I have been looking at the way regulation in industry stimulates corporate behaviour.
I find it interesting that the addition of regulation stimulates employment opportunities and "work activity" around the regulation.
* Oversight and enforcement behaviour from "regulators"
* Avoidance and complicance behaviour from those being "regulated"
This is fine and obvious. The interesting this to me is how every regulation creates niches that small operators can use to enter the market. Exactly like the idea of micro-climates within an eccosystem.
Take for instance a large open grassland. Large herds of herbivors roam as they wish and grow to huge proportions. This is the effect of companies in an un-regulated space. They are not differentiated and are generally circular-ish in shape. Their members are randomly distributed throughout their mass and there are no threats.
Now introduce some small number of predators. (Regulators) who start to pick at the edges of the herd. The herd either quickly adapts or is quickly obliterated. The herd adapts its behaviour simply by becoming more cohesive and starting to fight as a group. The herd still moves as (roughly) a circle across an open landscape. The preditors have no opportunity.
Now introduce some sort of obstacle within the environment. A line of cliffs, a fence... whatever. This is effectivly a "rule" that governs where the herd can move and what it can do. The herd, being a self-organising system, adapts by avoiding the obstacle ( or suffers a fairly catastropic injury)
The interesting thing is that the larger the herd, the more efficiently it moves when it stays clear of the obstacles. So there is a little fringe of ground near the obstacles that is not grazed. It now presents a resource opportunity for a small herd or something else to exploit. Thus we have a micro-climate around the obstacle, that is formed by the lack of exploitation by the larger groups who cannot effectivly use their scale to exploit the small niches.
So these micro-climates become "nurseries" for nurturing the next generation, similar to mangrove swamps which shelter small fish from the large predators.
In practical terms, if you look at the American banking and financial industry, you an see the effect of the removal of regulation. The big groups have grown without constraint. They have absorbed everything from share trading, to financial managment, to banking, to insurance, to mortgages, small business financing etc. There is no way small entrants into the market could compete with that size company unless they are in a sheltered area that the large company does not want to compete in. This is exactly what has been happening. Take a look at all the small entrants in the industry and you will find them in little "niche" areas servicing(exploiting) populations that do not have enough "margin" to be of interest to the large groups (very poor people and small small businesses. but they have even figured out that by grouping them together and selling them as derivatives, they can use scale to exploit this niche too), or those that the large group do not want to be associated with ( used to be criminals, migrants, socially un-populare industries, but since they are no longer concerned with repuation as it cant hurt them... is virtually no one)
So, simply by removing all the obstacles, the groups in the finance industry have grown and consolidated into a number of mega-herds that roam around and decimate the landscape by over-grazing and trampling whatever remains... tada! Global financial crisis. (I know this is a simplification...)
The other intersting thing is that the lack of regulation has expanded the space in which the herds can move. This has occured by the "removal" of partitioning regulation between the financial "spaces". So industries that were previously seperate, such as insurance and banking, have merged together into a seamless amalgum.
This amalgumation of the financial industries/spaces into a single "whole" has also amalgamated the effect of a "change in the weather", which previously may have effected each different eccosystem differently, now effects the whole space in the same way. This makes for a frgile system that is prone to extreems of boom and bust... tada! GFC again.
Looking at the European environment, there are still a lot of structural obstacles in place within the financial space. They have a lot of debri from the geopolitical amalgamation of the Euro-zone. This is to do with the cultural remanants, the language barriers, the different local regulation models and historical artifacts that are still shaping their individual banking and financial systems. Its interesting to note how resiliant they have been, even thought some of the countries that were carrying large debit levels have crashed... others survived. While the US, that is one cohesive system, took a fairly massive blow that was distributed across the whole system. The only reason it survived was scale. The size of the herd allowed it to survive the storm.
The Europeans are currently busy trying to pick each other up and playing a game of pass the parcle with debit generated by some historical habits. The interesting thing about the Euro-zone is just how rich a set of micro-climates exist. There is a massive pile of different banking and finacial systems still bouncing around in that space. Lots of small players who can potentially grow as the big ones fail.
This is all simply statement of fact. It's not particularly a judgement about the success or failure of these systems. Any large system is essentially "unique". There is no "correct" way to structure such a system. In any given environment, there are variables that allow some individuals, groups and populations to thrive while others fail. The only point I am making is that by understanding the effects of these structures and the environmental variables that they create... it becomes easier to predict the effect of manipulating these artifacts.
I think that the biggest problem all the political regulators have is that they think they have something different to all the other environmental manipulators, farmers, hunters, fishermen. But in reality they need to learn the lessons of the past and be very careful when cultivating and exploiting a monoculture. It can all go very wrong if that one crop fails.
Showing posts with label economics. Show all posts
Showing posts with label economics. Show all posts
Saturday, November 3, 2012
Friday, October 19, 2012
Exhaustion....
I have decided that the thing that will kill the movie industry is simple inertia. Changing market dynamics, movie pirates, old school business models, more TV channels, too much Internet, gaming etc... all these are just symptoms and distractions. The root cause is the incredibly slow pace of production.
The "industry" (and remember its a collection of individuals with no common purpose; so herd or rabble may be a better description) generates a finite number of movies per annum. Of these, only a certain number will be of interest to any particular group of movie viewers.
Viewers come in two groups, the first is "Indiscriminate Viewers" who will watch anything as the opportunity arises. The second is "discriminating viewers" who are in some fashion selective in their viewing habits. These are people who will refuse to watch some movies given the opportunity and further will expend effort to seek out movies that satisfy their interest.
Generally, I would suggest that over time an indiscriminate viewer will move toward being a discriminate viewer; simply though the mechanims of experience. They find what they enjoy and they seek to maximise that.
So, given that the longer a viewer watches movies, the less (overall) of the annual production they will likely consume.
For instance, a viewer who finds they are a fan of romantic commedy, may seek to see a movie a week (its a figure, don't worry too much about it) which means they want to see 52 romantic comedies a year. What do they do if they can't find something to watch? (Go elsewhere, do something else... probably) The point is that they cannot point this out to the industry... cause the industry is a figment of the collective rabble. Keep in mind that romantic comedy is a very well represented genre in the movie back catalog.
In the event that we look at a fan of a smaller genre...say sci-fi thrillers. Then they may be offered a new release bi-yearly... if that. How does "the industry" (fictional group... I know) expect to keep that persons attention? They can keep up with the new releases if they have a move marathon once every decade... yah!
The other thing is that they can work through the existing back catalog of all sci-fi thrillers ever made in a couple of weeks of casual viewing. Job done. Genre exhausted.
"The Industry" has simply failed them. They may go and find something else to entertain themselves... but its random chance if that thing happens to be another genre of movies. Its just as likely to be any other entertainment... sport, games, porn, fine art restoration, busking.... racing goats... whatever. The odds are against the movie industry getting them back as a paying customer.
My point? Ok... I think the thing that has spoilt the party is simply access to databases of movies. Its now possible to search through the genre that you are interested in and tick off all the ones you have seen, all the ones you would like to see and any that you never want to see...and get a survey of the scope of the situation. There is no longer any mystery. No hope that there is one out there that will keep you interested and searching. You can be sure.
I've done this with the Genres that I'm interested in. I can see the end of my movie watching fast approching. I have certainty that I'm done! Now its just maintenance mode. As new movies come out, I can catch up with them in my own time and tick them off. In between I can re-watch some of the good ones... but essentially there is not a lot left for me. I have thoughly checked all the other genres and frankly, they're just not interesting. Chances are that I am un-representative of the rest of the movie watching population... but as it gets easier and software takes over helping people to organise their media collections... I expect this "ticking off" exercise to be simpler. The only hope is that there will be some feedback to the industry to give them (collectivly) a better idea of the genres and the frequency of delivery that will hold their audience.
