Designing our Complex Future with Machines

While I had long been planning to write a manifesto against the technological singularity and launch it into the conversational sphere for public reaction and comment, an invitation earlier this year from John Brockman to read and discuss The Human Use of Human Beings by Norbert Wiener with him and his illustrious group of thinkers as part of an ongoing collaborative book project contributed to the thoughts contained herein.

The essay below is now phase 1 of an experimental, open publishing project in partnership with the MIT Press. In phase 2, a new version of the essay enriched and informed by input from open commentary will be published online, along with essay length contributions by others inspired by the seed essay, as a new issue of the Journal of Design and Science. In phase 3, a revised and edited selection of these contributions will be published as a print book by the MIT Press.

Version 1.0

Cross-posted from the Journal of Design and Science where a number of essays have been written in response and where competition winning peer-reviewed essays will be compiled into a book to be published by MIT Press.

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Nature's ecosystem provides us with an elegant example of a complex adaptive system where myriad "currencies" interact and respond to feedback systems that enable both flourishing and regulation. This collaborative model-rather than a model of exponential financial growth or the Singularity, which promises the transcendence of our current human condition through advances in technology--should provide the paradigm for our approach to artificial intelligence. More than 60 years ago, MIT mathematician and philosopher Norbert Wiener warned us that "when human atoms are knit into an organization in which they are used, not in their full right as responsible human beings, but as cogs and levers and rods, it matters little that their raw material is flesh and blood." We should heed Wiener's warning.

INTRODUCTION: THE CANCER OF CURRENCY

As the sun beats down on Earth, photosynthesis converts water, carbon dioxide and the sun's energy into oxygen and glucose. Photosynthesis is one of the many chemical and biological processes that transforms one form of matter and energy into another. These molecules then get metabolized by other biological and chemical processes into yet other molecules. Scientists often call these molecules "currencies" because they represent a form of power that is transferred between cells or processes to mutual benefit--"traded," in effect. The biggest difference between these and financial currencies is that there is no "master currency" or "currency exchange." Rather, each currency can only be used by certain processes, and the "market" of these currencies drives the dynamics that are "life."

As certain currencies became abundant as an output of a successful process or organism, other organisms evolved to take that output and convert it into something else. Over billions of years, this is how the Earth's ecosystem has evolved, creating vast systems of metabolic pathways and forming highly complex self-regulating systems that, for example, stabilize our body temperatures or the temperature of the Earth, despite continuous fluctuations and changes among the individual elements at every scale--from micro to macro. The output of one process becomes the input of another. Ultimately, everything interconnects.

We live in a civilization in which the primary currencies are money and power--where more often than not, the goal is to accumulate both at the expense of society at large. This is a very simple and fragile system compared to the Earth's ecosystems, where myriads of "currencies" are exchanged among processes to create hugely complex systems of inputs and outputs with feedback systems that adapt and regulate stocks, flows, and connections.

Unfortunately, our current human civilization does not have the built-in resilience of our environment, and the paradigms that set our goals and drive the evolution of society today have set us on a dangerous course which the mathematician Norbert Wiener warned us about decades ago. The paradigm of a single master currency has driven many corporations and institutions to lose sight of their original missions. Values and complexity are focused more and more on prioritizing exponential financial growth, led by for-profit corporate entities that have gained autonomy, rights, power, and nearly unregulated societal influence. The behavior of these entities are akin to cancers. Healthy cells regulate their growth and respond to their surroundings, even eliminating themselves if they wander into an organ where they don't belong. Cancerous cells, on the other hand, optimize for unconstrained growth and spread with disregard to their function or context.

THE WHIP THAT LASHES US

The idea that we exist for the sake of progress, and that progress requires unconstrained and exponential growth, is the whip that lashes us. Modern companies are the natural product of this paradigm in a free-market capitalist system. Norbert Wiener called corporations "machines of flesh and blood" and automation "machines of metal." The new species of Silicon Valley mega companies--the machines of bits--are developed and run in great part by people who believe in a new religion, Singularity. This new religion is not a fundamental change in the paradigm, but rather the natural evolution of the worship of exponential growth applied to modern computation and science. The asymptote of the exponential growth of computational power is artificial intelligence.

The notion of Singularity--that AI will supercede humans with its exponential growth, and that everything we have done until now and are currently doing is insignificant--is a religion created by people who have the experience of using computation to solve problems heretofore considered impossibly complex for machines. They have found a perfect partner in digital computation--a knowable, controllable, system of thinking and creating that is rapidly increasing in its ability to harness and process complexity, bestowing wealth and power on those who have mastered it. In Silicon Valley, the combination of groupthink and the financial success of this cult of technology has created a positive feedback system that has very little capacity for regulating through negative feedback. While they would resist having their beliefs compared to a religion and would argue that their ideas are science- and evidence-based, those who embrace Singularity engage in quite a bit of arm waving and make leaps of faith based more on trajectories than ground-truths to achieve their ultimate vision.

