Choosing Control

Bust of Emperor Augustus wearing the Corona Civica, on display in the Musei Capitolini (Rome). (Photo credit: Wikipedia)

The future really is almost here.

We now have flying cars, self-driving cars, and floating concept cars. Of course, the latter’s  technology would in my ideal world be used to create Back to the Future hoverboards just in time for 2015, but I digress…

The point is that our technological sophistication is extraordinary. Other examples would the powerful miniature computers we carry around (even if most people just browse Facebook, play Angry Birds, and make the occasional telephone call on them), the bionic exoskeleton that let a paralysed woman complete a marathon and motion capture technology that should make teleconferencing more useful. And as the sheer quantity of data exchanged across the internet increases, our ability to continuously access this data also advances by leaps and bounds.

Increasingly, the problem we face is one of control. The weakest link in all the above technologies are the human beings using them; we simply can’t crunch information as quickly as a computer. Our advantage lies in being able to prioritise data once we have a manageable amount to deal with. But we need help to winnow the initial mass down. This is why manipulating the flow of information is crucial. It explains the rise of search engines, automated control systems, and social networking sites. All of them personalise what information enters your conscious sphere; an invisible filter on the world.

The dilemma individuals face is how to retain a broad enough overview of the world to have a balanced perspective while not getting bogged down with excessive detail.

It’s impossible to ignore new technologies. Unless you are an avowed Luddite, you’re exposed to it daily. However, it is possible to prioritise. The world is tipping in favour of those who can correctly decide what is important. They can choose what data to exchange, adjusting their degree of privacy to accomodate this. And they can choose when to let automation run their lives and when to actively intervene to change course. These people will get the benefit of technological sophistication. Everyone else will be prone to becoming lost and homogenised within a morass of data and control systems.

What do you actually want to achieve, and why?

Life can be so fast-paced that people spend all their time running to stand still. Decide your goals. Then figure out what information you need to allow into life to facilitate them. For example, if you don’t need 100 different apps, don’t get them. It’s clutter; rubbish filling your mind and clouding it.

Do not be a human magpie attracted to the newest shiny object, and then instantly forgetting it.

Augustus Caesar’s personal motto of festina lente (“hurry slowly”) is more relevant than ever. A sense of control is not achieved by trying to do everything quickly, but by actively choosing when and how to act. Take the time to plan ahead and life simplifies. And technology returns to being a tool rather than a master.

Aquascutum: shielding a brand from financial storms

Aquascutum scarf, showing its club check
Image via Wikipedia

Aquascutum, venerable maker of stylish raincoats for over 150 years, is in administration. As this is the second time in almost as many years that it is in stormy financial waters, it may be said that they are better at shielding you from water than they are at protecting themselves. At time of typing, YGM, the Hong Kong based owners of Aquascutum’s Asian rights are exploring the possibility of buying the entire brand.

Sadly, one suspects this may result in downward pressure on quality in order to restore margins, and a general exploitation of the brand. As an owner of Aquascutum raincoats and overcoats, I would personally regret such an outcome. But are there any other possibilities? And why has Aquascutum been unable to be profitable?

The latter issue is fairly easy to understand. Aquascutum has always been an mid-to-upper market player, heavily focused on the rainwear segment. That is the model that kept in business for so many decades but it is no longer sustainable for two very simple reasons; fewer men wear raincoats regularly and the middle-market in general has been squeezed in favour of a polarisation of sales towards either niche high-end luxury brands or bargain basement low-cost retailers. This reflects the current development path of our societies in general. Aquascutum has been stuck in a no-man’s land.

It has tried various strategies to escape this trap, but they have been highly contradictory and poorly followed through. For instance, it spent a lot of money developing non-rainwear lines, but never marketed them aggressively. And it attempted to position itself as a luxury brand while having more discount outlets in its portfolio than it has proper shops, not to mention the less-than-stellar concessions it has in too many middling department stores.

It has never been able to decide what it really wants to be, diluting the brand’s identify in the eyes of consumers across the world.

A rescue strategy will have to make some fundamental decisions: do they want to take Aquascutum upmarket? Or do they want to make it a mass market brand?

In my opinion, it would find life as a mass market brand impossible. Theoretically, production could be aggressively offshored, more lines added and an attempt made to milk any latent value in the brand to the general consumer by having a small halo line of top quality products above a large range of far less impressive merchandise. This is the Burberry school of brand development. It has worked for them (more or less), but it is expensive and risky, especially with Burberry already a large presence in the same marketplace. I fear Aquascutum has simply left it too late to compete with them in this arena.