After a lifetime of regular cinema and movie watching.... its a bit sad to see the end of it. But unless things change, there's really only one movie yet to be released that I am looking forward to and thats it.
TV Series are a different matter. I think they are filling the space between movies for a lot of the genres. The problem with TV Series is simply the commitment from a production company is so much greater. This makes it harder to get niche genre series off the ground. I wonder what the failure dynamics are with niche series? I wonder if becuase its in a less crowded niche that there is less risk of failure? Interesting.
I am a bit vauge as to where I was going with this whole post... probably just that the movie industry is too slow to release anything and that access to databases has removed the uncertainty about the movies that are availible.
The "industry" (and remember its a collection of individuals with no common purpose; so herd or rabble may be a better description) generates a finite number of movies per annum. Of these, only a certain number will be of interest to any particular group of movie viewers.
Viewers come in two groups, the first is "Indiscriminate Viewers" who will watch anything as the opportunity arises. The second is "discriminating viewers" who are in some fashion selective in their viewing habits. These are people who will refuse to watch some movies given the opportunity and further will expend effort to seek out movies that satisfy their interest.
Generally, I would suggest that over time an indiscriminate viewer will move toward being a discriminate viewer; simply though the mechanims of experience. They find what they enjoy and they seek to maximise that.
So, given that the longer a viewer watches movies, the less (overall) of the annual production they will likely consume.
For instance, a viewer who finds they are a fan of romantic commedy, may seek to see a movie a week (its a figure, don't worry too much about it) which means they want to see 52 romantic comedies a year. What do they do if they can't find something to watch? (Go elsewhere, do something else... probably) The point is that they cannot point this out to the industry... cause the industry is a figment of the collective rabble. Keep in mind that romantic comedy is a very well represented genre in the movie back catalog.
In the event that we look at a fan of a smaller genre...say sci-fi thrillers. Then they may be offered a new release bi-yearly... if that. How does "the industry" (fictional group... I know) expect to keep that persons attention? They can keep up with the new releases if they have a move marathon once every decade... yah!
The other thing is that they can work through the existing back catalog of all sci-fi thrillers ever made in a couple of weeks of casual viewing. Job done. Genre exhausted.
"The Industry" has simply failed them. They may go and find something else to entertain themselves... but its random chance if that thing happens to be another genre of movies. Its just as likely to be any other entertainment... sport, games, porn, fine art restoration, busking.... racing goats... whatever. The odds are against the movie industry getting them back as a paying customer.
My point? Ok... I think the thing that has spoilt the party is simply access to databases of movies. Its now possible to search through the genre that you are interested in and tick off all the ones you have seen, all the ones you would like to see and any that you never want to see...and get a survey of the scope of the situation. There is no longer any mystery. No hope that there is one out there that will keep you interested and searching. You can be sure.
I've done this with the Genres that I'm interested in. I can see the end of my movie watching fast approching. I have certainty that I'm done! Now its just maintenance mode. As new movies come out, I can catch up with them in my own time and tick them off. In between I can re-watch some of the good ones... but essentially there is not a lot left for me. I have thoughly checked all the other genres and frankly, they're just not interesting. Chances are that I am un-representative of the rest of the movie watching population... but as it gets easier and software takes over helping people to organise their media collections... I expect this "ticking off" exercise to be simpler. The only hope is that there will be some feedback to the industry to give them (collectivly) a better idea of the genres and the frequency of delivery that will hold their audience.
After a lifetime of regular cinema and movie watching.... its a bit sad to see the end of it. But unless things change, there's really only one movie yet to be released that I am looking forward to and thats it.
TV Series are a different matter. I think they are filling the space between movies for a lot of the genres. The problem with TV Series is simply the commitment from a production company is so much greater. This makes it harder to get niche genre series off the ground. I wonder what the failure dynamics are with niche series? I wonder if becuase its in a less crowded niche that there is less risk of failure? Interesting.
I am a bit vauge as to where I was going with this whole post... probably just that the movie industry is too slow to release anything and that access to databases has removed the uncertainty about the movies that are availible.
Thursday, June 21, 2012
Economics with browsers
http://www.news.com.au/technology/kogan-wages-war-on-internet-explorer-users-taxed/story-e6frfro0-1226395298505
There should be more of this. Pushback is the only way to maintain a boundary. If someones choice costs you, push the cost back on them.
There should be more of this. Pushback is the only way to maintain a boundary. If someones choice costs you, push the cost back on them.
Wednesday, June 13, 2012
Kickstarter Stats
http://www.appsblogger.com/kickstarter-infographic/
Interesting analysis of the Kickstarter Ecosystem.
Interesting analysis of the Kickstarter Ecosystem.
Saturday, March 24, 2012
Free Trade
Woke up thinking about the concept of free trade and protectionism. This is in light of the current debat on subsidies in the Australian car industry.
I guess like any market, there are legal mechanimsm for protectionism, tarifs, additional overt and covert taxes, regulatory mechanisms like "standards" and quality control. My favorite is warranty systems... but thats just not used effectivly. However, my brain was fiddling around with the issues of physical protectionism. Cost of transport from supplier to market... and all the possible costs that could be imposed via the supply chain.
Think about issues such as cost of shipping, availibiliy of shipping, timely delivery, cost models (limits, ceilings, on costs, discounts etc) then think about congestion in shipping lanes, losses due to weather or poor packaging (think Cocain Cowboys for a case study)... then we get to the landing port.
In Australia we have maratime unions that hold a lot of power on the wharfs, if they are so inclined they can act as a limiting factor on freight in general or specific businesses or specific origins etc. We also have some basic infrastructure limits... apparently there are just not enough docks and ports to import and export quickly enough. I think this is primarily a problem for the export resources industry who can't get the volume of cheap raw materials out of the country fast enough... but thats another story.
So my point so far is that emergent protectionism could be seem to be implemented simply by placing physical limits in the way of imports. This would not stop the imports, just slow the flow.
Once you get past the border, there are other mechanisms that could be imposed... but currently are not. Simply because all the ecconomic elements are so throughly decoupled. We have vertically integrated business in retail that essentially own their whole supply chain from dock to shop and so are not subject to any choices that a sub-contractor might make. But for a small business trying to get into a market, it would be possible for contractors ( such as freight haulers) to discriminate based on the origin on the product they are hauling... this is speculation because market forces and competition would simply kill that business.
Anyway, there are various points of protectionism... but the problem is that having a well developed ecconomy without much corruption and very little "Friction", lots of competition means that goods and equipment can get anywhere a customer exists to purchase them. There are still costs... but it works.
The cost to the whole ecconomy is simply that we are being integrated into the Chinese ecconomy more and more. However only the Australian component is heavily regulated, policed and "fair" while the rest is still a bit of a free for all as far as manufacturing/copyright/trademark etc, goes. This is just a temporary (relativly speaking) imbalance between the two ecconomies that market forces will eventually balance out.
The question is how long will this balancing out take? Will it be slow and gradual or quick and violent? Its been quite destructive to the Australian ecconomy todate but thats due to the scale of the difference in the ecconomies. Not only the size of the labour pool but the different in prices and relative cost of living levels of the players.
