Posts Tagged ‘Savage hazard’
Is “Black Swan Theory” applicable to man-made systems?
Has anyone seen a swan (baja3) physically? In the flesh, or even flying or walking? If you are asked “what is the color of a swan?” I bet your answer is “White, obviously”. Actually, a black swan was identified a few years ago. Is it possible to eventually identify a multicolored swan?
You might say that finding a black swan, or even a tribe of black swans, or a mixture of black and white swans stand to reason, but is it feasible to have a green, blue… swan? You might respond that genetic engineering can produce whatever colored swan you desire as a pet…
Why do you think all of us believed that a swan must be white, and nothing but white? Most of us have not seen a swan, except in pictures, movies or documentaries; we might not even be able to identify a swan from a duck if the bird is not named…
If even nature, which changes slowly and its trends can be mostly predicted, has the potential of surprising us with rare events, a few of them catastrophic.
We got in the habit of expecting frequent disasters from man-designed and man-made systems, within a few years of their applications and usage by people…
The variability in living creatures and the behaviors of users are a thousand folds more numerous than variability in nature. Wouldn’t you be appalled in total disbelief to hear any designer of systems claiming that the product is definitely designed and manufactured to be entirely controlled and managed according to users’ satisfaction, safety, and health?
The teams of designers of many professions such as scientists, engineers, psychologist, legal professionals… are aware of two things:
First, there will be frequent minor malfunctions to the system in terms of financial loss, safety and health casualties, but these malfunctions can be controlled and fixed.
Second, any system contains rare catastrophic malfunctions that will eventually occur (doud al khal minho wa fih) and predicting these rare events is very challenging and out of control and management. When you hear of economic-safety analysis trade-off of a system, bear in mind that the study concerns the number of casualties and the financial cost that owners (more frequently the State or the tax payers) will have to set aside for these calamitous eventualities.
The funny part is that:
First, no money is ever set aside by the private shareholders for these catastrophes and the States or tax-payers will eventually cover up the expenses.
Second, transparency and full disclosure to the general public is never disseminated widely, if ever published.
Third, the public and communities in most countries have no say in the design and decision-making processes of vast man-made systems.
Fourth, no man-made system has instituted an independent specialized and dedicated team responsible of gathering data and analysing statistics of the various malfunctions. Most malfunctions are barely reported and serious hazardous events are dusted-off under the carpet: No read, never happened!
Do you know that the UN agency for health is forbidden to collect and report statistics on nuclear disaster consequences? That the atomic UN agency is not to share statistics with other UN agencies concerned with health and safety of world population?
Note 1: Nassim Nicholas Taleb, a mathematician by formation wrote “The Black Swan: The power of the unpredictable” and “Savage hazard”. Taleb was initially trying to explain the financial crisis since he is in the financial business. The theory is fine and explains many fluctuations in man-made designs, for example the international financial system.
Note 2: This post is a re-edited version of the first part of a lengthy article related to claims that Black Swan Theory does not apply to the political/social structure in Lebanon
Is Lebanon political system a typical application of Black Swan theory?
Posted by: adonis49 on: June 24, 2011
Is Lebanon political system a typical application of Black Swan theory? Is it immune to radical non-violent revolts?
Has anyone seen a swan (baja3) physically? In the flesh, or even flying or walking? If you are asked “what is the color of a swan?” I bet your answer is “White, obviously”. Actually, a black swan was identified a few years ago. Is it possible to eventually identify a multicolored swan?
You might say that finding a black swan, or even a tribe of black swans, or a mixture of black and white swans stand to reason, but is it feasible to have a green, blue… swan? You might respond that genetic engineering can produce whatever colored swan you desire as a pet…
Why do you think all of us believed that a swan must be white, and nothing but white? Most of us have not seen a swan, except in pictires, movies or documentaries; we might not even be able to identify a swan from a duck if the bird is not named…
If even nature, which changes slowly and its trends can be mostly predicted, has the potential of surprising us with rare events, a few of them catastrophic. We got in the habit of expecting frequent disasters from man-designed and man-made systems, within a few years of their applications and usage by people…
The variability in living creatures and the behaviors of users are a thousand folds more numerous than variability in nature. Wouldn’t you be appalled in total disbelief to hear any designer of systems claiming that the product is definitely designed and manufactured to be entirely controlled and managed according to users’ satisfaction, safety, and health?
The teams of designers of many professions such as scientists, engineers, psychologist, legal professionals… are aware of two things:
First, there will be frequent minor malfunctions to the system in terms of financial loss, safety and health causalities, but these malfunctions can be controlled and fixed.