It would be better served by shrinking and focusing on a pure luxury identity. Keep production in England, focus on rainwear/outerwear/related items, drastically reduce the number of discount outlets & department store concessions, and ensure the one or two full retail locations that remain exude quality, brand pedigree and personalised service. Turnover would be a lot lower, but margins could be restored and the brand might have a fighting chance. Aquascutum now needs to be aspirational luxury to survive.

Are there any other options? Has Aquascutum simply left it too late? And is there life left in the middle class, mid-market segment generally?

Predicting the Future II: What the 2012 Boat Race tells us about the future role of Government

In the Oxford & Cambridge Boat Race, crews must pass through the centre arch of Barnes Bridge. (Photo credit: Wikipedia)

Anyone who watched the tumultuous 2012 Oxford-Cambridge Boat Race would be forgiven for viewing my last post on Predicting the Future with a degree of skepticism. Who could have predicted the trifecta of unusual events: a lone swimmer disrupting the event, a broken oar within a few strokes of a controversial restart, and the collapse of one of Oxford’s rowers after their battered boat crossed the finishing line in an undeserved second place?

Surely our hypothetical reader would be well-justified in arguing that this sequence of events underlines a chaotic and inherently unpredictable model of reality?

My response is that in fact, it supports the essential thesis of my last entry: that complexity paradoxically reduces unpredictability by reducing the scope for an individual’s directed action to influence larger scale societal events. The Boat Race, like any sporting event, is a very simplified reduction of reality. It imposes strict and arbitrary rules on the flow of events and therefore creates a simplicity that is altogether lacking in real life. It is for this reason that sports are enjoyable to participate in or watch. They offer a glimpse into a simpler time, where one man – or small group of men with common purpose – could change their fate simply through concerted effort. Of course, as in those simpler times, the trajectory of those men’s lives in sport is much more prone to events; a lone swimmer can disrupt a race between two boats on a narrow stretch of the Thames, but cannot so easily simultaneously disrupt all global shipping routes.

Complexity and globalisation create systems so fundamental to society that they have immense redundancy. Competition between providers of these systems ensures this. Where the systems are narrowest – simplest – vulnerability is highest. Returning to the example of global shipping, blowing up the Suez Canal would have significant impact and it is possible to construct a hypothetical scenerio where this could be done by relatively few people. Staying in the Middle East, the global diplomatic attention focused on Iran is in part down to their ability to (transiently) disrupt shipping through the Strait of Hormuz.

If complexity is an ally of predictability through creating redundant systems, this creates significant implications for good government. The historical guiding principle behind good government is that it should manage events. By anticipating and managing global events to national advantage, it is supposed to create conditions allowing its citizens to thrive. I would suggest that as the world becomes more complex, it should become increasingly easy for governments to predict the long-term future regardless of short-term fluctuations. For instance, globalisation is making China increasingly corporatist (and thus eventually capitalist) by forcing it to invest the large capital flows that its exporting creates. It is only when a country is isolated from the impact of global events that its behaviour becomes more unpredictable: North Korea being a prime example of this.

The implications of this for the (lack of) efficacy of sanctions are interesting, suggesting that the best way to manage countries like Iran would be to drown them in global capital and make it impossible for them to act independently as they’d be slitting their own throats. This theory is not dissimilar to MAD – the Mutually Assured Destruction of the Cold War – except that the embedding of a nation in the interdependent system is done through chains of gold rather than fear.

A counter-argument would be to highlight the financial crisis of the past few years; surely that proved beyond doubt that complexity creates more risk, not less? Certainly, the complexity of the collateralised debt market created an unexpected outcome. However, the underlying trend is little changed. Individual people (and countries) have been ruined, but the overall trajectory towards an increasingly globalised world has not budged. If anything, it has been strengthened by forcing countries like China to acknowledge their increasing responsibilities in that world of globalised capital, forcing them to act in ways that support the system. The beauty is this increasing enmeshment is done voluntarily, out of national self-interest. Would we have seen China allowing the yuan to appreciate to the extent it has in the past year without the financial crisis causing them to import inflation due to US quantitative easing programmes? I think not.

If it is becoming increasingly impossible for national governments to significantly make long-term differences to a nation’s path because of the effects of increasing complexity, what should a government actually do?

We are already seeing the effects: governments are becoming more like advertisers than managers. The role of government is to sell an image of the nation to its citizens, sufficient to make them content to carry on, almost regardless of what actually happens. Of course, this has always been true to some extent. But it’s not surprising that the nature of politics has accelerated in this direction over the past 20-30 years as it is over this period that the rate of globalisation has accelerated due to increasing technological, logistical and financial sophistication.