I have always beleived that people and social groups can adapt (not always pleasantly) to slow change, but do not deal well with sudden shocks. The biggest issue that I see is that this change has come within one generation. The way our parents lived and the rhythms of their lives are significantly different to ours. But within the Australian ecconomy the ecconomi coupling between the generations is still very stong.
The children need to pay the taxes so the elderly can live. Houses need to be sold by the elderly and purchased by the young to transfer value for retirement, but at a rate sufficient to pay for the extended periods of retirement and standard of living that their social context dictates.
This was all systematically fine until the perfect storm of longer life spans, self funded superannuation, higher cost of living etc on the elderly end and a loss of manufacturing industry, reduced wages and casualisation across many other industries and a fungal growth in the cost of living for the young.
There are so many things in the ecconomy now that are just not viable. For me, the cost of living and the cost of housing are just ridiculus. Trying to look after a family and save some money is just unrealistic. Both myself and my partner are essentially selling all our time simply to keep our heads above water while we paddle like crazy. And whats the cost here? Where have we take all that free time from? Family, community and recreation. So now all the community groups and volunteer organisations are dying off simply because they only attract the elderly who have time on their hands. The last generation had latch-key kids who were the children of parents who worked... I think this generation will take that as far as it can go and still not find enough time to meet the demands of the system. Looks pretty similar to the stories about manufacturing workers in China doesnt it.... work long hours and still not end up with any time or money left over...
This brings me back to protectionism. The inequality between China and Australia has lots of geopolitical history and is not anything in particular. You could equally look at inequality between any developed nation and emerging nation... or developed nation and completly un-developed nation. The point is that once you join the two together with a trade infrastructure... then trade will happen. And as that tade becomes more fluid and the "friction" on that tade is systematically reduced through better infrastructure, reduced legislative friction, better transport, labour availibility... etc (lots of little ways) then the trade will flow as fast as it can.
We can take the big picture view and see this as a good thing for humanity... but at the nation, state, region, local, neighbourhood and individual levels it means a massive amount of change and adaptation. Niches that previously were pleasant and comfortable are drying up and being drained of resources... the value of houses and the infrastructure of life is changing quickly. People are migrating and trying different things. Change and uncertainty are in the air.... adapt or die. State the obvious really.
As in any migration, its the elderly and the young who get picked off by the wolves....
I guess like any market, there are legal mechanimsm for protectionism, tarifs, additional overt and covert taxes, regulatory mechanisms like "standards" and quality control. My favorite is warranty systems... but thats just not used effectivly. However, my brain was fiddling around with the issues of physical protectionism. Cost of transport from supplier to market... and all the possible costs that could be imposed via the supply chain.
Think about issues such as cost of shipping, availibiliy of shipping, timely delivery, cost models (limits, ceilings, on costs, discounts etc) then think about congestion in shipping lanes, losses due to weather or poor packaging (think Cocain Cowboys for a case study)... then we get to the landing port.
In Australia we have maratime unions that hold a lot of power on the wharfs, if they are so inclined they can act as a limiting factor on freight in general or specific businesses or specific origins etc. We also have some basic infrastructure limits... apparently there are just not enough docks and ports to import and export quickly enough. I think this is primarily a problem for the export resources industry who can't get the volume of cheap raw materials out of the country fast enough... but thats another story.
So my point so far is that emergent protectionism could be seem to be implemented simply by placing physical limits in the way of imports. This would not stop the imports, just slow the flow.
Once you get past the border, there are other mechanisms that could be imposed... but currently are not. Simply because all the ecconomic elements are so throughly decoupled. We have vertically integrated business in retail that essentially own their whole supply chain from dock to shop and so are not subject to any choices that a sub-contractor might make. But for a small business trying to get into a market, it would be possible for contractors ( such as freight haulers) to discriminate based on the origin on the product they are hauling... this is speculation because market forces and competition would simply kill that business.
Anyway, there are various points of protectionism... but the problem is that having a well developed ecconomy without much corruption and very little "Friction", lots of competition means that goods and equipment can get anywhere a customer exists to purchase them. There are still costs... but it works.
The cost to the whole ecconomy is simply that we are being integrated into the Chinese ecconomy more and more. However only the Australian component is heavily regulated, policed and "fair" while the rest is still a bit of a free for all as far as manufacturing/copyright/trademark etc, goes. This is just a temporary (relativly speaking) imbalance between the two ecconomies that market forces will eventually balance out.
The question is how long will this balancing out take? Will it be slow and gradual or quick and violent? Its been quite destructive to the Australian ecconomy todate but thats due to the scale of the difference in the ecconomies. Not only the size of the labour pool but the different in prices and relative cost of living levels of the players.
I have always beleived that people and social groups can adapt (not always pleasantly) to slow change, but do not deal well with sudden shocks. The biggest issue that I see is that this change has come within one generation. The way our parents lived and the rhythms of their lives are significantly different to ours. But within the Australian ecconomy the ecconomi coupling between the generations is still very stong.
The children need to pay the taxes so the elderly can live. Houses need to be sold by the elderly and purchased by the young to transfer value for retirement, but at a rate sufficient to pay for the extended periods of retirement and standard of living that their social context dictates.
This was all systematically fine until the perfect storm of longer life spans, self funded superannuation, higher cost of living etc on the elderly end and a loss of manufacturing industry, reduced wages and casualisation across many other industries and a fungal growth in the cost of living for the young.
There are so many things in the ecconomy now that are just not viable. For me, the cost of living and the cost of housing are just ridiculus. Trying to look after a family and save some money is just unrealistic. Both myself and my partner are essentially selling all our time simply to keep our heads above water while we paddle like crazy. And whats the cost here? Where have we take all that free time from? Family, community and recreation. So now all the community groups and volunteer organisations are dying off simply because they only attract the elderly who have time on their hands. The last generation had latch-key kids who were the children of parents who worked... I think this generation will take that as far as it can go and still not find enough time to meet the demands of the system. Looks pretty similar to the stories about manufacturing workers in China doesnt it.... work long hours and still not end up with any time or money left over...
This brings me back to protectionism. The inequality between China and Australia has lots of geopolitical history and is not anything in particular. You could equally look at inequality between any developed nation and emerging nation... or developed nation and completly un-developed nation. The point is that once you join the two together with a trade infrastructure... then trade will happen. And as that tade becomes more fluid and the "friction" on that tade is systematically reduced through better infrastructure, reduced legislative friction, better transport, labour availibility... etc (lots of little ways) then the trade will flow as fast as it can.
We can take the big picture view and see this as a good thing for humanity... but at the nation, state, region, local, neighbourhood and individual levels it means a massive amount of change and adaptation. Niches that previously were pleasant and comfortable are drying up and being drained of resources... the value of houses and the infrastructure of life is changing quickly. People are migrating and trying different things. Change and uncertainty are in the air.... adapt or die. State the obvious really.
As in any migration, its the elderly and the young who get picked off by the wolves....
Friday, January 20, 2012
Tuesday, December 6, 2011
Wired Bitcoin article
http://www.wired.com/magazine/2011/11/mf_bitcoin/all/1
Really interesting post on the internals of both the Bitcoin community and the emergent structure of the economy they constructed.
Really interesting post on the internals of both the Bitcoin community and the emergent structure of the economy they constructed.
Tuesday, November 8, 2011
Analystics for software groups
http://radar.oreilly.com/2011/10/moneyball-for-software-enginee.html
This is an interesting application of the same principles in moneyball to software teams.
This is an interesting application of the same principles in moneyball to software teams.
Vendor relationship Management
http://cyber.law.harvard.edu/research/projectvrm
This is an interesting idea that is about to find its time. I have been thinking about the evolving relationships between vendors, consumers and how the immediacy of feedback will expand the definition of a transaction and re-balance the power relationship in the consumer cycle.