Singularitarians believe that the world is "knowable" and computationally simulatable, and that computers will be able to process the messiness of the real world just like they have every other problem that everyone said couldn't be solved by computers. To them, this wonderful tool, the computer, has worked so well for everything so far that it must continue to work for every challenge we throw at it, until we have transcended known limitations and ultimately achieve some sort of reality escape velocity. Artificial intelligence is already displacing humans in driving cars, diagnosing cancers, and researching court documents. The idea is that AI will continue this progress and eventually merge with human brains and become an all-seeing, all-powerful, super-intelligence. For true believers, computers will augment and extend our thoughts into a kind of "amortality." (Part of Singularity is a fight for "amortality," the idea that while one may still die and not be immortal, the death is not the result of the grim reaper of aging.)

But if corporations are a precursor to our transcendance, the Singularitarian view that with more computing and bio-hacking we will somehow solve all of the world's problems or that the Singularity will solve us seems hopelessly naive. As we dream of the day when we have enhanced brains and amortality and can think big, long thoughts, corporations already have a kind of "amortality." They persist as long as they are solvent and they are more than a sum of their parts--arguably an amortal super-intelligence.

More computation does not makes us more "intelligent," only more computationally powerful.

For Singularity to have a positive outcome requires a belief that, given enough power, the system will somehow figure out how to regulate itself. The final outcome would be so complex that while we humans couldn't understand it now, "it" would understand and "solve" itself. Some believe in something that looks a bit like the former Soviet Union's master planning but with full information and unlimited power. Others have a more sophisticated view of a distributed system, but at some level, all Singularitarians believe that with enough power and control, the world is "tamable." Not all who believe in Singularity worship it as a positive transcendence bringing immortality and abundance, but they do believe that a judgment day is coming when all curves go vertical.

Whether you are on an S-curve or a bell curve, the beginning of the slope looks a lot like an exponential curve. An exponential curve to systems dynamics people shows self-reinforcement, i.e., a positive feedback curve without limits. Maybe this is what excites Singularitarians and scares systems people. Most people outside the singularity bubble believe in S-curves, namely that nature adapts and self-regulates and that even pandemics will run their course. Pandemics may cause an extinction event, but growth will slow and things will adapt. They may not be in the same state, and a phase change could occur, but the notion of Singularity--especially as some sort of savior or judgment day that will allow us to transcend the messy, mortal suffering of our human existence--is fundamentally a flawed one.

This sort of reductionist thinking isn't new. When BF Skinner discovered the principle of reinforcement and was able to describe it, we designed education around his theories. Learning scientists know now that behaviorist approaches only work for a narrow range of learning, but many schools continue to rely on drill and practice. Take, as another example, the eugenics movement, which greatly and incorrectly over-simplified the role of genetics in society. This movement helped fuel the Nazi genocide by providing a reductionist scientific view that we could "fix humanity" by manually pushing natural selection. The echoes of the horrors of eugenics exist today, making almost any research trying to link genetics with things like intelligence taboo.

We should learn from our history of applying over-reductionist science to society and try to, as Wiener says, "cease to kiss the whip that lashes us." While it is one of the key drivers of science--to elegantly explain the complex and reduce confusion to understanding--we must also remember what Albert Einstein said, "Everything should be made as simple as possible, but no simpler."¹ We need to embrace the unknowability--the irreducibility--of the real world that artists, biologists and those who work in the messy world of liberal arts and humanities are familiar with.

WE ARE ALL PARTICIPANTS

The Cold War era, when Wiener was writing The Human Use of Human Beings, was a time defined by the rapid expansion of capitalism and consumerism, the beginning of the space race, and the coming of age of computation. It was a time when it was easier to believe that systems could be controlled from the outside, and that many of the world's problems would be solved through science and engineering.

The cybernetics that Wiener primarily described during that period were concerned with feedback systems that can be controlled or regulated from an objective perspective. This so-called first-order cybernetics assumed that the scientist as the observer can understand what is going on, therefore enabling the engineer to design systems based on observation or insight from the scientist.

Today, it is much more obvious that most of our problems--climate change, poverty, obesity and chronic disease, or modern terrorism--cannot be solved simply with more resources and greater control. That is because they are the result of complex adaptive systems that are often the result of the tools used to solve problems in the past, such as endlessly increasing productivity and attempts to control things. This is where second-order cybernetics comes into play--the cybernetics of self-adaptive complex systems, where the observer is also part of the system itself. As Kevin Slavin says in Design as Participation, "You're Not Stuck In Traffic--You Are Traffic."³

In order to effectively respond to the significant scientific challenges of our times, I believe we must view the world as many interconnected, complex, self-adaptive systems across scales and dimensions that are unknowable and largely inseparable from the observer and the designer. In other words, we are participants in multiple evolutionary systems with different fitness landscapes⁴ at different scales, from our microbes to our individual identities to society and our species. Individuals themselves are systems composed of systems of systems, such as the cells in our bodies that behave more like system-level designers than we do.