For those unhappy with the government-as-advertiser model, there is an alternative. Government can act as national life coach instead. It can work to reframe and reconceive reality in a way that is palatable for most of its citizens and encourages them to adopt a positive attitude to maintaining a role within the system. In some ways, this is little more than a minor difference to the advertiser model, but it does at least encourage a focus on broader measures of contentedness. This is the reason we see increased attention being given by governments to concepts like national happiness indices. They are ways to measure and influence the debate around national contendedness without actually having to make significant long-term differences in outcomes. Remember, under this model the government is life coach to the nation NOT to individual citizens within it, and the best interests of the nation do not always coincide with the best interests of all its citizens.

For the individual, the lesson from the impact of complexity remains similar. If you cannot escape the complexity, it will be easier to manage your attitude to events rather to manage the events themselves. But if you can work to reduce complexity in your life, you can diminish the impact of wider events on you personally, and increase your ability to manage your personal future. It’s becoming increasingly hard for countries to do this, but individuals – for now – still have far more scope to act.

Predicting the Future: Concepts and Problems

Dr Isaac Asimov, head-and-shoulders portrait, facing slightly right, 1965 (Photo credit: Wikipedia)

Toss a coin into the air. What are the chances it lands heads-up?

The conventional answer is 1 in 2.

The convention is wrong.

The conventional answer simply reflects what we can easily calculate: that if the coin is perfectly balanced, and there are no other environmental factors affecting the toss, then if you toss it a very large number times, the average chance of it landing heads-up will be once in every two tosses. An equivalent way to calculate this is to take a very large number of identical, balanced coins and toss each once: half would land heads-up.

However, it is exceptionally difficult to calculate the actual outcome of a single coin toss with any degree of accuracy. Certainly, it is a virtual impossibility before the coin is in the air and only slightly more feasible (at least theoretically) once the coin is in motion. That theoretical feasibility would likely involve cameras/sensors able to track the movement of the coin in the air, and a sufficiently fast computer simulation of the physics involved to be able to project an outcome an instant before the coin lands.

What does this little thought experiment tell us about probability, and about making predictions?

1. Tossing a single coin thousands of times yields equivalent predictive power to tossing thousands of coins simultaneously, assuming the coins in the second experiment are sufficiently similar (homogenous) to not bias the results.
2. Even once a suitably mathematically rigorous model is developed to predict the average behaviour of an entity (or of a sufficiently homogenous population), predicting what actually happens becomes harder and more complicated the narrower the timeframe and the smaller the unit being observed.

While it may seem that I am belabouring very simple mathematical & scientific principles, these two points are highly counter-intuitive to most attempts we make to predict human behaviour. The internal model of people that we tend to adopt is that individual members of society (including ourselves) are unique, and that extensive study of their singular natures is required to predict how they might act. Even then, we assume that our predictions will only hold in the short-term where fewer variables have time to interfere. An expression of what happens in the mind when these incorrect beliefs coalesce is the vanity of the fundamental attribution error, wherein our own motives seem rational & pure and those of others irrational & base.

In fact, people are both simpler and more similar than we like to believe. The reason for this is that we apply conscious thought to our actions in a much more limited fashion than is generally accepted. This should not be controversial: just try remembering the exact details of your last commute to work, and then tell me you are were acting in a fully conscious manner at the time! And yet, most people rail against such an interpretation of their lives.

It does however have advantages. Unconscious actions tend to be more automatic, and therefore more predictable, than conscious ones. Give people time and opportunity to actively choose a course of action, and they can react in surprising ways. But keep them moving on a path that requires relatively less choice, and their potential range of action diminishes. This theory of behaviour becomes extremely useful when thinking about how large groups of people may act. The complexity of societal structure itself is an exceptionally good narcotic agent on the conscious mind: it funnels and moulds our actions in a deep manner, subtly constraining our choices at every step while still providing the illusion of choice.

The beauty of this effect is that it leads to a surprising conclusion: societies – and the people within them – are MORE predictable the larger and more complex they are. Simple small societies bring us closer to the level of a free individual, and so create more opportunity for a single rationally-thinking person to make changes. Large, intertwined societies tend to blur the effect of a single person, reducing the noise affecting the signal indicating the direction of travel of the society.

Irrationality thus becomes an asset to predictability, and rationality a liability. Situations are harder – not easier – to predict when too many people in a group actively attempt to cognitively reason out their next course of action. By constrast, irrationality tends to be the product of the unconscious and automatic mind, and that is much more straightforward to anticipate. The irrational action may or may not actually be helpful in achieving the group’s aim, but it is almost certainly more predictable. Any student of the human mind will confirm this pattern, whether they work as psychiatrist, psychologist, politician, salesperson, negotiator or diplomat.