Currently if someone sells you something that's crap (which is happening with increasing frequency now. I had to return two things over the weekend that were not fit for purpose) you have limited comeback. There is still inertia in the transaction that puts the cost of returning and complaining onto the customer. The retailer will get a certain amount of transactions where the customer does not want to carry the cost of returning the defective product, and so rubbish products remain in the market place.
What if the cost of returning a product and complaining about it was reduced to almost nothing? If the online review sites were maintained and linked with the ombudsman? If the cost of purchasing and importing goods that were defective could be pushed all the way back up the chain, it would reduce the value of making cheap rubbish and increase the value of producing quality products.
This would need better labeling laws and better warranty enforcement mechanisms.
This is an interesting idea that is about to find its time. I have been thinking about the evolving relationships between vendors, consumers and how the immediacy of feedback will expand the definition of a transaction and re-balance the power relationship in the consumer cycle.
Currently if someone sells you something that's crap (which is happening with increasing frequency now. I had to return two things over the weekend that were not fit for purpose) you have limited comeback. There is still inertia in the transaction that puts the cost of returning and complaining onto the customer. The retailer will get a certain amount of transactions where the customer does not want to carry the cost of returning the defective product, and so rubbish products remain in the market place.
What if the cost of returning a product and complaining about it was reduced to almost nothing? If the online review sites were maintained and linked with the ombudsman? If the cost of purchasing and importing goods that were defective could be pushed all the way back up the chain, it would reduce the value of making cheap rubbish and increase the value of producing quality products.
This would need better labeling laws and better warranty enforcement mechanisms.
App life cycles and market mechanisms
http://designmind.frogdesign.com/blog/mobile-apps-must-die.html
Without getting into the mobile apps vs native apps debate (cause its pointless... the problem dictates the solution not the other way around) but there are some good insights about the market place and the economics of the industry in this article. Need to read it again and digest.
Without getting into the mobile apps vs native apps debate (cause its pointless... the problem dictates the solution not the other way around) but there are some good insights about the market place and the economics of the industry in this article. Need to read it again and digest.
Five forces in the environment
http://en.wikipedia.org/wiki/Porter_five_forces_analysis
This stuff has been around for a long time... its spurred a couple of ideas when I read it which I cant remember now. Need to read it again.
This stuff has been around for a long time... its spurred a couple of ideas when I read it which I cant remember now. Need to read it again.
Wednesday, October 12, 2011
Future Gridlock
http://www.worldpolicy.org/journal/fall2011/innovation-starvation
This is an interesting rant by Neal Stephenson where he poses the possibility that his society (the US) no longer has the capacity to make big changes.
I would tend to agree and suggest that the problem is that there is too much inertia in the structure of the US. The political and social gridlock has reached a point that there is enough pressure from interested parties to prevent change that its almost impossible to enact large programs of change. Thus stasis. And as we know, a static organism rots.
Other societies have gone through this and if history is anything to learn from its that there is either evolutionary change (slow careful steps) or revolutionary change (rapid and substantial). I have no ability to clearly predict which path or when, but I don't think it takes a genius to realize that there is structural gridlock in most of the so-called "western" nations. If we look to the "so-called" Arab world at the moment, we can see revolutionary change happening after ( in some cases half a century) of static rotting. Their infrastructure, public systems, social orders and classes are all in decay and finally the active parts of their society have "renewed" the system by destroying the existing status quo and remaking their society.
My guess is that the static "western" nations have decades of gridlock to wait out before they reach a stage where revolution can happen. Some more than others. The amount of urban decay and dislocation has already started to play out in Europe in various place but its only small scale. The US is seeing the first widespread protests about its structural problems but their government and ruling elite have the resources to put that down without much effort at the moment.
This is not to say that evolutionary change has completely stopped. Its still happening all over the place in large and small amounts. The point is that the amount of big change has slowed notably and is moving toward and average of 0. As more and more gridlock builds up, and the organism looses the ability to adapt.... the amount of mal-adaption the the environment and consequently the amount of damage sustained just by being in the environment increases. (By environment I mean, social, political, resources, languages etc)
Enough ranting for one day....
This is an interesting rant by Neal Stephenson where he poses the possibility that his society (the US) no longer has the capacity to make big changes.
I would tend to agree and suggest that the problem is that there is too much inertia in the structure of the US. The political and social gridlock has reached a point that there is enough pressure from interested parties to prevent change that its almost impossible to enact large programs of change. Thus stasis. And as we know, a static organism rots.
Other societies have gone through this and if history is anything to learn from its that there is either evolutionary change (slow careful steps) or revolutionary change (rapid and substantial). I have no ability to clearly predict which path or when, but I don't think it takes a genius to realize that there is structural gridlock in most of the so-called "western" nations. If we look to the "so-called" Arab world at the moment, we can see revolutionary change happening after ( in some cases half a century) of static rotting. Their infrastructure, public systems, social orders and classes are all in decay and finally the active parts of their society have "renewed" the system by destroying the existing status quo and remaking their society.
My guess is that the static "western" nations have decades of gridlock to wait out before they reach a stage where revolution can happen. Some more than others. The amount of urban decay and dislocation has already started to play out in Europe in various place but its only small scale. The US is seeing the first widespread protests about its structural problems but their government and ruling elite have the resources to put that down without much effort at the moment.
This is not to say that evolutionary change has completely stopped. Its still happening all over the place in large and small amounts. The point is that the amount of big change has slowed notably and is moving toward and average of 0. As more and more gridlock builds up, and the organism looses the ability to adapt.... the amount of mal-adaption the the environment and consequently the amount of damage sustained just by being in the environment increases. (By environment I mean, social, political, resources, languages etc)
Enough ranting for one day....
Thursday, September 29, 2011
Semantics of "Technical Debit"
http://blog.objectmentor.com/articles/2009/09/22/a-mess-is-not-a-technical-debt
Good semantic analysis of the concept of "technical debit". Makes a clear distinction between deciding to take on debit as a strategic gamble and the other common use of the term to describe a mess created via unprofessional behaviour for no gain.
The best part is the point about a debit being a strategic gamble that has a probability of win/loss, while a mess is always a loss.
Good semantic analysis of the concept of "technical debit". Makes a clear distinction between deciding to take on debit as a strategic gamble and the other common use of the term to describe a mess created via unprofessional behaviour for no gain.
The best part is the point about a debit being a strategic gamble that has a probability of win/loss, while a mess is always a loss.
Thursday, August 4, 2011
More on Patent Trolls
http://www.economist.com/blogs/democracyinamerica/2011/08/intellectual-property
Fairly good summary of the situation. Nothing new or controversial, as you would expect from a conservative institution. Just interesting because its the stature of the voice doing the speaking.
Fairly good summary of the situation. Nothing new or controversial, as you would expect from a conservative institution. Just interesting because its the stature of the voice doing the speaking.
Tuesday, July 19, 2011
Adaption in MMOG business models
http://www.escapistmagazine.com/articles/view/features/9013-Evolve-or-Die
Good article on the changing business models in the MMOG market. Same message. Adapt or die.
Good article on the changing business models in the MMOG market. Same message. Adapt or die.