Second, any system contains rare catastrophic malfunctions that will eventually occur (doud al khal minho wa fih) and predicting these rare events is very challenging and out of control and management. When you hear of economic-safety analysis trade-off of a system, bear in mind that the study concerns the number of casualties and the financial cost that owners (more frequently the State or the tax payers) will have to set aside for these calamitous eventualities.
The funny part is that:
First, no money is ever set aside by the private shareholders for these catastrophes and the States or tax-payers will eventually cover up the expenses.
Second, transparency and full disclosure to the general public is never disseminated widely, if ever published.
Third, the public and communities in most countries have no say in the design and decision-making processes of vast man-made systems.
Fourth, no man-made system has instituted an independent specialized and dedicated team responsible of gathering data and analysing statistics of the various malfunctions. Most malfunctions are barely reported and serious hazardous events are dusted-off under the carpet: No read, never happened!
Do you know that the UN agency for health is forbidden to collect and report statistics on nuclear disaster consequences? That the atomic UN agency is not to share statistics with other UN agencies concerned with health and safety of world population?
Nassim Nicholas Taleb, a mathematician by formation wrote “The Black Swan: The power of the unpredictable” and “Savage hazard”. Taleb was initially trying to explain the financial crisis since he is in the financial business. The theory is fine and explains many fluctuations in man-made designs, for example the international financial system.
The problem emerges when Taleb ventures to extend his theory to the current “Arab” revolts and Arab political systems. The is no doubt that political structures are essentially man-made designs and that the current acceptable varieties as within the realm of “How a democratic political system satisfies the criteria of the Western system democratic types.”
Taleb contends that since governments in Lebanon take turn, for example representing “opposition alliances”, as in Italy, the inherent and natural fluctuations in the system instability are resolved naturally.
Basically and literally, Taleb claimed that Lebanon political structure is immune to drastic revolts , on the ground that dictator regimes fall badly because the system try hard to control minor legitimate discontents, and consequently, the system is fragile when any major revolt strikes unexpectedly.
Either Taleb (Lebanese of origine) is using selective memory, or he is faking not to be that familiar with the history of Lebanon’s political structure.
I suspect that Taleb confused catalysts with causes in the case of Lebanon, a confusion he frequently warned against, in analyzing the cases of the “Arab Spring” revolts and the financial crisis.
First, since independence in 1943, Lebanon officially recognized two failed internal coup d’etats, one in 1949 and another in 1961. Lately, Lebanon witnessed a minor failed coup d’etat at the ministry of communication, because a private interest wanted to conserve its mobile communication business.
Second, Lebanon witnessed two officially recognized civil wars, one in 1958 and another one in 1975 that lasted 17 years.
Since the end of the civil war in 1991, Lebanon experienced a major military coup d’etat in 2008 that started in the Palestinian camp of Nahr el Bared around Tripoli: The army needed 11 months to overcome the uprising of the Islamist salafists Jund al Sham, and hundreds of fallen martyrs and handicapped soldiers.
Beirut experienced a quick military coup in 2007 by Hezbollah, as the government attempted to control land communication lines.
The war of 2006 against Israel was actually a military coup perpetrated by the Lebanese government to control Hezbollah’s military might.
Third, Italy has true political parties with programs and policies. The election laws in Italy are among the fairest and most equitable in the western States. Frequent changes in governments didn’t prevent Italy to continue being among the leading economic powers in the world.
Italy is very generous in investing in the poorer nations and its grants are relied upon in most States around the Mediterranean Sea basin. Italy has many contingents in the various UN peace-keeping forces…
Where as, for example, Lebanon is practically a Non-State country or a pseudo-State since its independence. The 18 religious sects represent the main de-facto powers and also by law to exercising political influence. Civil status of every “citizen” is run and administered by the officially recognized religious sects that own more than 50% of the land. Every religious sect is backed by over three confessional “political parties”.
The two historically secular political parties, the Communist and the Syrian National Social parties, were denied participation in the Parliament via biased and tailored-made election laws and procedures.
The Syrian National Social party was recently permitted to enter the parliament, carried on the shoulders of other main confessional parties. The multi-theocratic system, backed by the financial institutions that lend Lebanon governments to cover budget deficit, have vested interests in prohibiting the constitution of any viable and sustainable modern State governing system.
Fourth, Lebanon lacks sustainable public institutions and any long-term programs and policies. The only benefit the citizen enjoys is a mere passport. There exist no serious governance for the people to march against and demand reforms.
Was Taleb aware of the actual conditions and situation in Lebanon for him to categorize Lebanon as falling in line within the “stable” political systems and immune to radical revolts as Italy?
