Tag Archives: Steven Johnson

The Great Crash vs. Emergence (re-mixed)

So it is with impeccable timing that about 3 weeks ago I started listening to John Kenneth Galbraith’s “The Great Crash: 1929.” (Indeed, I wish I had similar impeccable timing when planning my RRSP, 401k and stock purchases). Obviously the events of the last week, and more precisely the events of yesterday make this essential reading for everyone.

By quirk of luck (due to a recommendation by Mark Surman) I have also been reading Emergence: The Connected Lives of Ants, Brains, Cities, and Software by Steven Johnson. Emergence is about “the way complex systems and patterns arise out of a multiplicity of relatively simple interactions.” Possibly the most easily understood exmaple of emergence is seeing how ants or termites can create complex societies based on a few simple rules.

Interestingly, although Galbraith and Johnson almost certainly never met, and their books were written over 50 years apart, they are fundamentally writing about the same thing.

John Kenneth Galbraith’s The Great Crash is about an emergent system – the speculatory stock market bubble that lead to the 1929 crash. Indeed what makes reading these books simultaneously so interesting is observing how Galbraith describe an emergent system without the language and frameworks available to Johnson 50 years later. Consequently, Galbraith’s book is hints at a larger system even as he struggles to describe how the decisions of hundreds of thousands of individuals could be simultaniously coorindated but not directed. He intuits a distributed system, but simple can’t describe it as accurately as Johnson.

A great example of this struggle is visible when Galbraith’s describes his frustration with others efforts to pin the 1929 crash on a given, or set of, individuals. I’m willing to bet that, sadly, we are about to embark on a similar misadventure: I wager the next congress is going to launch a series of hearings to determine “who” caused our current financial crises. This, as Galbraith pointed out about “The Great Crash”, will be nothing short than a colossal waste of time and energy, one that will distract us from the real challenge. This is not to say illegal activities did not occurr somewhere on wallstreet (or K street) both in recent years and in the years leading up to 1929. I’m certain they did. Nor should they go unpunsished. They should. It is just that then, as well as today, they almost certainly did not cause this crisis. As Galbraith puts it:

“This notion that great misadventures are the work of great and devious adventurers, and that the latter can and must be found if we are to be safe, is a popular one of our time. Since the search for the architect of the Wall Street debacle, we have had a hue and cry for the man who let the Russians into Western Europe, the man who lost China, and the man who thwarted MacArthur in Korea. While this may be a harmless avocation, it does not suggest an especially good view of historical processes. No one was reponsible for the great Wall Street crash. No one engineered the speculation that preceded it. Both were the product of the free choice and decisions of thousands of individuals. The latter were not lead to the slaughter. There were impelled to it by the seminal lunacy which has always seized people who are seized in turn with the notion that they can become very rich. There were many Wall Streeters who helped foster this insanity, and some of them will appear among the heroes of these pages. There was none who caused it.”

There was no one who caused it. Remember that. Galbraith wants to pin it on something large and decentralized but can’t put his finger on what it is. Consider this line “No one engineered the speculation that preceded it. Both were the product of the free choice and decisions of thousands of individuals. The latter were not lead to the slaughter. There were impelled to it by the seminal lunacy which has always seized people who are seized in turn with the notion that they can become very rich.” Throughout his book Galbraith keeps talking about a “collective lunacy” but cannot account for it. As he concedes, the desire to become rich is ever present, something in 1929 triggered a larger hysteria. Some emergent property made it vogue.

This is what we need to understand. In 1929 – as well as today – a group of people lived and worked in a system that had powerful incentives that encouraged them to engage in risky practices (in 1929 it was investing in stock on margin, today it was lending people money who simply could not afford it). Finding the people will achieve little compared to understanding the basic set of rules that created these incentives – removing the people will do little. Managing the incentives will do everything. A big part of this may involve new regulations, but probably more importantly it requires recognizing that whole new business models are required as these shape incentives far more than regulations. No business wants to go through this type of crises again. A business model that insulates them against it will be the one to copy. This is why Umair Haque’s post is so important.

Encouragingly and contrary to popular beleif, Galbraith doesn’t believe that the crash of 1929 caused the Great Depression. Depressingly he sites other problems that lead to the larger crisis – problems some of us might see as familiar:

  • A dramatic and uneven distribution of income (we got that)
  • Poor corporate structures (we got that one too)
  • Poor banking structure (check)
  • A uneven state of the foreign balance (check again, although in reverse)
  • Opaque economic intelligence (not so sure about this one).

Yikes, so we are batting 3, maybe 4 out of 5.

My biggest fear and suspicion is that this bailout, if it occurs. Will probaby not “rescue” the system. It will simply give us breathing room to adapt the system. Certainly that would have been the case in 1929, and history very much looks like an emergent system, beyond the control of a top down state, has once again taken over.

Review of Steven Johnson’s "Everything Bad is Good For You"

Everything bad is good for youSteven Johnson’s contrarian book “Everything Bad is Good For You” argues that, for the past three decades, a combination of economic, technological and neurological forces have increased the complexity of popular culture. The result? Popular culture is causing us to exercise our minds in new and increasingly strenuous ways. In short, popular culture isn’t making us dumber, it is making us smarter.

To understand Johnson thesis it is essential to distinguish between the content and structure of pop culture. This is because Johnson is not applauding or even condoning the content of pop culture, what he is celebrating is how the increasing complexity of TV shows, video games and internet content is forcing us to work harder to explore, understand, engage and even guide, the content. Better yet, our brains want it this way. The result is a virtuous loop created within the pop culture industry. People who want and demand more engaging and complicated pop culture foster a media industry keen to serve it up. Don’t believe it? Try following Johnson’s advice and watch a TV show from 20 years ago. Invariably, you’ll quickly notice is how linear, simple and boring it is.

What makes this book compelling – particularly when juxtaposed against those who rant about the decline of culture – is its style. Everything Bad is Good For You is not a social commentary piece, anecdotally comparing a rose tinted past to the present (or vice versa). It is a book grounded in evidence and research relying, in particularly, on improving IQ tests as its principal data source. The result is a book filled with little gems. For example, contrary to all stereotypes, white collared professionals who play video games are actually more social, more confident and more adept at solving problems than their colleagues. Revenge of the nerds anyone?

The highlight though, was how the book provided an indirect explanation of a broader societal shift I’ve noticed, commented on, but have had difficulty articulating. Before it properly penetrated the popular consciousness the term ‘network’ kept cropping up in within Canada25. By the time we wrote From Middle to Model Power report the word was such a touchstone for the organization we decided to explicitly make it the central theme of the report. This turned out to be a wise decision.

Whenever I presented on or spoke about the report, the network theme resonated strongly, particularly but not exclusively, with younger members in the audience. Suddenly, everywhere I turned people were thinking in terms of networked systems. Up until this book I’d assumed that this was the result of the internet – that somehow its architecture was influencing how people thought and understood the world. It appears that that answer was only partly correct. Everything Bad is Good For You persuasively argues that the influences behind this emerging perspective are more pervasive than just the internet – they have permeated every medium of our pop culture including games, TV, movies, etc… Consequently, pop culture has been shaping the minds of an entire generation, turning them into system thinkers for whom the network is the structure they most naturally and intuitively identify with. Now there’s an idea I can’t wait to sink my teeth into further…

[tags] book review, Everything bad is good for you, steven johnson, popular culture[/tags]