Of course, I do accept that if absolutely everyone acted rationally all the time, society would be perfectly predictable. This is why the behaviour of an algorithmic computer is theoretically predictable. The difficulty is where both rationality and irrationality co-exist i.e. the human context. Here, it is the presence of rationality that creates a more disruptive effect on predictive power than irrationality. The larger and more complex the society, the less impact a small amount of rationality can have. Trends, conventions and accepted boundaries, however arbitrary, are more effective constraints of behaviour than rational argument ever can be.

Psychohistory is the fictional science created by Isaac Asimov for his Foundation series, which postulates a mathematical predictive model of society. Today, the concept is being explored (albeit in rudimentary fashion compared to Asimov’s fantastical version) through the work of a range of behavioural modellers in many disciplines, though few would apply the term psychohistory to what they do or indeed even realise that their work may in future apply to such a field. The few who consciously strive towards such a distant grand ambition have renamed themselves students of Cliodynamics. Psychohistory as a term survives instead as the study of historical and sociological trends through the lens of psychodynamic principles.

The fictional science of psychohistory, or modern cliodynamics, faces massive practical challenges. Fortunately, two of them are being gradually solved simply by the passage of time: firstly, our ability to computer simulate complex models grows exponentially with increases in processing power; and secondly, our societies become ever more complex and intertwined, limiting the impact of disruptive, rational, behaviour.

While the idea of a fully developed psychohistory of society may induce feelings of anomie or nihilism, it should be emphasised that it does not negate the individual. Individuals will still exist, exercising both rational and irrational thought just as they always have. And they’ll still have all the same illusions around choice and freedom that they always have. It would be exceptionally hard to eradicate such a useful evolutionary trait. Just like today, each of us will still prefer to believe we can control the world, while minimising the degree to which it influences us. And just like today, it will be those with a strong sense of their own identity who will be most able to adopt quiet & discreet lives where such influence is indeed minimised.

Changing Opinions

Sitting on the Fence (Photo credit: Wikipedia)

How often do you change your mind about something?

I don’t mean having difficulty deciding something and bouncing between a couple of options while doing so. I mean, once you’ve made you mind up, how often do you really change it?

If you’re like most people, the answer is, “not often”. Most people try to make big decisions in a moderately rational way. The bigger the decision, the more they try to apply logic to solve it. Small decisions like whether to order a latte or americano today, tend to be left to the more primitive parts of our brain. For the big issues, though, we like to go through a vaguely scientific process of asking a question, acquiring relevant information, balancing the information against preferred outcomes, and deciding what to do. Trouble is, most big issues are big because they’re difficult to solve logically, which means we end up having to make a final “gut instinct” judgement call in order to finally decide our opinion about the problem facing us. We end up using a heuristic rather than purely algorithmic approach; I’ve discussed such Wicked Problems before.

Heuristic problem-solving is inherently fraught with uncertainty; it’s based on a pattern-recognition approach, the validity of which varies according to the mind of the person applying the heuristic filter. Put simply, the wiser the person, the more likely they are to reach a correct result. But if the problem is truly wicked, then one can never test the result, and so we can never definitively prove who is wisest.

There are many proxy markers for wisdom, including reported or perceived happiness, wealth, position and/or influence in the eyes of others, and how well words stand the test of time. None of these is entirely satisfactory, for self-evident reasons, which means that definining wisdom itself ultimately becomes a matter of consensus and opinion. This is clearly troubling if one is concerned about creating an objective yardstick by which to measure human progress.

However, it is empowering if you are more concerned about making changes that chime in with your own personal opinion. Firstly, it allows you to define the frame of reference for success and failure. Secondly, it promotes uncertainty in other people’s decision-making, creating a space for you to influence their judgement. And lastly – if you are interested in making large-scale rather than personal changes – it provides you with a long-term tool by which to modify the broader cultural perception of what is ethically correct. As a culture, we have even given a name to this last process: Politics.

Politics is the art of persuading a sufficiently large number of people that your opinions are culturally correct. This actually applies as much to a tyranny as it does to the kinds of limited/representative democracies most readers will live in. It’s just that the violence and speed of the mechanisms of changing government that varies: revolution in the former; elections in the latter. But more than this, far-sighted politicians also understand that the optimal way of persuading people of their rightness is to modify the cultural mindset within which the choice is made. Alter the frame of reference, and you can ensure a specific answer will always emerge. This is also something tyrannies and democracies share, with only superficial differences between the two: tyrannies tend to use coercive force and single-party elections; democracies use advertising and other softer propaganda like manipulating the flow of information.

All the above is no more than I would expect an average teenager to grasp, and I actually think many do (at least on an unconscious level), even if the usual response is anomic cynicism rather than recognising the empowering potential. The more thoughtful will recognise another implication, however: even quite severe unpopularity in the short-term is irrelevant, provided you can sufficiently alter the mindset of a large enough group of people to influence their long-term cultural mindset in your favour to protect your long-term survival. This applies to individual lives as much as it does to organisations and to political parties.