While Wiener does discuss biological evolution and the evolution of language, he doesn't explore the idea of harnessing evolutionary dynamics for science. Biological evolution of individual species (genetic evolution) has been driven by reproduction and survival, instilling in us goals and yearnings to procreate and grow. That system continually evolves to regulate growth, increase diversity and complexity, and enhance its own resilience, adaptability, and sustainability.⁵ As designers with growing awareness of these broader systems, we have goals and methodologies defined by the evolutionary and environmental inputs from our biological and societal contexts. But machines with emergent intelligence have discernibly different goals and methodologies. As we introduce machines into the system, they will not only augment individual humans, but they will also--and more importantly--augment complex systems as a whole.

Here is where the problematic formulation of "artificial intelligence" becomes evident, as it suggests forms, goals and methods that stand outside of interaction with other complex adaptive systems. Instead of thinking about machine intelligence in terms of humans vs. machines, we should consider the system that integrates humans and machines--not artificial intelligence, but extended intelligence. Instead of trying to control or design or even understand systems, it is more important to design systems that participate as responsible, aware and robust elements of even more complex systems. And we must question and adapt our own purpose and sensibilities as designers and components of the system for a much more humble approach: Humility over Control.

We could call it "participant design"--design of systems as and by participants--that is more akin to the increase of a flourishing function, where flourishing is a measure of vigor and health rather than scale or power. We can measure the ability for systems to adapt creatively, as well as their resilience and their ability to use resources in an interesting way.

Better interventions are less about solving or optimizing and more about developing a sensibility appropriate to the environment and the time. In this way they are more like music than an algorithm. Music is about a sensibility or "taste" with many elements coming together into a kind of emergent order. Instrumentation can nudge or cause the system to adapt or move in an unpredictable and unprogrammed manner, while still making sense and holding together. Using music itself as an intervention is not a new idea; in 1707, Andrew Fletcher, a Scottish writer and politician, said, "Let me make the songs of a nation, I care not who makes its laws."

If writing songs instead of laws feels frivolous, remember that songs typically last longer than laws, have played key roles in various hard and soft revolutions and end up being transmitted person-to-person along with the values they carry. It's not about music or code. It's about trying to affect change by operating at the level songs do. This is articulated by Donella Meadows, among others, in her book Thinking in Systems.

Meadows, in her essay Leverage Points: Places to Intervene in a System, describes how we can intervene in a complex, self-adaptive system. For her, interventions that involve changing parameters or even changing the rules are not nearly as powerful or as fundamental as changes in a system's goals and paradigms.

When Wiener discussed our worship of progress, he said:

Those who uphold the idea of progress as an ethical principle regard this unlimited and quasi-spontaneous process of change as a Good Thing, and as the basis on which they guarantee to future generations a Heaven on Earth. It is possible to believe in progress as a fact without believing in progress as an ethical principle; but in the catechism of many Americans, the one goes with the other.⁶

Instead of discussing "sustainability" as something to be "solved" in the context of a world where bigger is still better and more than enough is NOT too much, perhaps we should examine the values and the currencies of the fitness functions⁷ and consider whether they are suitable and appropriate for the systems in which we participate.

CONCLUSION: A CULTURE OF FLOURISHING

Developing a sensibility and a culture of flourishing, and embracing a diverse array of measures of "success" depend less on the accumulation of power and resources and more on diversity and the richness of experience. This is the paradigm shift that we need. This will provide us with a wealth of technological and cultural patterns to draw from to create a highly adaptable society. This diversity also allows the elements of the system to feed each other without the exploitation and extraction ethos created by a monoculture with a single currency. It is likely that this new culture will spread as music, fashion, spirituality or other forms of art.

As a native Japanese, I am heartened by a group of junior high school students I spoke to there recently who, when I challenged them about what they thought we should do about the environment, asked questions about the meaning of happiness and the role of humans in nature. I am likewise heartened to see many of my students at the MIT Media Lab and in the Principles of Awareness class that I co-teach with the Venerable Tenzin Priyadarshi using a variety of metrics (currencies) to measure their success and meaning and grappling directly with the complexity of finding one's place in our complex world.

This is brilliant, sophisticated, timely. Question, what do you want to do with this manifesto? Socio-economic political cultural movement? To begin with, who do you want to read this? In what spaces?I know people who are working on this on the political side. I am interested in the arts and sciences ie buildable memory cultural side.

Don't know if people would agree with my conclusions here, but I've been working on developing my music in relation to housing issues around the Bay Area recently.I believe that it's important for us to develop a sensibility for diversity not just as an abstract exercise, but in ways that reflect our day to day lives. We're in need of new visions of how we plan to co-exist with one another, and I do think that artists have the ability to pave the way here in very real ways.

I'm also heartened by organizations such as the IEEE, which is initiating design guidelines for the development of artificial intelligence around human wellbeing instead of around economic impact. The work by Peter Seligman, Christopher Filardi, and Margarita Mora from Conservation International is creative and exciting because it approaches conservation by supporting the flourishing of indigenous people--not undermining it. Another heartening example is that of the Shinto priests at Ise Shrine, who have been planting and rebuilding the shrine every twenty years for the last 1300 years in celebration of the renewal and the cyclical quality of nature.