The hot season has started in the northern hemisphere, and the Spring Revolt might cool off a bit. In Lebanon, we missed the spring upheavals that swept the “Arab” world, but we planted the seed of a fresh drastic non-violent revolt for the next spring season.
The youth in Lebanon organized five marches in various cities in Lebanon demanding change in the confessional political structure.
Next Spring, the revolt will still be non-violent, but the target and purpose of the revolt will not be a matter of a reform here and another there. The traditional “leaders” have demonstrated that they refuse to establish a functioning State for all “citizens”: Lebanon has been run by Non-State governments, or care-taker governments.
The youth Movement for Change must be ready for the dawn of the next spring season: It must start doing serious due diligence. For example,
1. Specialized teams have to dig-up and dust-off the policies and programs stored in the basements of ministries. The goal of reviewing and revising already studied programs is: “A political system from the people to the people”.
2. The Lebanese have to feel true citizens with equal rights under the law.
3. The Lebanese have to enjoy fair and equitable election laws that allow common people to accede to decision-making positions.
4. Laws have to be revised for citizens, regardless of genders, race, or religious affiliation, to have fair opportunities to all political positions and job opportunities in the public and private institutions and enterprises.
5. The Constitution has to be re-written to separate religion from civil power and responsibility…
Radical changes are possible: There are no other alternatives to patching up a rotten political and social structure; it is not feasible to move on with small incremental reforms under the power of the ferocious religious and financial oligarchies that have been dominating our lives and subjugating us to constant instability and indignities.
We have grown up to be mature and responsible adult “citizens”. Lebanon is Not immune to drastic revolts, and the next revolution will be successful!
Note 1: Nassim Taleb, a mathematician, was a trader and worked for 20 years as consultant to large investment banks in New York and London. He created Empirica LLC for trading. He is engineering professor at the polytechnic institute at the University of New York.
Is Lebanon political system immune to radical non-violent revolts? Black Swan theory NOT applicable? Think again!
Posted by: adonis49 on: June 3, 2011
Is Lebanon political system immune to radical non-violent revolts?
Black Swan theory NOT applicable to Lebanon? Think again!
Nassim Nicholas Taleb (see note), the mathematician who wrote “The Black Swan: The power of the unpredictable” published an article in the French weekly Le Courrier International. Nassim stated that Lebanon’s political structure, as in Italy, is immune to drastic revolts similar to those taking place in Tunisia, Egypt, Libya, Yemen…
Taleb contends that since governments in Lebanon take turn representing “opposition alliances”, as in Italy, the inherent and natural fluctuations in the system instability are resolved naturally.
Taleb said that dictator regimes fall badly because the system try hard to control minor legitimate discontents, and consequently, the system is fragile when any major revolt strikes unexpectedly.
(As a reminder, Black Swan is a term coined after discovering a black swan a couple of years ago. People firmly believed that all swans were white: A few might have observed a black swan, but refused to identify it as a swan. Maybe black swans are common sight in particular regions and people had no idea that black swans are considered rarity all over the world and might be purchased for their weight in gold to be raised in zoos!)
Either Taleb is using selective memory, or he is not that familiar with Lebanon’s political structure history after staying abroad for so long. I suspect that Taleb confused catalysts with causes in the case of Lebanon, a confusion he frequently warned against in analyzing the cases of the “Arab Spring” revolts and the financial crisis.
First, since independence in 1943, Lebanon experienced two failed internal coup d’etats, one in 1949 and another in 1961, and several uprising such as in 1950, 1958, and 1974… Last week, the Moustakbal party that led an alliance which governed Lebanon since 1991, has tried a failed coup d’etat to conserve its mobile communication interests: The general director of the internal forces, General Reefy, led a force of 400 armed men and occupied the second flat in the communication ministry. The director of the communication ministry, Youssof, a stauch member of the Moustakbal of Saad Hariri PM party, participated in that stupid undertaking.
Second, Lebanon witnessed two civil wars, one in 1958 and another one in 1975 that lasted 17 years. Since the end of the civil war in 1991, Lebanon experienced a major military coup d’etat in 2008 that started in the Palestinian camp of Nahr el Bared around Tripoli: The army needed 11 months to overcome the uprising of the Islamist salafists Jund al Sham.
Beirut experienced a quick military coup in 2007 by Hezbollah, as the government attempted to control land communication lines. The war of 2006 against Israel was actually a military coup perpetrated by the Lebanese government to control Hezbollah’s military might.