Saturday, July 9, 2011
More debit semantics
Debit = Time shifted expenditure(expenditure = asset loss)
Therefore if investment is diametrically opposite on the same axis:
Investment = time shifted income (Income = asset gain not access to resources)
Assets are internal while resources are external (From resiliance theory)
All this suggests that the semantic concept that I have been trying to describe as "equilibrium" needs a different name and concept set. Its closer to some concept of "Individual" or "self" . This includes the possibility of the individual changing ( increasing in assets and decreasing) while the idea of "equilibrium" suggests something more static.
The problem being that the central concept needs to encapsulate a descriptor for each of the dimensions/properties that are used to describe it. It also needs to capture state and again some sense of the relative and absolute value.... is there any possible single word to describe this ball of mud concept?
More thinking.
Therefore if investment is diametrically opposite on the same axis:
Investment = time shifted income (Income = asset gain not access to resources)
Assets are internal while resources are external (From resiliance theory)
All this suggests that the semantic concept that I have been trying to describe as "equilibrium" needs a different name and concept set. Its closer to some concept of "Individual" or "self" . This includes the possibility of the individual changing ( increasing in assets and decreasing) while the idea of "equilibrium" suggests something more static.
The problem being that the central concept needs to encapsulate a descriptor for each of the dimensions/properties that are used to describe it. It also needs to capture state and again some sense of the relative and absolute value.... is there any possible single word to describe this ball of mud concept?
More thinking.
Tuesday, July 5, 2011
More Debit
I had another thought about debit. Can't think of it right now.
Mess vs Cleaning
Storing food vs wasting it.
Pest management.
Maintenance.
Saftey vs exposure
Health vs destructive living
Sleep and exercise
All the usual things that get described using the debit investment nomenclature.
So the basic idea is about pivoting around equilibrium. Although this has to be an abstraction, and a relative one at that. At any time you can call whatever you like or want the balance point and see activity as either a positive or negative against the relative center.
I think the key point is that some activities are intrinsically negative within a given context. While some are intrinsically positive within the same context. The question is why? Why are these activities so "obviously" easy to classifiy? Why do they map so easily to the ecconomic models that have been developed to explain the games people have developed with money... oh wait... the common element is people. Perhaps the rules of ecconomics are actually representative of some rule set that people have encoded at a more fundamental level. Could it be?
Perhaps the concepts of gain, loss, investment, debit etc map so easily to so many other systems is that the same fundamental drives have been abstracted and form the basis of the ecconomy. We just happen to have ignored the connection.
At its most fundamental, people are motivated by self interest. If you look at the fundamentals of a commercial organisation, its composed of many people and the "profit" motive is the same thing writ large. Really just the same self interest magnified and channelled.
An interesting aside that I was debating with myself this morning was the idea of what happens when someone does not put their self interest first. Is this even possible? Unless we talk about really brutal absolutes, I think its quite common for people to put other things above their self interest. It's certainly common for people to work for the collective, family or team... but is this really putting the interest of the group ahead of the individual or is this just the individual investing in the group with the expectation of self benefit being a side effect of the groups situation being improved by the contribution of the individual.
So the question is what sort of scenario could be constructed in which an individuals self interest is compeletly at odds with that of the group and for the individual to still be motivated to work for the group.
I guess when some other motivation trumps that of self interest... things like fear... but usually fear is based on self preservation or pain avoidance, the avoidance of pain or loss or something else that the individual values. Something is threatened. Fear of the unknown? How does this work? People are certainly motivated by fear of the unknown but I guess in different ways, depending on what particular unknown they imagine is out there. If someone is scared of monsters in the woods... its basically fear of getting eaten by something... again comes back to self interest ( or fear for the individuals children)
This leads into a different thread. The idea of being motivated by the interests of ones children. This is a clear case of something trumping pure self interest. The same sort of pattern can be seen where someone identifies a project, product or thing as "their baby". People make some irrational decisions that are not always in their interests but are motivated by protecting something they strongly identify as being their "baby".
Again without getting into "law of the jungle" kind of scenarios, there are lots of people who will make choices that favour their children over themselves. Otherwise, "taking candy from a baby" would be much more common.
Then again there are clearly enough people who go the other way, but that's not the point.
So, self interest being the root of personal motivation, but what is the essence of "self interest"? Can we break it down?
We get back to maslows hierarchy of needs.
Physiological needs
Saftey needs
Love and belonging
Esteem
Slef actualisation
Self Trancendence(aparently added by some guy called Vikto Frankl acording to wikipedia http://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs)
So if you cook self interest down into these levels (I don't fundamentally disagree) then the decisions are fundamentally satisfying one or another drive. Simple enough.
Then we take it back to ecconomic models, which I contest are based on some mess of these drives made large. So to bring a long ramble around to something that looks like a circle; if the principles of the ecconomic model are derived and understood in from the point of view of the motivation of the individual then most of it makes pretty obvious sense. There are no great mysteries, just lots of agents in a dynamic system trying like hell to look after themselves and their offspring. Big suprise to anyone?
And how does an intuitive understanding of debit relate to this? I think that just about everyone understands debit because it has very concrete instances. Running your health down, not cleaning up, not fixing the car when it needs it.. Unless you're a natural abstract thinker, these ideas stay at the intuitive level.
Ok, there is no real content in this ramble, its late and my brain is just wandering around. Not even sure this is cathartic anymore... just rambling without much in the way of a point.
I'm out.
More later....
Ok, so forgive the whole sleepy typing thing... I just felt the need to write.
I think the seed of the idea in the ramble above gets back to the intuitive models that everyone has about the way the world works. (psychology 101) Equilibrium is the most recently remembered state of rest. While debit is relative to that, its expenditure that we intuitivly know we will have to pay back later. There are many different ways to draw down on the equilibrium but we all know that its a tradeoff. For us to perceive such a tradeoff however we need to have a set of concepts that allow us to perceive that the world works like this. Behind all this is some sense of "karma" or something similar. Some cultural imperitive that says we not only can return to some higher state but should.
If you think about it, non social species do not seem to carry these abstractions. A small mammal living in the bush will make decisions based on the options availible to it at any given time. Some have developed simple social structures but are essentially historyless. Each day starts it all again. There is still individual memmory, so they are not completely historyless. There is no oral history and very little ability or desire to communicate more complex abstractions than "Fight, feed, flee" So they have no concept of debit. They cannot make time based tradeoffs. They cannot save for the future. They cannot build up resources except what they can carry or hide.
Is this right? What about animals that do invest? They invest in relationships ( mating pairs), they invest in constructions ( nests, tunnels, warrens) they store for winter ( fat, nuts, kills) etc. While its easy to make the assumption that its all some hard wired biological impreitive there is still a sense of understanding of investment and loss when a nest is destroyed or a cache of food raided by someone else.
How does a squirell know that it has enough food stored? Do they just keep storing until its time to sleep and then just wing it? Its certainly a strategy and the kind of brutal selection that is common in nature. So it makes sense. Simple strategy that works across the population but is pretty much random chance for the individual. Good old nature.
So the odds are that most animal behaviour that I would call investment is actually just a set of encoded behaviours and strategies that I, in my pattern seeking nature apply the name of investment too. There is nothing but a successful strategy that has adapted to the environment. (The question is whether its socially encoded or neurally encoded and what the difference is in reality)
If these strategies where neurally encoded ( possible) it would be fairly easy to test by simply taking a squirell from an area where they have successfully adapted and placing them in a different environment where their strategies were not as strongly successful. See if they continue to perform the same habits( in which case the conclusion woud be that they are neurally encoded) or if they adapt to the local situation ( possibly by either working it out or watching the neighbours) then the conclusion would be that the stategies are socially encoded. If the squirell was able to breed, would their offspring (in a single generation) display the same strategies that their parent(s) displayed in their former habitat or would they have adapted to their new habitat. My thesis is that they would not have adapted because they did not need to. They would not have any memory of their parents habitat, but they may still model their parents behaviour, even if it didn't make as much sense in the context. The next generation would be even more adapted as they modeled less and less of their grand parents behaviour ( assuming there is a nice gene pool and we are not practicing any inbreeding in this though experiment...)