Coming full circle to the start of this post, changing someone’s mind is very difficult in the short-term. Instead, you have to alter the way they make decisions. The more time you have to do this, the easier it becomes. This is partly what accounts for incumbency effect in politics: it’s harder to dislodge a known politician from a post than if two unknowns are fighting for the same position. It’s not usually that incumbents have really proven anything about whether they’re right or not; it’s just that they’ve become part of the mental furniture of voters. Even if they’re unpopular in some respects, the incumbent still usually retains a higher chance of retaining power than if they didn’t have that mindshare of reality. In a US Election year, it’s worth noting that this is a big part of the reason that most US Presidents tend to get re-elected for a second term, even if at mid-term it seems like they’re unpopular. UK politics frequently operates similarly: being in government allows you to craft the narrative in a much deeper way than being in opposition, and you can see it in many of the Budget 2012 changes being announced today (esp. personal tax statements, reducing reliefs & benefits and increasing personal allowances), despite the potential for some other changes to be unpopular in the short term. And even when the longer-term cycle of change occurs, political parties never reverse even a majority of changes imposed by their predecessors, no matter how vehemently they may have opposed them at time of their introduction.

Reality is like chewing gum: sticky but malleable.

The ultimate expression of this thesis of persuasion is that tactics should always be secondary to strategy, and that strategy should be guided by clear long-term insightful aims. Only that will allow you to gradually work on altering the perception of enough people for them to reach what you would consider correct decisions. Logic and argument is a poor convincer of anyone except a computer. Persuasion through modifying the frame of reference of the argument works much better on human beings. Next time you disagree with someone, or need to negotiate with them, remember these principles rather than attempting to argue with them. You won’t convince them today, but you might just change their mind tomorrow.

Placebo Effects and Paradigm Shifts

It’s rare to find an article in the traditional medical literature that I feel readers here may be interested in, so I hope you will forgive my extensive quoting of McQueen & St John Smith’s Guest Editorial in the February 2012 issue of International Psychiatry which arrived through my letterbox this morning:

Placebo effects may be simplistically defined as those accruing from taking dummy pills or inactive treatments. In placebo-controlled randomised controlled trials (PCRCTs) placebo is defined negatively, as those non-specific (typically nonpharmacological) effects to be subtracted from the treatment arm, to reveal the specific (typically pharmacological) effect. Here, placebo is “noise” obscuring the “signal” of “real” treatment. Recently, placebo effects have been defined positively as the specific effects arising from caregiving.

Systematic evaluations reveal that placebo treatments can have large effects, sometimes larger than the effects of properly evaluated “evidence-based treatments”. This is the “efficacy paradox”. The neurobiology of placebo effects (nuclei, pathways, neurotransmitters, peptides and hormones) is being mapped out. There is evidence for various psychological  mechanisms, including classical conditioning, evaluative conditioning, expectation (including the expectations of professionals), the quantity of care and attention received from professionals, and the quality of the therapeutic relationship or alliance.

Placebo effects are no less real or, in some illnesses, clinically important than the effects of direct biomechanical or pharmacological interventions.

Healing rituals occur in all human societies… The investigation of placebo effects and mechanisms has emerged as a way of studying the “healing situation”. The technological model of medicine seeks impersonal means of cure that can be applied independently of context and person. The PCRCT is a central tool of technological medicine. It developed precisely to control for interpersonal healing effects and individual and contextual factors. This approach has had spectacular success in the treatment of disease (the objective anatomicopathophysiology).

However, meaning, cultural context, interpersonal effects, personal preferences and values are enormously important in the treatment of illness (the phenomenological
subjective experience), particularly psychiatric conditions (Miller et al, 2009)…

Prescribing evidence-based treatments and simply expecting the technology to work while failing to establish therapeutic relationships profoundly limits clinical effectiveness.

As the guest editors go on to point out, the real challenge is therefore to encourage the development of positive therapeutic relationships. After all, the non-placebo, technological side of the equation is comparitively conceptually straightforward, if admittedly time-consuming and expensive to develop.

They suggest improvements in the training of psychiatrists. This is an important issue, but perhaps it is also worth highlighting that therapeutic relationships are hardly encouraged by the way modern medicine (including psychiatry) is structured and delivered, and there is also a limit to the efficacy of training for the subset of practitioners whose natural talents do not lean this way. There is a strong focus on “evidence-based” practice – possibly because it is very measurable and audit-able – with relatively little regard to the art of being able to talk to someone in a pleasant and productive manner, and think about what the conversation might mean.

