a fall on an uneven sidewalk or a barbarian invasion. But this similarity doesn’t provide explanatory value in either case. No physician or historian will be able to do her job better by use of the metaphor.

…click on the above link to read the rest of the article…

A Video Game Analogy to Our Energy Predicament

November 29, 2017

A Video Game Analogy to Our Energy Predicament

The way the world economy is manipulated by world leaders is a little like a giant video game. The object of the game is to keep the world economy growing, without too many adverse consequences to particular members of the world economy. We represent this need for growth of the world economy as being similar to making a jet airplane fly at ever-higher altitudes.

Figure 1. Author’s view of the situation we are facing. World leaders look at their video screens and adjust their controllers to try to make the world economy fly at ever-higher levels.

World leaders look at their video game screens for indications regarding where the world economy is now. They also want to see whether there are specific parts of the economy that are doing badly.

The game controllers that the world leaders have are somewhat limited in the functions they can perform. Typical adjustments they can make include the following:

Add or remove government programs aimed at providing jobs for would-be workers
Add or remove government sponsored pension plans and payments to those without jobs
Add or remove laws regulating efficiencies of new vehicles
Change who or what is taxed, and the overall level of taxation
Through the above mechanisms, change government debt levels
Change interest rates

There are numerous problems with this approach. For one thing, the video game screen doesn’t give a very complete picture of what is happening. For another, the aspects of the economy that can be controlled are rather limited. Furthermore, the situation is very complex–there seem to be several “sides” of the economy that need to “win” at the same time, for the economy to continue to grow: (a) oil importers and oil exporters, (b) businesses and their would-be customers, (c) governments and their would-be taxpayers, and (d) asset holders and the would-be buyers of these assets, such as families needing new homes.

…click on the above link to read the rest of the article…

Give it Another Century and We Will See How it Goes

November 16, 2017

Give it Another Century and We Will See How it Goes

I got push back from readers when I dissed some flavorless suburban condo complexes in the context of urban agriculture on my blog.

My observation was meant to be simple. We’re on a trajectory of ever larger, more complex, and highly leveraged institutional “solutions” to endemic social and economic problems that don’t actually make things better. Quite the opposite. What we need are small, direct, hyper local, and incremental responses that address immediate needs at a very low burn rate. This was misinterpreted as, “Oh, you think growing zucchini is more important than solving the housing crisis for working families.” Not what I’m saying. At all.

Everywhere I go in the world, I find older neighborhoods that were built in a surprisingly similar manner regardless of geography, culture, religion, politics, or climate. Philadelphia has a wide variety of established neighborhoods that rarely get above three stories tall (see the photos above). Yet they provide convenient employment, local shops, schools, hospitals, houses of worship, groceries, culture, public parks, universities, and so on. Everything is within a reasonable walk or bike ride of a generous supply of homes.

The residential and commercial activities are completely mixed together. Rich and poor tend to occupy the same neighborhoods in close proximity even if their accommodations are wildly disparate. Before planes, trains, and automobiles there weren’t that many options beyond shoe leather, horses, and sailing ships so urban form and daily customs accommodated that reality.

…click on the above link to read the rest of the article…

Global Climate Change & Its Link to Soil Organisms

October 26, 2017

GLOBAL CLIMATE CHANGE & ITS LINK TO SOIL ORGANISMS

When people think of the consequences of global warming, most jump to the melting ice caps and death of beloved polar bears. We know that as our Earth undergoes climate change, it’s adversely affecting the ecological balance in complex ways. For the first time, however, a study done at the University of California Berkley, has linked climate change to the downfall of microbial species that are considered essential to ecological systems. Previous studies have identified the use of chemicals as harmful for soil organisms, insects, and birds, but never has climate change been pinpointed as a threat to these species.

The study states that “models predict that up to 30% of parasitic worms are committed to extinction, driven by a combination of direct and indirect pressures.” With this, species that are adapting to the climate change will allow them to “invade and replace” native organisms resulting in unpredictable, but most likely negative consequences.

Dr. Colin Carlson is the lead author of the study and estimates that we will see a huge extinction rate within the soil organisms as time and climate change continues. He blames this effect on the loss of habitat and the implications of trying to coexist. The end result of this could be detrimental to the human species, requiring lively soil to live.

Carlson explains that the effect of climate change on soil organisms has gone unnoticed for so long because our research focuses on the impact of the change on animals like vertebrates. Most people see microbial organisms as pests, rather than a crucial part of the ecological system. Since the modernization of agriculture, we have seen soil as a medium for holding plants, as Jenny Hopkins, author of “Can American Soil Be Brought Back To Life”, likes to put it.

…click on the above link to read the rest of the article…

Nonlinear Complexity – Too Much for Most People to Comprehend

October 18, 2017

Nonlinear Complexity – Too Much for Most People to Comprehend

QUESTION: Dear Mr. Martin Armstrong.

Good day to you Martin. I know you are a very busy man, but I still like to send you emails time to time, hoping that you may read my email and respond to me. In regards to your recent post about the theory of Non-linear intervention, I was quietly amazed at the fact that I recently had the same idea as yours.

In my math class, my teacher taught us a different way to solve quadratic equations, and it was completely done by original algebra rules, not with the formulas we used to be given in high school. My math teacher said that most teachers do not use this method other than using special case formulas because its non-linear solution and that messes up people’s brain.

Also in my Economics class, we are learning about the basics of supply and demand and here we again use the straight linear method, such as ceteris paribus. I was sincerely curious to know if that is true for everything we do.

You have shown me a clear path in every aspect of this world. But I have a question about the Euro, I too have lost so much money by just looking at the fundamentals and execute trades and now I have learned that the fundamentals do not matter the most to move the market unless its very significant incident. (is that correct?) For instance, the Euro rallied whenever there was a chance to go up, and as a person who was only looking at the fundamental side, it was very odd and frustrating for me to watch it go up, but on the other hand, the technical communities were chanting a song that EUR/USD will spike to 1.2000 and so it did. I am still a fool who cannot read the market.

…click on the above link to read the rest of the article…

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