So, debit. While I think understanding debit is intuitive, I don't think its in our dna. I think its part of a socially encoded set of strategies that has been built into the cultural norms of most of the more developed cultures. If you look at the remaining hunter gatherer societies, the concepts of storing and investing are much less developed. They play by similar rules to the animals that invest; in that there is a distinct risk that when you check on your investment it might all be wiped out and there is pretty much nothing you can do about it. Its worth doing but don't rely on it.
I have heard it expressed a couple of times that cultural groups with no history of saving do not immediatly "get it" all their cultural strategies are to just go out, go fishing, eat, be happy, repeat. When there is an abundance of food and no effective ways to preserve it, how would anyone develp a strategy that included investment and debit models.
Still there has to be investment and debit concepts. Build a house, has a high cost in energy with a promise of a future payoff. This becomes even more complex when you need to get other peoples help to do the work. Their immediate payoff is nothing. But they have the expectation that in the future, you will help them in turn. "What goes around comes around". "You scratch my back and I will scratch yours".
These fundamental ideas all depend on self-interest, a sense of investment and return and strategies that can be socially encoded. Investment and return is based on time-shifting value decisions. This depends on the ability to make a value decions and project the return equation into the future.
These ideas all depend on concepts of time, space, common linear movement of people through time, common appreciation of value as a constant over time as a constant. There are also lots of social structures that need to be in place. Honesty, communication, mutually held belief in what the future might hold, common abstractions about ownership of the value that being invested, concepts of transferal of value, comparison of value so one party does not over spend. This leads to ideas about equity and that leads to fairness and justice.
So, my current thesis is that with a pile of needs and the concept of time, and the ability to make a simple value judgement, we have developed all the complexity of an ecconomy. Around which we have built many differnet cultures and belief systems, but at their root are the same common factors.
So the interesting idea is to look for scenarios where these factors have been different. Concept of time would be the most signficant, I guess. I wonder what would happen if you could model an AI society and then play with the concepts of time. Either by removing the shared understanding of time or by making different actors perceive time differently. My first guess is that chaos would ensue. Could a society adapt to something like that? I have read a few speculative fiction works that played with the idea in various ways but its hard to pick.
Mess vs Cleaning
Storing food vs wasting it.
Pest management.
Maintenance.
Saftey vs exposure
Health vs destructive living
Sleep and exercise
All the usual things that get described using the debit investment nomenclature.
So the basic idea is about pivoting around equilibrium. Although this has to be an abstraction, and a relative one at that. At any time you can call whatever you like or want the balance point and see activity as either a positive or negative against the relative center.
I think the key point is that some activities are intrinsically negative within a given context. While some are intrinsically positive within the same context. The question is why? Why are these activities so "obviously" easy to classifiy? Why do they map so easily to the ecconomic models that have been developed to explain the games people have developed with money... oh wait... the common element is people. Perhaps the rules of ecconomics are actually representative of some rule set that people have encoded at a more fundamental level. Could it be?
Perhaps the concepts of gain, loss, investment, debit etc map so easily to so many other systems is that the same fundamental drives have been abstracted and form the basis of the ecconomy. We just happen to have ignored the connection.
At its most fundamental, people are motivated by self interest. If you look at the fundamentals of a commercial organisation, its composed of many people and the "profit" motive is the same thing writ large. Really just the same self interest magnified and channelled.
An interesting aside that I was debating with myself this morning was the idea of what happens when someone does not put their self interest first. Is this even possible? Unless we talk about really brutal absolutes, I think its quite common for people to put other things above their self interest. It's certainly common for people to work for the collective, family or team... but is this really putting the interest of the group ahead of the individual or is this just the individual investing in the group with the expectation of self benefit being a side effect of the groups situation being improved by the contribution of the individual.
So the question is what sort of scenario could be constructed in which an individuals self interest is compeletly at odds with that of the group and for the individual to still be motivated to work for the group.
I guess when some other motivation trumps that of self interest... things like fear... but usually fear is based on self preservation or pain avoidance, the avoidance of pain or loss or something else that the individual values. Something is threatened. Fear of the unknown? How does this work? People are certainly motivated by fear of the unknown but I guess in different ways, depending on what particular unknown they imagine is out there. If someone is scared of monsters in the woods... its basically fear of getting eaten by something... again comes back to self interest ( or fear for the individuals children)
This leads into a different thread. The idea of being motivated by the interests of ones children. This is a clear case of something trumping pure self interest. The same sort of pattern can be seen where someone identifies a project, product or thing as "their baby". People make some irrational decisions that are not always in their interests but are motivated by protecting something they strongly identify as being their "baby".
Again without getting into "law of the jungle" kind of scenarios, there are lots of people who will make choices that favour their children over themselves. Otherwise, "taking candy from a baby" would be much more common.
Then again there are clearly enough people who go the other way, but that's not the point.
So, self interest being the root of personal motivation, but what is the essence of "self interest"? Can we break it down?
We get back to maslows hierarchy of needs.
Physiological needs
Saftey needs
Love and belonging
Esteem
Slef actualisation
Self Trancendence(aparently added by some guy called Vikto Frankl acording to wikipedia http://en.wikipedia.org/wiki/Maslow%27s_hierarchy_of_needs)
So if you cook self interest down into these levels (I don't fundamentally disagree) then the decisions are fundamentally satisfying one or another drive. Simple enough.
Then we take it back to ecconomic models, which I contest are based on some mess of these drives made large. So to bring a long ramble around to something that looks like a circle; if the principles of the ecconomic model are derived and understood in from the point of view of the motivation of the individual then most of it makes pretty obvious sense. There are no great mysteries, just lots of agents in a dynamic system trying like hell to look after themselves and their offspring. Big suprise to anyone?
And how does an intuitive understanding of debit relate to this? I think that just about everyone understands debit because it has very concrete instances. Running your health down, not cleaning up, not fixing the car when it needs it.. Unless you're a natural abstract thinker, these ideas stay at the intuitive level.
Ok, there is no real content in this ramble, its late and my brain is just wandering around. Not even sure this is cathartic anymore... just rambling without much in the way of a point.
I'm out.
More later....
Ok, so forgive the whole sleepy typing thing... I just felt the need to write.
I think the seed of the idea in the ramble above gets back to the intuitive models that everyone has about the way the world works. (psychology 101) Equilibrium is the most recently remembered state of rest. While debit is relative to that, its expenditure that we intuitivly know we will have to pay back later. There are many different ways to draw down on the equilibrium but we all know that its a tradeoff. For us to perceive such a tradeoff however we need to have a set of concepts that allow us to perceive that the world works like this. Behind all this is some sense of "karma" or something similar. Some cultural imperitive that says we not only can return to some higher state but should.
If you think about it, non social species do not seem to carry these abstractions. A small mammal living in the bush will make decisions based on the options availible to it at any given time. Some have developed simple social structures but are essentially historyless. Each day starts it all again. There is still individual memmory, so they are not completely historyless. There is no oral history and very little ability or desire to communicate more complex abstractions than "Fight, feed, flee" So they have no concept of debit. They cannot make time based tradeoffs. They cannot save for the future. They cannot build up resources except what they can carry or hide.