In the 1960s and 70s, the hippie movement tried to pull together a "whole earth" movement, but then the world swung back toward the consumer and consumption culture of today. I hope and believe that a new awakening will happen and that a new sensibility will cause a nonlinear change in our behavior through a cultural transformation. While we can and should continue to work at every layer of the system to create a more resilient world, I believe the cultural layer is the layer with the most potential for a fundamental correction away from the self-destructive path that we are currently on. I think that it will yet again be about the music and the arts of the young people reflecting and amplifying a new sensibility: a turn away from greed to a world where "more than enough is too much," and we can flourish in harmony with Nature rather than through the control of it.

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1. An asymptote is a line that continually approaches a given curve but does not meet it at any finite distance. In singularity, this is the vertical line that occurs when the exponential growth curve a vertical line. There are more arguments about where this asymptote is among believers than about whether it is actually coming.

2. This is a common paraphrase. What Einstein actually said was, "It can scarcely be denied that the supreme goal of all theory is to make the irreducible basic elements as simple and as few as possible without having to surrender the adequate representation of a single datum of experience."

3. Western philosophy and science is "dualistic" as opposed to the more "Eastern" non-dualistic approach. A whole essay could be written about this but the idea of a subject/object or a designer/designee is partially linked to the notion of self in Western philosophy and religion.

4. Fitness landscapes arise when you assign a fitness value for every genotype. The genotypes are arranged in a high dimensional sequence space. The fitness landscape is a function on that sequence space. In evolutionary dynamics, a biological population moves over a fitness landscape driven by mutation, selection and random drift. (Nowak, M. A. Evolutionary Dynamics: Exploring the Equations of Life. Harvard University Press, 2006.)

5. Nowak, M. A. Evolutionary Dynamics: Exploring the Equations of Life. Harvard University Press, 2006.

6. Norbert Wiener, The Human Use of Human Beings (1954 edition), p.42.

7. A fitness function is a function that is used to summarize, as a measure of merit, how close a solution is to a particular aim. It is used to describe and design evolutionary systems.

A conversation with Robleh Ali, the former head of the the Digital Currencies team at the Bank of England. It was a wide ranging conversation about Bitcoin, economics and the role of central banks and regulators.

Audio of the conversation is available on SoundCloud and iTunes.

I recently visited and had a conversation with Limor "Lady Ada" Fried and Phil Torrone of Adafruit. I first met them about ten years ago at SxSW.

Limor is an MIT grad that we're super-proud of and Phil is an amazing pioneer in communications, hacking and many other things. Phil and Limor are two of my most favorite people and I aways get giddy just getting a chance to hang out with them. We discussed making, electronics, business, manufacturing, hacking, live video and more.

They've been doing live video daily for the last 10 years or so and are real pioneers in this medium as well. We used their setup to stream the video to Facebook Live and Periscope and posted the recordings on YouTube and the audio on SoundCloud and iTunes.

Seth Godin has taught me so much about communications, leadership, publishing and life that I thought that it was important to stream my conversation with Seth. As usual, it was a great conversation.

Seth is on the Media Lab Advisory Council.

I streamed it to Facebook Live and posted the video to YouTube and audio to SoundCloud and iTunes.

Accounting underlies finance, business, and enables the levying of taxes for raising armies, building cities, and managing resources at scale. In fact, it is the way that the world keeps track of almost everything of value.

Accounting predates money, and was originally used by ancient communities to track and manage their limited resources. There are accounting records from Mesopotamia dating back more than 7,000 years, listing the exchange of goods. Over time, accounting became the language and information infrastructure for trade. Accounting and auditing enabled the creation of vast empires, such as those built by the Egyptians and the Romans.

As accounting scaled, it made sense to go from counting sheep, bushels of grain, and cords of wood, to calculating and managing resources using their exchange value in terms of an abstract unit: money. In addition to exchange, money allowed for recording and managing obligations. So where earlier bookkeeping just kept records of promises and exchanges between individuals (Alice lent Bob a goat on this date), money opened up a new realm of accounting by dramatically simplifying the management of accounts and allowing markets, companies, and governments to scale. However, through the centuries, this once powerful simplification has a resulted in a surprising downside-a downside made worse in today's digitally connected world.

Defining Value

While companies today use enterprise resource planning (ERP) systems to keep track of widgets, contractual obligations, and employees, the accounting system-and the laws that support it-require us to convert just about everything into monetary value, and enter it into a ledger system based on the 700-year-old double-entry bookkeeping method. This is the very same system used by the Florentine merchants of the 13th century and described by Luca Pacioli, the "father of accounting," in his book Summa de Arithmetica, Geometria, Proportioni et Proportionalità, published 1494.