The guest editors suggest that this positive way of considering the placebo effect means that we are approaching a paradigm shift in how we treat people. I hope so, but paradigm shifts require a critical mass of people to think differently, and I’m not convinced we have that yet.

The full issue of International Psychiatry from which I have quoted can be downloaded in PDF format from The Royal College of Psychiatrists

The Last Generation

Countdown to Singularity, Image via Wikipedia

Are we the last generation of humanity?

One of the unique aspects of human consciousness is a desire to understand the nature of our reality. This has manifested itself across all domains of life: spiritual, scientific, psychological, and philosophical. As a species, we are blessed with a deep dissatisfaction with whatever our current circumstances may be, leading to a drive to improve our quality of life. This has lead to the rise and fall of civilisations and religions across the ages. Distinct from this waxing and waning of interpersonal systems has been a much more steady rise in our technological sophistication. Of course there have been hiatus, often caused by an influx of newcomers into a rigid society e.g. the arrival of the Sea Peoples leading to Bronze Age collapse, or the fall of the Roman Empire due to political infighting during a period of external pressure from the Goths. Similar patterns can be detected in civilisations across the globe. But while the collapse of societal structures have delayed technological progress, they have never been able to fully press the reset button, and so sophistication accumulates.

It has been suggested that such progress is logarithmic, leading inevitably to the development of a technological singularity at which time mankind would be able to design an artificial intelligence greater than its own. Beyond this point, such superintelligences become able to improve themselves faster than man can understand, leading to an unpredictable and rapidly-evolving future. The idea is old, stretching back to the 19th century, but has received much greater attention and publicity over the past quarter-century. Theories abound as to whether singularity is possible, and whether the implications will be transformative or apocalyptic for humanity.

What is certain is that recent technological progress has done nothing to suggest that the theory is fundamentally flawed. Almost every day brings stories of startling new discoveries. For instance, it is now possible to read what another person is thinking, at least in a very rudimentary fashion. Is it really so far-fetched to assume that at some point, the technology to do so will be refined, miniaturised and made portable?

Consider your mobile phone, and how it would have seemed the height of science fiction even 30 years ago to suggest everyone would be routinely carrying around such incredibly powerful and versatile devices. It does not seem unlikely to me that such technology would continue to advance and become so integrated into our lives that it becomes integrated into our bodies, with displays directly interfacing with our retinas. Science fiction? Only just. There are already more than a dozen electronic prosthetic retinas in various stages of development and clinical trials, with an aim of restoring sight to the blind. While still primitive, money and time have a way of solving most difficulties, and both have been made available to these devices. The next obvious step would be using such technology to augment vision, instead of merely to restore it.

Even if we do not go down the road of cybernetic implants, it seems irrefutable that our degree of technological immersion will advance in other ways. Our entertainment systems, our cars, our phones, our very ability to acquire and process new information: all are already heavily influenced by electronic networks. It seems almost irrelevant whether they become physically part of us; they are already mentally – and emotionally – part of us.

The great hope of many transhumanists is that technological singularity and our increased integration with electronic networks will lead to a form of immortality, at least of consciousness. This has the vague air of eschatological myth, albeit built upon scientific hopes rather than religious ones. One might even describe this unconscious desire for ego dominance over death as a power phantasy.

I am not so convinced; everything I see suggests we are on a path to a very different kind of existence, with potential for a signifiant degree of self-actualisation within its broader scope.

Unfortunately, I do rather suspect the transhumanists are over-optimistic on the timeline. They suggest singularity sometime around the middle of this century or a little later i.e. within my lifetime, with luck and good health. I have a sneaking suspicion that it will arrive somewhat later. I will have to make do with other ways of seeking Jungian individuation.

Strange to think that my generation may be the last to need to do so.

A Panglossian Perspective on the EU summit

Image via Wikipedia

In our turbulent times, it it reassuring to know that certain things remain unwaveringly true. One of those things is that regardless of any grand statements, national interests override supranational ones. Nowhere was this more in evidence than at the European Summit overnight. Interestingly enough, despite that, most of the major countries got their way and will not walk away unhappy.

Purists Germany stopped the ECB from actually solving the Eurozone debt crisis by letting it act as a proper central bank and prevented the ESM/EFSF from getting banking licenses of their own. The UK protected itself from a heavy extra burden of financial regulation in the City, a key driver of our economy, while not preventing the Eurozone from beginning the process of integrating into a more meaningful fiscal union with the real and necessary restrictions of national sovereignty required for a currency union to work. And the French got to maintain the pretence that they are the key diplomatic player in the EU, the power behind Germany’s economic throne, by loading the proposed treaty with so much of that financial regulation as to force the UK to veto an EU-wide treaty. And on an EU level, at least the Eurozone debt crisis has a bigger temporary sticking plaster to kick the can down the road a bit longer.