Is this right? What about animals that do invest? They invest in relationships ( mating pairs), they invest in constructions ( nests, tunnels, warrens) they store for winter ( fat, nuts, kills) etc. While its easy to make the assumption that its all some hard wired biological impreitive there is still a sense of understanding of investment and loss when a nest is destroyed or a cache of food raided by someone else.
How does a squirell know that it has enough food stored? Do they just keep storing until its time to sleep and then just wing it? Its certainly a strategy and the kind of brutal selection that is common in nature. So it makes sense. Simple strategy that works across the population but is pretty much random chance for the individual. Good old nature.
So the odds are that most animal behaviour that I would call investment is actually just a set of encoded behaviours and strategies that I, in my pattern seeking nature apply the name of investment too. There is nothing but a successful strategy that has adapted to the environment. (The question is whether its socially encoded or neurally encoded and what the difference is in reality)
If these strategies where neurally encoded ( possible) it would be fairly easy to test by simply taking a squirell from an area where they have successfully adapted and placing them in a different environment where their strategies were not as strongly successful. See if they continue to perform the same habits( in which case the conclusion woud be that they are neurally encoded) or if they adapt to the local situation ( possibly by either working it out or watching the neighbours) then the conclusion would be that the stategies are socially encoded. If the squirell was able to breed, would their offspring (in a single generation) display the same strategies that their parent(s) displayed in their former habitat or would they have adapted to their new habitat. My thesis is that they would not have adapted because they did not need to. They would not have any memory of their parents habitat, but they may still model their parents behaviour, even if it didn't make as much sense in the context. The next generation would be even more adapted as they modeled less and less of their grand parents behaviour ( assuming there is a nice gene pool and we are not practicing any inbreeding in this though experiment...)
So, debit. While I think understanding debit is intuitive, I don't think its in our dna. I think its part of a socially encoded set of strategies that has been built into the cultural norms of most of the more developed cultures. If you look at the remaining hunter gatherer societies, the concepts of storing and investing are much less developed. They play by similar rules to the animals that invest; in that there is a distinct risk that when you check on your investment it might all be wiped out and there is pretty much nothing you can do about it. Its worth doing but don't rely on it.
I have heard it expressed a couple of times that cultural groups with no history of saving do not immediatly "get it" all their cultural strategies are to just go out, go fishing, eat, be happy, repeat. When there is an abundance of food and no effective ways to preserve it, how would anyone develp a strategy that included investment and debit models.
Still there has to be investment and debit concepts. Build a house, has a high cost in energy with a promise of a future payoff. This becomes even more complex when you need to get other peoples help to do the work. Their immediate payoff is nothing. But they have the expectation that in the future, you will help them in turn. "What goes around comes around". "You scratch my back and I will scratch yours".
These fundamental ideas all depend on self-interest, a sense of investment and return and strategies that can be socially encoded. Investment and return is based on time-shifting value decisions. This depends on the ability to make a value decions and project the return equation into the future.
These ideas all depend on concepts of time, space, common linear movement of people through time, common appreciation of value as a constant over time as a constant. There are also lots of social structures that need to be in place. Honesty, communication, mutually held belief in what the future might hold, common abstractions about ownership of the value that being invested, concepts of transferal of value, comparison of value so one party does not over spend. This leads to ideas about equity and that leads to fairness and justice.
So, my current thesis is that with a pile of needs and the concept of time, and the ability to make a simple value judgement, we have developed all the complexity of an ecconomy. Around which we have built many differnet cultures and belief systems, but at their root are the same common factors.
So the interesting idea is to look for scenarios where these factors have been different. Concept of time would be the most signficant, I guess. I wonder what would happen if you could model an AI society and then play with the concepts of time. Either by removing the shared understanding of time or by making different actors perceive time differently. My first guess is that chaos would ensue. Could a society adapt to something like that? I have read a few speculative fiction works that played with the idea in various ways but its hard to pick.
Monday, June 13, 2011
Post Ecconomic Meltdown Analysis
I was watching "Inside Man" and thinking about some of the big picture issues that it raises. While there is a lot of explicit and implicit suggestion that lack of regulation allowed this horrible event to happen, which is true, it also highlighted for me the structural effect of regulation.
Don't get me wrong, I don't think a completely deregulated market is a perfect market. The point I am trying to make is slightly more subtle.
A regulation is a rule. A rule encodes knowledge about whats permitted based on assumptions. Enforcing a rule allows whats permitted and relies on the assumptions. A rule cannot work the way it was envisaged if the assumptions no longer hold.
Now all this is fine, except for the fact that the assumptions are rarely stated. This is a problem for both dungeon masters and financial regulators. Mainly because they both forget this simple fact.
If we use the iceberg metaphor, the rule is the 10% and the assumptions are the 90% that is hidden. The thing to take away from this is that the assumptions change easily and constantly while the rule text stays static.
You could see it in a different way.
A set of rules define a market place. If the rules are fairly comprehensive and prescriptive, they make for a very structured and "known" game. There are still plenty of variables but most of the big ones are locked. Its a game most people could play.
The rules are the encoded wisdom of the market regulators about what is and is not allowed. They encoded knowledge about what has worked and what has not worked. In effect they try to freeze time. The market is frozen at a point that the regulators are happy with how its performing. This gives the ecconomy around the market a very stable base and everything adapts to the stability of the market.
Happy days..
But what happens if one of the commodities in the market in no longer available? Easy enough, just don't use any rules that apply to it. But what about the capital that used to invest in that commodity? It moves into other commodities and changes the prices and the values. More people trade in those commodities. Ok, its a subtle change but thats what markets are about.
Now take a more radical change in the assumptions. A whole new currency is in use and competing with the existing currency. Its electronic currency and everyone can print their own money. It has a wildly fluctutating exachange rate with the existing standard currency but people are still willing to exchange between them. (Don't asky why or how, think dutch tulip bubble if you want an example) Yes it may be a bubble but its still violationg the assumptions of the market place and has introduced changes that the existing rule set were not designed to handle. Much like any social rule set. Except in a market, the dependencies between the rules are much more immediate. Its a dynamic system. Closer to fluid dynamics than a newtonian clockwork.
You need to remember that a market does not have a fixed equation like an energy equation. It has fluffly edges that at any time may introduce more or less products onto the playing field, players on the field may put value on the table or take it out of circulation randomly. There may be idiot sistuations where structures allow emergent bubbles or drains to occur. The point is that a static rule set that is highly prescriptive will be much easier to break in a dynamic environment.
If you want a look at a fixed environment, have a look at the Japanese banking system. Its been stuck in the 1930's for the best part of a century. It has begun to change but its way past its used by date.
So whats the point. One of the interesting points that I took away from watching Inside Man was a throw away comment that someone made about allowing the market to take on more risk and to explore more risk.
The interesting point I think was that removing some of the regulations allowed the market to explore new ideas. This generated a whole new set of opportunities and threats. The biggest problem was that no-one did anything about the emerging threats. The regulatory systems were completely corrupted and all the watchdogs had their teeth systematically removed.
Now imagine the same situation with a strong hand at the tiller. As the economy started to explore all these new opportunities, and made some exploratory moved into toxic CDO's, a good regulator would have pointed out that these were a ticking time bomb, helped the market to unwind the situation gracefully and prevented more of them being generated. This would have been the encoding of new wisdom into the market regulation mechanism.
The consistent failure of the US administration is not that it has failed to shackle the market with lots of regulations, the failure is that it has failed to build a set of dynamic regulatory mechanisms that have teeth.