When you take, for instance, a contract that pays out $1 million if it rains tomorrow, and put it into your accounts, you will be required to guess the chance of rain-maybe 50 percent-and value that asset at something like $500,000. The contract will actually never pay out $500,000; in the end, it will either be worth zero (no rain) or $1 million (rain). But if you were forced to trade it today, you'd probably sell it for something close to $500,000; so for tax and management purposes, you "value" the contract at $500,000. On the other hand, if you are unable to sell it because there are no buyers, it might actually be valued at zero today by regulators interested in liquidity, but then suddenly valued at $1 million tomorrow if it rains.

Basically, a company's accounts are an aggregate of cells in various ledgers with numbers that represent a numerical value denominated in some currency-yen, dollars, euros, etc.-and those numbers are added up and organized into both a balance sheet and an income statement that show the health of the company to management and investors. They are also used to calculate profits and the amount of tax owed to governments. This balance sheet is a list of assets and liabilities. If you looked in the assets column, you'd have a number of items that you would be reporting as having value, including things like printing presses, lines of code, intellectual property, obligations from people who may or may not pay you in the future, cash in various countries' currencies, and best guesses on things like the future prices of a commodity or the value of another company.

As an auditor, investor, or trading partner, you might want to drill down and try to test the assumptions that the company is making and see what would happen if those were incorrect at the time they were recorded, or turned out to be wrong sometime in the future. You might also want to understand how buying another company would change your own company based on the way your obligations and bets interacted with theirs. You could rack up millions of dollars in auditor fees to "get to the bottom" of any number of assumptions. The process would involve manually reviewing the legal contracts, and also the assumptions made in every cell of every spreadsheet. That's because standard accounting is a very "lossy" process that reduces complex and context-dependant functions and transforms them into static numbers at every step. The underlying information is somewhere, but only exposed with a lot of manual digging.

The modern complex financial system is full of companies that have figured out ways to guess when investors and the companies themselves have made mistakes in their assumptions. These companies bet against a company with inaccurate pricing or take advantage of the gap in information to convert this into financial returns for themselves. When these mistakes are duplicated across the system, it can cause fluctuation amplification that also allows companies to make more money both as markets rise, as well as fall, if they can successfully predict those fluctuations. In fact, as long as the whole system doesn't collapse, smart traders make more money on fluctuation than on stability.

Just like rodent exterminators aren't excited about the idea of rodents being completely eliminated because they would no longer have jobs, those financial institutions that make money by "making the system more efficient and eliminating waste" don't really want a stable system that isn't wasteful.

Right now, the technology of the financial system is built on top of a way of thinking about money and value that was designed back when all we had were pen and paper, and when reducing the complexity of the web of dependencies and obligations was the only way to make the system functionally efficient. The way we reduce complexity is to use a common method of pricing, put elements into categories, and add them up. This just builds on 700­-year­-old building blocks, trying to make the system "better" by doing very sophisticated analysis of the patterns and information without addressing the underlying problem of a lossy and oversimplified view of the world: a view where everything of "value" should be as quickly as possible recorded as a number.

The standard idea of the "value" of things is a reductionist view of the world that is useful to scale the trading of commodities that are roughly of equal worth to a large set of people. But, in fact, most things have very different values to different people at different times, and I would argue that much-if not most-things of value can't and probably shouldn't be reduced to numbers on a spreadsheet. Financial "value" has a very specific meaning. A home clearly has "value" because someone can live in it and it's useful. However, if no one wants to buy it and no one is buying similar homes on the market, you can't set a price for it; it is illiquid and it is impossible to determine its "fair market value." Some contracts and financial instruments are nonnegotiable, may not have a "fair market value," and may even have no value to you if you needed money (or an apple) RIGHT NOW. Part of the confusion comes from the difficulty of describing legal and mathematical ideas in plain English, and the role of context and timing.

One example is exchange rates. My wife moved to Boston from Japan several years ago, but still converts prices into yen. She sometimes comments on how expensive something has gotten because the value of the yen has diminished. Because most of our earnings and spending are in dollars, I always have to remind her, the "value" in yen is irrelevant to her now, although not irrelevant to her mother, who is in Japan.

We have become accustomed to the notion that things have a "price," and that "price" is equivalent to its "value." But an email from you to me about a feeling that you had about our last conversation is probably valuable to me at a particular time and probably not valuable to most people. A single apple is worth a lot more to a hungry person than the owner of an apple orchard. Context is everything.

"Can't Buy Me Love" - The Beatles

The economics notion of consumers making financial decisions to maximize "utility" as a kind of proxy for happiness is another example of how the notion of a universal system of "value" oversimplifies its complexity-so much so that the models that assume that humans are "economically rational" actors in a marketplace simply don't work. The simplest version of this model would mean that the more money you had, the happier you would be, which Daniel Kahneman and Angus Deaton argue is true up to about $75,000 a year in annual income.[1]

Today, we have the technology and the computational power to create a system of accounts that could retain and deal with a lot of the complexity that the current system was designed to avoid. There is, for example, no reason that every entry in our books needs to be a number. Each cell could be an algorithmic representation of the obligations and dependencies that it represents. In fact, using machine learning, accounts could become sophisticated probabilistic models for what might happen depending on how things around them change. This would mean that the "value" of any system would change depending on who was asking, their location, and the time parameters.