Let us be clear: Germany holds the Eurozone’s pursestrings and if any nation can be said to have got its way more fully than the rest, it is Germany. They have imposed their economic model on the rest of the Eurozone. It may not quite be an iron hand yet, but the velvet glove is certainly off. In the meantime, the EFSF will run concurrently with the ESM for about a year, which together with other resources pledged, brings the total amount of money in the EU bailout pot for profligate PIIGS to a bit over a trillion euros. That’s still not enough, really. Two would be nicer. But it’s not a bad sticking plaster – certainly better than the ones we’ve had so far – and might just be enough to calm the situation. Time will tell; it’s a little too early to judge that today.

The UK was forced to wield its veto. The usual suspects have begun hand-wringing about “isolation”, but as Terry Smith of brokers Tullet Prebon amusingly suggested this morning: “the UK as isolated as somebody who refused to join the Titanic just before it sailed”. To have signed the treaty would have subjected the City to a huge potential increase in regulation. Like it or not, the City contributes about 10% to our national wealth, a far greater percentage than any other EU country’s financial intermediation services. Add in financial services more generally, and the figure rises to about 1/3 of GDP. Even just considering the taxes it pays (yes, it does actually pay a lot of tax, despite what some would have you believe), that’s an important cash-cow for the UK government to preserve. Subjecting it to a new swathe of regulation is hardly conducive to profit, especially in such fragile times.

The French are very aware of this of course, which is why they insisted on including so much financial regulation in the proposed treaty. Unable to persuade the Germans to give the ECB proper banking powers, they were at risk of appearing impotent in the EU. And if there’s one thing that a French President with a looming re-election campaign can’t afford to appear, it’s impotent. As no other EU nation has as large a financial sector as Britain, it was easy for them to ensure that the other countries would not object; the impact of the regulations would be negligible to them. This ensured that either Britain would capitulate (handicapping one of its traditional strengths, benefiting France) or it would have to veto the treaty (allowing Sarkozy to frame the outcome as British isolation, boosting his domestic prospects).

The UK’s relationship with the EU will certainly now be very different to before. A veto, once wielded, is no longer a frightening spectre to either British PMs or our EU colleagues, but merely a tool. It will likely be used more frequently. I suspect the likely outcome will be a multi-speed EU, with the eurozone (and its likely future members) moving towards a more integrated political and economic union, and the UK and any other permanent non-eurozone members remaining in a looser alliance with the eurozone. The key thing the UK has to negotiate is the maintenance of a single market when it comes to no cross-border tariffs, minimising internal national subsidies, and the other key free trade tenets currently enshrined at an EU-level. Everything else can gradually be allowed to drift apart, which in the medium term will make it easier to begin cutting back on some of the more intrusive bits of current EU social and regulatory legislation.

It is undoubtedly in the UK’s long-term economic interests to remain part of the free-market aspects of the EU (although Channel 4′s relatively impartial FactCheck suggests its benefits may often be overstated). The challenge will be maintaining the UK’s free market relationship with the EU while the Eurozone members integrate further politically. Given the free market aspects are already in place, this should not be an impossible challenge. A delicated balancing act, certainly. But not impossible.

In the longer term, the UK can develop into a low-tax offshore gateway to the rest of the EU, with less regulation than the mainland, attracting global investment precisely because of that lower regulatory burden. A jumbo-sized Hong Kong, if you like. This would not be possible if the UK were part of a more integrated political, fiscal and monetary union with it. In the very long term, the balance may shift again. We cannot predict what the EU or the World will look like in 50 or 100 years. But for today, and for the short and medium terms, David Cameron did the right thing for Britain.

And funnily enough, leaving aside the relative sideshow of financial services regulation, the Eurozone may just have done enough to stave off imminent disaster too. Well, as the title suggests, I am an optimist.

Italy. Or, How Markets Got Their Groove Back.

Image via Wikipedia

Two Eurozone governments toppled in almost as many days. First Prime Minister Papandreou of Greece was forced to resign, and at time of typing we hear that Prime Minister Berlusconi of Italy is finally throwing in the towel. The common factor? Despite bluster, both eventually kow-towed to capital markets.

Markets are much misunderstood & maligned. They are either perceived as Machiavellian, plotting complex geopolitical outcomes from the shadows, or as irrational, disregarding long-term economic fundamentals in favour of short-term risk-taking. Markets are a reflection of the sum of a large number of disparate actions. As such, they are subject to the emotional temperature of those making deals. Fearful traders make for volatile markets.