Regulations have a used by date. A good market needs to adapt to change and allow some exploration of both old and new ideas to see if they may be valuable in the moment.
Around the edges there will be theft, fraud, ethical failures, conflict of interests, lies, deceit etc, but these can be dealt with by a strong market regulator. They just need some flexible rules that allow them to rein players in, give them a clear talking to, impose a penalty and continue playing. Markets do not need bursting bubbles. Many lose while few win.
Don't get me wrong, I don't think a completely deregulated market is a perfect market. The point I am trying to make is slightly more subtle.
A regulation is a rule. A rule encodes knowledge about whats permitted based on assumptions. Enforcing a rule allows whats permitted and relies on the assumptions. A rule cannot work the way it was envisaged if the assumptions no longer hold.
Now all this is fine, except for the fact that the assumptions are rarely stated. This is a problem for both dungeon masters and financial regulators. Mainly because they both forget this simple fact.
If we use the iceberg metaphor, the rule is the 10% and the assumptions are the 90% that is hidden. The thing to take away from this is that the assumptions change easily and constantly while the rule text stays static.
You could see it in a different way.
A set of rules define a market place. If the rules are fairly comprehensive and prescriptive, they make for a very structured and "known" game. There are still plenty of variables but most of the big ones are locked. Its a game most people could play.
The rules are the encoded wisdom of the market regulators about what is and is not allowed. They encoded knowledge about what has worked and what has not worked. In effect they try to freeze time. The market is frozen at a point that the regulators are happy with how its performing. This gives the ecconomy around the market a very stable base and everything adapts to the stability of the market.
Happy days..
But what happens if one of the commodities in the market in no longer available? Easy enough, just don't use any rules that apply to it. But what about the capital that used to invest in that commodity? It moves into other commodities and changes the prices and the values. More people trade in those commodities. Ok, its a subtle change but thats what markets are about.
Now take a more radical change in the assumptions. A whole new currency is in use and competing with the existing currency. Its electronic currency and everyone can print their own money. It has a wildly fluctutating exachange rate with the existing standard currency but people are still willing to exchange between them. (Don't asky why or how, think dutch tulip bubble if you want an example) Yes it may be a bubble but its still violationg the assumptions of the market place and has introduced changes that the existing rule set were not designed to handle. Much like any social rule set. Except in a market, the dependencies between the rules are much more immediate. Its a dynamic system. Closer to fluid dynamics than a newtonian clockwork.
You need to remember that a market does not have a fixed equation like an energy equation. It has fluffly edges that at any time may introduce more or less products onto the playing field, players on the field may put value on the table or take it out of circulation randomly. There may be idiot sistuations where structures allow emergent bubbles or drains to occur. The point is that a static rule set that is highly prescriptive will be much easier to break in a dynamic environment.
If you want a look at a fixed environment, have a look at the Japanese banking system. Its been stuck in the 1930's for the best part of a century. It has begun to change but its way past its used by date.
So whats the point. One of the interesting points that I took away from watching Inside Man was a throw away comment that someone made about allowing the market to take on more risk and to explore more risk.
The interesting point I think was that removing some of the regulations allowed the market to explore new ideas. This generated a whole new set of opportunities and threats. The biggest problem was that no-one did anything about the emerging threats. The regulatory systems were completely corrupted and all the watchdogs had their teeth systematically removed.
Now imagine the same situation with a strong hand at the tiller. As the economy started to explore all these new opportunities, and made some exploratory moved into toxic CDO's, a good regulator would have pointed out that these were a ticking time bomb, helped the market to unwind the situation gracefully and prevented more of them being generated. This would have been the encoding of new wisdom into the market regulation mechanism.
The consistent failure of the US administration is not that it has failed to shackle the market with lots of regulations, the failure is that it has failed to build a set of dynamic regulatory mechanisms that have teeth.
Regulations have a used by date. A good market needs to adapt to change and allow some exploration of both old and new ideas to see if they may be valuable in the moment.
Around the edges there will be theft, fraud, ethical failures, conflict of interests, lies, deceit etc, but these can be dealt with by a strong market regulator. They just need some flexible rules that allow them to rein players in, give them a clear talking to, impose a penalty and continue playing. Markets do not need bursting bubbles. Many lose while few win.
Monday, June 6, 2011
Bitcoin as scam
http://www.quora.com/Is-the-cryptocurrency-Bitcoin-a-good-idea/answer/Adam-Cohen-2
This is an interesting analysis of the BitCoin system. Looks at the ecconomic fundamentals and identifies the weaknesses that undermine BitCoin as an old school "currency". The question is if BitCoin is an old school currency? Do the same rules apply? Are the weaknesses really valid for a system that spans nations and avoids many of the assumptions that rule old school currency markets?
I am not claiming BitCoin is anything. Just asking some interesting questions.
This is an interesting analysis of the BitCoin system. Looks at the ecconomic fundamentals and identifies the weaknesses that undermine BitCoin as an old school "currency". The question is if BitCoin is an old school currency? Do the same rules apply? Are the weaknesses really valid for a system that spans nations and avoids many of the assumptions that rule old school currency markets?
I am not claiming BitCoin is anything. Just asking some interesting questions.
Thursday, May 26, 2011
Fun with Botnets
http://www.abuse.ch/?p=3294
This is an analysis on botnet size captured using a technique called sinkholeing. Looks like an effective method for trashing botnets if it was used effectively. The article also points out the obvious that the botnets and the malware are no longer that important. Its other links in the value chain that are more critical to extracting usable value from the exercise. Essentially a botnet is just illegal infrastructure for a business. Anything like this needs a whole ecosystem around it to form an economic activity.
I would expect that at some point, some of the botnet systems will ( as suggested in the comments on the article) turn into a cloud service and at some future point, they will start to turn legit by paying the drone computers and selling the service to the highest bidder. This legitimise the botnet part of the system and push the criminal/illegal parts to a smaller section of the value chain. Eventually the criminal element will be just a contractor and eventually they will move somewhere else and try to exploit a different niche.
The biggest losers from such a transformation will be the ecosystem of security companies that have fed off the fear and uncertainty that the botnets/maleware/virus ecosystem has created. They were an opportunistic business model at the best of times. They will transform into a much more specific security service for clients and provide targeted security around assets, probably information assets. I fully expect to see infosec turn into some sort of cloud service where you check your information in and have a guaranteed access to it anywhere, anytime under a certain level of security. People like guarantees.
This is an analysis on botnet size captured using a technique called sinkholeing. Looks like an effective method for trashing botnets if it was used effectively. The article also points out the obvious that the botnets and the malware are no longer that important. Its other links in the value chain that are more critical to extracting usable value from the exercise. Essentially a botnet is just illegal infrastructure for a business. Anything like this needs a whole ecosystem around it to form an economic activity.
I would expect that at some point, some of the botnet systems will ( as suggested in the comments on the article) turn into a cloud service and at some future point, they will start to turn legit by paying the drone computers and selling the service to the highest bidder. This legitimise the botnet part of the system and push the criminal/illegal parts to a smaller section of the value chain. Eventually the criminal element will be just a contractor and eventually they will move somewhere else and try to exploit a different niche.
The biggest losers from such a transformation will be the ecosystem of security companies that have fed off the fear and uncertainty that the botnets/maleware/virus ecosystem has created. They were an opportunistic business model at the best of times. They will transform into a much more specific security service for clients and provide targeted security around assets, probably information assets. I fully expect to see infosec turn into some sort of cloud service where you check your information in and have a guaranteed access to it anywhere, anytime under a certain level of security. People like guarantees.
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