Today, when a bank regulator conducts a stress test, it gives a bank a scenario-changes in the credit markets or the prices of certain things. The bank is then required to return a report on whether it would crash or remain solvent. This requires a lot of human labor to go through the accounts and run simulations. But what if the accounts were all algorithmic, and instead you could instantly run a program to provide the answer to the question? What if you had a learning model that could answer a more important question: "What sets of changes to the market WOULD make it crash, and why?" That's really what we want to know. We want to know this not just for one bank, but the whole system of banks, investors, and everything that interacts.

When I'm buying something from a company-let's say a credit default swap from your company, AIG-what I would want to know is whether, when the day comes to pay the obligation, in the unlikely chance that the AA mortgage-backed bonds that I was betting against defaulted, would your company be able to pay? Right now, there is no easy way to do this. However, what if all of the obligations and contracts, instead of being written on paper and recorded as numbers, were actually computable and "visible"? You'd immediately be able to see that, in fact, in the scenario in which you'd have to pay me, you'd actually have no money since you'd written similar contracts to so many people that you'd be broke. Right now, even the banks themselves can't see this unless an internal investigator thinks to look for this ahead of time.

Rethinking the Fundamentals of Accounting

With cutting edge cryptography like zero-knowledge proofs and secure multiparty computation, there are ways we might be able to keep these accounts open to each other without compromising business and personal privacy. While computing every contract as a cell in a huge set of accounts, every time anyone asked a question it would exceed even today's computing capacity. But with machine learning and the creation of models, we might be able to dampen, if not stabilize, the massive amplifications of fluctuations. These bubbles and collapses occur today, in part, because we are building our whole system on an oversimplified house of cards, with the handlers having an incentive to make them fragile and opaque in order to introduce inefficiencies they can exploit later to make money for themselves.

I think the current excitement about Bitcoin and distributed ledgers has created a great opportunity to take advantage of its flexible and reprogrammable nature, allowing us to rethink the fundamental system of accounts. I'm much more interested in this than in apps for banks, or even new ideas in finance, which will address some of the symptoms without taking a shot at eliminating one of the root causes of the impossibly complex and outdated system that we've built on a 700 year old double-entry bookkeeping method-the very same system used by the Florentine merchants of the 13th century. It feels like we are using integers when we should be using imaginary numbers. Reinventing accounting should be more like discovering a new number theory than tweaking the algorithms, which is what I feel like we've been doing for the last several hundred years.

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Originally posted on PubPub.ito.com. Please read and post comments there.

References

[1]Daniel Kahneman and Angus Deaton. "High Income Improves Evaluation of Life But Not Emotional Well-Being". Proceedings of the National Academy of Sciences. (2010).

By Thomas Crampton

Add international money transfers to my list of activities that are now easier
online than in the "real" world.

I had always found bank transfers a pain because they generally required a
visit to the bank with stacks of forms to fill in. If lucky, my money disappeared
for up to eight working days before arriving in the destination bank at a horrible exchange rate.

Recently I wrote about my experiences using an online foreign currency exchange service that was easier, cheaper and faster than the bank.

Since it is easy to transfer small amounts, I now find the service a lifesaver.

What other new Web-based services could be useful for people who live abroad?

Note: I may cross-post comments on the IHT blog and they may be reproduced in the paper for publication.

Posted by Thomas Crampton

Got an early exclusive look at a fascinating survey by ACNielsen about online shopping worldwide.

The study of 21,000 web users in 38 countries, to be made public later today, found that online shopping habits vary radically by country.

The US is way behind Europe in the amount of online shopping (ranking 11 worldwide), perhaps because mall shopping is so much easier than shopping in a European city. This encourages Europeans to shop online.

What people purchase online is very different country-by-country. In South Korea one third of online shoppers purchase nutritional/cosmetic goods, while the global average is just 10 percent.

Payment for online shopping - not surprisingly - are dominated by credit card (visa) and bank transfer globally.

BUT cash on delivery is the second most popular way to pay for purchases in Europe!

I was surprised by Europe's cash on delivery preference, but affirmed it last night at a dinner in Paris. French people at the supper said they do not trust the web so prefer to see the goods before paying. They also said their lack of trust makes them very reluctant to use eBay!

Similar to cellphones, the technology of online shopping may be uniform, but the way in which people interact with it varies by country.

Anyone come across other differences of usage of an identical platforms?

Posted by Thomas Crampton

My experiences in changing cities five times and continents three times in the last 18 months have given me an insight into the shallowness of certain aspects of globalization from a consumer perspective.

(My experiences are used merely as example I know well, not because I think they are of world significance. )

I first had an American Express card in Hong Kong, then in the US and now in France. When I applied for the new Amex card in the US and in France, I was assured that my membership date would go back to when I first joined.