Third, Italy has true political parties with programs and policies. The election laws in Italy are among the fairest and most equitable in the western States. Frequent changes in governments didn’t prevent Italy to continue being among the leading economic powers in the world. Italy is very generous in investing in the poorer nations and its grants are relied upon in most States around the Mediterranean Sea basin. Italy has many contingents in the various UN peace-keeping forces…
Whereas Lebanon is practically a Non-State country since its independence, a pseudo State by any criteria. The 18 religious sects represent the main powers by law, and they exercise de-facto political influence. Civil status of every “citizen” is run and administered by the officially recognized religious sects that own more than 50% of the land.
Every religious sect is backed by over three confessional “political parties”. The two historically secular political parties, the communist and the Syrian National Social parties, were denied participation in the Parliament via tailored-made election laws and procedures. The Syrian National Social party was recently permitted to enter the parliament, carried on the shoulders of other main confessional parties.
Fourth, Lebanon lacks sustainable public institutions and any long-term programs and policies. The only benefit the citizen enjoys is a mere passport. The are no serious governance for the people to march against and demand reforms. Was Taleb aware of the actual conditions and situation in Lebanon for him to catagorize Lebanon as falling in line within the “stable” political systems and immune to radical revolts as Italy?
The hot season has started in the northern hemisphere, and the Spring Revolt might cool off a bit. In Lebanon, we missed the spring upheavals that swept the “Arab” world, but we planted the seed of a fresh drastic non-violent revolt for the next spring season.
The youth in Lebanon organized 5 marches in various cities in Lebanon demanding change in the confessional political structure. Next Spring, the revolt will still be non-violent, but the target and purpose of the revolt will not be a matter of a reform here and another there.
The traditonal “leaders” have demonstrated that they refuse to establish a functioning State for all “citizens”: Lebanon has been run by Non-State governments, or care-taker governments.
The Movement for Change must be ready for the dawn of the next spring season: It must start doing serious due dilligence.
First, specialized teams have to dig-up and dust-off the policies and programs stored in the basements of ministries. The goal of reviewing and revising already studied programs is: “A political system from the people to the people”.
Second, the Lebanese have to feel true citizens with equal rights under the law. The Lebanese have to enjoy fair and equitable election laws that allow common people to acceed to decision-making positions.
Third, Laws have to be revised for citizens, regardless of genders, race, or religious affiliation, to have fair opportunities to all political positions and job opportunities in the public and private institutions and enterprises.
Fourth, The Constitution has to be re-written to separate religion from civil power and responsibility…
Radical changes are possible: There are no other alternatives to patching up a rotten political and social structure; it is not feasible to move on with small incremental reforms under the power of the ferocious religious and financial oligarchies that have been dominating our lives and subjugating us to constant instability and indignities.
We have grown up to be mature and responsible adult “citizens”
Note 1: Nassim Taleb, a mathematician, was a trader and worked for 20 years as consultant to large investment banks in New York and London. He created Empirica LLC for trading. He is engineering professor at the polytechnic institute at the University of New York. Taleb published “Savage hazard” and “The Black Swan: The power of the unpredictable.”
Note 2: The deposed Saad Hariri PM is a Saudi citizen first, and has been located in Saudi Arabia for the past three months, taking care of private business, and is currently established in Paris….
Black Swan model: Can rare catastrophic events of man-made systems be controlled? Part 1
Posted by: adonis49 on: June 1, 2011
Black Swan model: Can rare catastrophic events in complex man-made systems be controlled?
Note: The application of the Black Swan model to the “Arab” Spring revolts and in southern Europe, and the financial crisis will be explained in the follow-up article.
Warning! Pay closer attention to the “predictable” but unexpected rare calamitous events!
Black Swan is a term coined after discovering a black swan a couple of years ago. People firmly believed that all swans were white: A few might have observed a black swan but refused to identify it as a swan; or black swans are common sight in particular regions and people had no idea that black swans are considered rarity all over the world and might be purchased for their weight in gold to be raised in zoos!
You know the adage: “If an event can occur, it will happen“, meaning, it does not matter how low the predicted probability of occurrence of the rare events, it will strike “unexpectedly”. If there is a chance in a million for an asteroid to smash onto earth, an asteroid will fall on our head: Asteroid did fall and transform earth several times in the last four billion years.
Just think on the even lower probability of “being who we are, as an individual”. You could naturally have been an inanimate object, a plant, another animal species, born somewhere else, lived after birth, survived to be 5 year-old…
The Black Swan theory states: “In complex systems, especially man-made complex systems, it is not feasible to comprehend all the interactions among the hundred of variables affecting outcomes. In man-made systems, we have to allow natural fluctuations that are at work. The rare predicted calamitous events will strike unexpectedly, and we will fail to react accordingly and adequately if we consciously avoid to consistently take them into consideration in our analysis and reports.”