Since the global financial crisis first hit in late 2007, those traders realised en-masse that something had gone dreadfully wrong. The complexity of some of the financial vehicles, especially in securities markets, led to an inability to accurately price risks. Accurate pricing of risk is an essential of any market, from the man on the street choosing how much a used car is worth, to an investment bank deciding what a trillion-dollar collateralised debt is worth.

That inability to price risk shook confidence in the entire financial system, with results we’re all familiar with. Far from being Machiavellian geniuses, traders are all too human. They became extremely fearful to trade with, well, anyone. They lost the ability to gauge what was worth investing in and what was not, and in their fear desperately turned to politicians and governments to solve the problem.

There is something subtly different in the air this week. The repeated failure of those politicians to restore confidence, most especially in the eurozone but also in the USA, has caused something to snap. Market have gone from childlike fear to doing their basic job: pricing in risk. The cost of Italian government debt rose to near-unsustainable levels on the back of prolonged shilly-shallying by the Berlusconi government, prompting his slow-motion fall.

This is a restoration of moral hazard in markets for which we should all be very grateful, as it is the first sign in over four years of a return to some degree of normality in how markets are supposed to work, as abnormal and dramatic as the events themselves are. Unpopular as they currently are, markets are our least-worst way of judging monetary value. There is something potentially cathartic and empowering about their net actions this past week, which may encourage sustainability and further progress in the months to come.

Governments, beware.

Measuring Power

Image by JAS_photo via Flickr

Forbes magazine loves lists. One of their annual features is World’s Most Powerful People, the latest revision of which has just been published. The names on the list change occasionally; the order of the names changes more frequently. But what is power, why does it matter, and can it really be measured?

For Forbes, a business-orientated publication, the answer is a calculus of the financial, human and physical resources an individual can draw upon. Unsurprisingly, their list is therefore dominated by global political and business leaders. This demonstrates an important feature of power: it is as much in the eye of beholder (or in this case, beholden?) as beauty is.

On a global scale, Forbes’ list is not a bad attempt. If the world is a pond, Forbes measures the potential ripple effect created by an individual landing on its smooth surface. Current #1 Barack Obama is undeniably a bigger stone to throw in than a random African villager.

Another analogy would be the distortion of the fabric of space-time by large celestial objects. Massive bodies like the Sun or Jupiter create deep gravity wells, drawing other objects into their influence, to the point of bending light around them. At a gravitational extreme, a black hole creates a gaping maw that does not permit anything else to shine. People can create a similar effect on those around them.

One theory of planet formation is that small particles gradually accrete together, eventually forming planets. This analogy allows for an understanding of how large organisations wield power. Obama is not powerful because he is Obama; he is powerful ex officio as a result of the combined wealth & military might of the United States, and there are certainly those in the world who, rightly or wrongly, like to complain that the USA doesn’t let them shine.

Maintaining the strength of an organisation is therefore one method of its leader maintaining power. A more sophisticated analysis would point to the increasing importance of networks rather than organisations. To use Obama again, the power of the President of the USA is magnified through the network of allied nations whose political favours it can draw upon. On a more modest level, an individual’s power over their own network is magnified if they are the hub or major node of the network rather than a distant spoke.

All these forms of power are extrinsic in nature; they correlate power with the ability of an individual to influence the world around them. I would argue that this is a fundamentally unwise way to measure power.

Why? Because it is ultimately dis-empowering; it is a game no participant can definitively win. It is impossible for an individual to maintain their position at the head of an organisation or network indefinitely; new players keep entering the field, and the field of play itself continuously mutates. Essentially, to play this game requires you to accept a life of running to stand still, akin to a giant hamster wheel. It is not the act of a powerful person to subjugate themselves to a system in this way.

True power is intrinsic. It is the acceptance of self that comes from being able to stop. Epicurus famously said, “I would rather be first in a little Iberian village than second in Rome”, and the logical extension of this is to reduce the circle of concern to that within which it is small enough to remain permanently first. This is of course the individual himself. Mastery over one’s own life & emotions is the real challenge, and true mastery over these domains is real power.

Epicurus goes on to describe the nature of this challenge: “the art of living well and the art of dying well are one”. In other words, in order to achieve mastery over self, it is necessary to come to terms with death and the end of one’s existence. This is easy on an abstract level, and much harder on practical/personal one. Nonetheless, it is good to acknowledge the reality of the problem facing us instead of pursuing the endless distraction of extrinsic power. “It is better for you to be free of fear lying upon a pallet, than to have a golden couch and a rich table and be full of trouble”, as the aforementioned philosopher also said.

As those who know me will attest, I am no fan of a poverty-stricken hairshirt existence. Money is important. It has an undoubted – and powerful – insulating effect, permitting an individual the necessary psychological breathing space required to focus on the self. But if I may be permitted a final quote: “Not what we have but what we enjoy, constitutes our abundance”.