Each time I got the card, however, (my French card just arrived) they considered me a new member. A longer term of membership can confer benefits.

When I complained to the French Amex yesterday, the customer service person explained that American Express in Hong Kong is not the same as American Express in France. Funny, because that is not what their advertising seems to imply.

I had a similar experience with HSBC. Their Hong Kong service has been excellent (great website), so I checked out the bank in the US and then here in France. Each time I was informed that although they market the bank as HSBC in these different places, each bank is fairly independent country-by-country. They said this is partly due to banking legislation that varies in each jurisdiction.

What generalizations can be drawn? Products (McDonalds burgers, Coke, etc) globalize more quickly than services?

Posted by Thomas Crampton

Wrote a story in today’s paper about the new section of Charles de Gaulle airport being built for the A380, the world’s largest airliner.

Turns out that the aircraft is so big that it requires a reconfiguration of terminal and in some ways it could be good. The second floor of the aircraft, for example, means that you can have two almost entirely separate sections. For people flying business and first class – not me! - they would walk into a separate part of the airplane that could have separate style of reception.

The airport created a first-ever virtual visit of the new section for us to put on our website.

I wonder what other innovations could come of having such a large number of passengers in the sky? Massive online gaming within the aircraft?

My blog uses a "by/2.0" Creative Commons license. This means that anyone can use anything from my blog and copy or create derivative works without asking permission as long as they give me attribution. NEC has gotten into blogging and wanted to use the content from my blog. Unfortunately, I write mostly in English. I have tried translating posts myself as well as using a number of volunteer translators. The problem is, translation is not very fun and I would rather write another post in English than spend time translating. The combination of NEC's desire to use my content and my Creative Commons license allows NEC to pay a translator to translate my blog into Japanese and use the content on their blog. I don't get paid, but now my words are available in Japanese too.

NEC tells me that after a six month period, they will release the Japanese content under and Creative Commons by-nc-sa/2.1/jp license which will allow me to copy the the translations back to my blog after this period.

Translations are essential for building bridges between cultures. One big problem is that translation sometimes cost MORE than the cost of writing the original work. It's also more boring. Using CC to allow people to create business models to pay translators seems like a great idea to me. Thanks NEC!

NEC's Japanese Joi Ito's Web

Rebecca blogs about the first BloggerCorps success story. BloggerCorps is project to try to hook up local bloggers with important local projects who need help from bloggers. It's a great idea which just needs a bit more momentum I think. It ties in well with the Global Voices stuff. (The first version of the manifesto is done.)

eBay Acquires Minority Interest in craigslist

SAN FRANCISCO & SAN JOSE, Calif.--(BUSINESS WIRE)--Aug. 13, 2004--eBay, The World's Online Marketplace (Nasdaq:EBAY) (www.ebay.com), and craigslist, an online community featuring classifieds and forums (www.craigslist.org), announced today that eBay has acquired a preexisting minority ownership interest in craigslist of approximately 25%. The resulting relationship will allow eBay and craigslist to share expertise, resources, and creativity on behalf of online communities everywhere.

Craig shares his account of this about it on his blog. Craig mentions on his blog that it was a former employee who sold his shares to eBay and that the company was not sold or money invested into craigslist.

I can imagine some people complaining about this, but I think this is a good direction for craigslist to go. Congrats to all involved. I look forward to seeing how these communities will interact and how eBay helps craigslist and vice versa.

A Business 2.0 article did a very good job describing Creative Commons and the "sharing economy" which they believe is a multi-billion dollar industry. As I approach companies about trying to adopt creative commons, free software or investment in basic open research and innovation, I am struck by the lack of understanding of the value of sharing and contributing to the commons. It makes a lot of sense to me, but I wonder if it might be useful to try to collect material and generate some addition material that describes the benefits of sharing from a business and economics perspective.

Lawrence Lessig describes the argument very well in Free Culture, but I think that a rigorous business treatment would help the business guys a lot. The think the argument can be made that open protocols such as TCP/IP and http have enabled a great deal of business to happen and if either had been "owned" or patented, we would not have the Internet today. I'm sure IBM can make a strong case about the value of Linux which it has embraced so wholeheartedly. I recently met business researchers in St. Gallen who were displacing management consultants by allowing companies to participate in academics studies about their management that would be contributed to open research. I think there are many arguments about contributing to the commons and how the commons creates a foundation upon which we can build.

I'm going to try to collect papers and articles about this. If anyone has any good references or ideas, please add them to the wiki page I just set up.

Are there any good books about this? I think this is such an important topic that if I had time to write a book, this is what I would want to write it about...

I will be on a panel at a conference in Helsinki on June 10. It is the Annual Meeting of the International Network of Private Business Organizations - COMPETITIVENESS THROUGH CREATIVITY. I will be representing the Keizai Doyukai (The Japan Association of Corporate Executives) and will be speaking about "Creativity and Innovation - Rare Virtue or New Standard?". I'm not sure who they're inviting to participate, but if you're going, please let me know.