The unexpected events cannot be analyzed as odds in card games or casino games: Human behavior with thousands of variability in moods, emotions, conventions, conviction, personal experiences… cannot be predicted as games are.
Natural sciences such as engineering, physics, chemistry, architecture, astronomy, planet explorations…are within the linear domain of thinking life and the universe. Social and human sciences, epidemics, economics… are within far more complex domains, and the linear methods that mankind was trained to resolving problems and fluctuations are not adequate to be transposed to complex systems.
We are better equipped to predicting lunar eclipses, but not stock evolution, or foreign political upheavals. It is NOT the “last grain of sand that crashed the structure or the bridge…” The last grain was the catalyst for the failure but not the cause. The fault is in the designed system, and not in its components.
For example, the “subprime” was not the cause of the financial crisis in 2008: It was just the latest among the catalysts of hazardous financial tools. The cause was a faulty financial system that the political decision-makers failed to redesign in due time, requiring courageous and determined positions to ironing-out the serious problems growing out of proportions in risky behaviors, in an unregulated system, and in instantaneous pouring of massive liquidity to “stabilizing” a fragile outmoded designed and faulty system.
There is this trend of confusing catalysts with causes: The designers of a system do not necessarily have this confusion, but the political decision-makers and owners of the systems that purposely confuse the general public as catastrophes strike. Two psychological biases are at the sources of confusing catalysts with causes:
The first bias is our illusion in our capacity to control volatility in man-made complex systems. For example, we focus on the “normal working” of a system and we delete from our analysis and reports the minor fluctuations or rare events that are occasionally occurring. In a sense, if there are no variations, there are no information worth controlling. This tendency of feeling very comfortable dealing with only a “stable” system leads to forgetting the consequences of calamitous rare events.
The second psychological bias is the illusion that acting on a factor is better than doing nothing and letting the system work-out its fluctuations. For example, authorities think or are pressured to think that they were elected or appointed to act and react on any variations, instead of doing nothing when fluctuations are within the norm. Consequently, it is these actions that usually exacerbate a system going bad and out of proportion. For example, Alan Greenspan and later Ben Bernanke lowering the central bank interest rates to almost negative rates in order to “stabilize” a fragile faulty financial system that needed major redesign.
The Fukushima disaster of the melting down of three nuclear reactors is a typical example. It is NOT the earthquake and the tsunami that are the causes of the meltdown: They were the catalysts. The cause is a faulty designed system for generating electricity that is highly dangerous and built in a region frequently exposed to high levels of earthquakes and tsunami. The economic risk trade-off was meant for normal functioning of a nuclear plant, and the consequences of a serious event striking was swept under the carpet for three decades.
The owner of the power nuclear plant and the government blamed natural phenomena as the causes and toned down the lethal exposure to radiation for over a month. Why? It is better not scare the people! What? It is better to let people die peacefully than give them the proper information to decide on their own plan of actions?
It is normal for mankind to be wary of the volatile aspects in life. In the past, mankind managed to block-out drastic fluctuations from their consciousness in order to survive: Mankind figured out the major trends in hazard in order to foresee and adopt simple models they could control for administering and managing their lives and the survival of the community.
The behavioral model should allow normal fluctuations in behavior to react within normal realities.
Simple models have been replaced by complex models, but within the past linear mentality and comprehension. You may understand a few interactions among three main variables, but when man-made design inserted hundreds of volatile factors in a system, we should no longer expect to have total control on the complex system.
If we are not ready to design reasonable fluctuations in a system, and be ready to take seriously the problems of rare occurrences, and be trained to react to calamitous rare events, then it is wise to stick to simple systems that individual operators can understand and can control.
A man-made system should not be designed to eliminate all the faults, ill-behavior, and limitations of mankind, but to factor them in, and be trained to react adequately to these variations: The operator has to be constantly motivated to learn and be vigilant to minor fluctuations and comprehend the main interactions.
Note 1: Nassim Taleb, a mathematician, was a trader and worked for 20 years as consultant to large investment banks in New York and London. He created Empirica LLC for trading. He is engineering professor at the polytechnic institute at the University of New York. Taleb published “Savage hazard” and “The Black Swan: The power of the unpredictable.”
Note 2: Mark Blyth is a Scottish professor of international political economy at the university of Brown (Rhode Island). He published “Great Transformation: Economic ideas and institutional change in the 20th century”. A new book is to be released “Austerity: The history of a dangerous idea“
