Fragility, Antifragility and Us

Nissam Taleb has a new book out. Matt Ridley reviews it here. His thesis is that knowledge grows 'bottoms up' and that theory simply codifies the heuristics or rules of thumb that have been found to work over time - theory does not create reality. This means that complex systems that are designed centrally from the top down and managed by 'experts' (e.g. attempts to impose theoretical order on messy reality) are subject to catastrophic failure - he calls systems with these characteristics 'fragile'. According to Taleb the Fed is a classic fragile system.  It is a complex, tops down institution led by 'experts' who have great confidence that they 'know' how to use the money supply and banking system to 'manage' the economy.

On the opposite end of the spectrum there are 'antifragile' systems - systems that actually get better the more failure and flux that they experience - Taleb cites both the restaurant industry and biology as systems that tolerate and indeed rely on many, many small failures to improve. Without the flux they stagnate. A free market economy is an antifragile system.

So what?

We are in the implementation phase of the two most complex and ambitious tops down system reengineering projects in the history of government. Anywhere.  Ever.  They seek in one fell swoop to transform the two largest, most complex sectors in America - Financial Services and Healthcare. Essentially they are attempts to centrally plan these sectors using tens or even hundreds of thousands of pages of regulations administered by thousands of 'experts'.

They are destined to fail, but as they fail I fear they will create enormous collateral damage  in much the same way that the Fannie and Freddie bankruptcies were not just a couple failed specialty lenders but the trigger for a global financial collapse.  Or in the way that Mao Ze Dong's
"Great Leap Forward" didn't just result in a lot of crappy backyard steel but in the starvation of tens of millions.


                               
Of course tops down, expert driven theory is what you expect from our most 'academic' administration ever. The central conceit of the intellectual 'elect' that rule us is that by writing millions of runes on the magic Federal Register hard drive they can choreograph 315 million human beings spread over 3.6 million square miles and seven time zones like a Busby Berkeley dance extravaganza from the 1930s

Paraphrasing Tiny Tim (Geithner): God help us every one.