The Financial Times

Google considers online IPO auction

By Richard Waters in San Francisco

Google is considering holding a massive online auction of shares early next year in an initial public offering that investment bankers predict could value the internet search-engine company at more than $15bn.

Holy cow. Does anyone have any more information on this?

I wonder if it's going to be a Dutch Auction IPO?

Philip Greenspun blogs about the idea that stocks are going up in the US because more and more public domain is moving into the hands of large corporations. He gives the example of Disney being the beneficiary of the the copyright extension and the restriction on flying thru the airspace over Disneyland.

Thanks to rvr and bluehaze on #joiito.

Brian Barry writes in The Economist about how little Japan has leveraged IT and how this is still the source of inefficiency. He also gives some examples of companies that are using IT to change Japan. I agree with him totally and think that in addition to unwiding some of the big companies that don't make sense anymore, improving the cost performance of the exisiting companies can greatly increase the profitability of Japanese companies which is key.

I feel self-conscious about quoting my one quotes after that parody of this site but:

The Economist

A tour of the
business-class lounges at Narita airport, says Joichi Ito, an internet entrepreneur, reveals how senior managers feel about information technology: "In United's lounge everyone has their laptop out; in the Japan Airlines lounge they are all drinking beer."

Actually, someone else pointed this out to me a long time ago and I have since observed it myself and have used it as one of my favorite examples.

PS Having a meal with TWO Brian B's in Tokyo this week was very confusing for my calendar...

PPS The Economist site link is "premium content". blah.

Tim Oren also seems to think that the buzz is back and that we've hit a bottom.

Gave a talk on March 19 at the MIT Enterprise Forum in Tokyo hosted at the Nikkei BP office. I tried to tie a bunch of things together. I started out by saying that at a macro level, I was very depressed, but that at a micro level, I was extremely excited. I talked first about the lack of entrepreneurs in Japan, the problem with the economy and democracy in Japan. Then I talked about the nature of risk and why risk/return is broken in Japan. Then I talked about weblogs and about how excited I was about the political, media, social, communications and tool building aspects of weblogs. I closed by talking about open standards and the impact that open standards could have on consumer electronics. I promised to upload the slides so here they are in a 16.2mb pdf file and a1.2mb QT file. I don't have any notes on the slides, so by themselves, they're pretty useless, but...I promised. I used keynote, which was a true pleasure. I also fixed up some of the slides so the images are newer than the presentation date.

Generally good response. Blogging seemed to be new to people so the blow-by-blow of how a blog works seemed to be useful. The democracy issue was very interesting to some, irrelevant to others. ;-)

Al Gore and Apple sure picked an interesting day to announce this. I wonder if they are going to declare war on Microsoft?

CNet

Al Gore joins Apple's board
By Ian Fried
Staff Writer, CNET News.com
March 19, 2003, 1:38 PM PT

Apple Computer on Wednesday named former Vice President Al Gore to its board of directors.

I did an interview about IT and venture businesses in Japan for Glocom. Video streams just went online.

I was talking to a fairly well known CEO of a securities firm. He told me that the Nikkei would hit the 8000 range last year. Today he said that he thought foreign investors were going to dump Japanese stocks and that it might hit 6000 in the next 3 months and that it would probably most definitely hit 7000. He said that the branch manager of a fairly large branch of Nomura Securities told him that 10 of his top 20 accounts recently liquidated ALL of their equity holdings. He also said that many of the major banks would probably soon come under government protection/control through the Bank of Japan. Argentina, here we come!

The Japan Times

MINISTRY SECRECY DRAWS SPOTLIGHT Even victimized divided on death penalty

By KAHO SHIMIZU
Staff writer

Masaharu Harada was stunned when he found out that the man who murdered his younger brother had been executed on Dec. 27 in Nagoya.

He wondered why authorities felt they had to kill such a remorseful man.

Toshihiko Hasegawa was one of two convicts hanged in December. He was convicted of killing Harada's brother and two other people in a murder-for-insurance scheme between 1979 and 1983. His death sentence was finalized in 1993.

Harada had petitioned the Justice Ministry on Hasegawa's behalf to stay his execution. He believed letting Hasegawa live so he could express remorse was the only way for him to atone for his crime.

This issue about lack of transparency and the debate about capital punishment are important and something that should be part of a public debate, but one thing that I noticed was that the crime committed by this "remorseful man" was another "murder-for-insurance" crime. There have been a quite a few of these crimes and I'm beginning to wonder if it such crimes might be committed by people who are driven to this from debt. The Japanese prime interest rate are very low, but the consumer loan business booms with interest rates in the 15-20+ percent range. There has been a crackdown on loan sharking, but I think the interest rates for consumer loans is higher than the US for instance. Many of the taxi drivers I talk to are driving taxis because of loan/debt problems.

So what does this Worldcom thing mean? Many people saw it coming. I've been hearing about this possibility for a long time.