Why we must reorganize our society
E-Book, Englisch, 304 Seiten
ISBN: 978-3-96092-360-2
Verlag: FinanzBuch Verlag
Format: EPUB
Kopierschutz: Wasserzeichen (»Systemvoraussetzungen)
Markus Krall, bestselling author and one of the most insightful connoisseurs of the risk landscape, shows how currently unfolding distortions in business and politics, rapid technological development and geostrategic mistakes could lead us to catastrophe. He also shows where and how we can intervene to put our society on a new and better footing.
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Prologue
"To act on the belief that we possess the knowledge and the power which enable us to shape the processes of society entirely to our liking, knowledge which in fact we do not possess, is likely to make us do much harm." Friedrich August von Hayek The future is not what it used to be. What sounds like an oxymoron is the consequence of cognitive dissonance. Yesterday’s future is the present. And because, yesterday, we were already not very well able to predict what it might look like, the present must differ from the forecasts made at that time. Developments that nobody had anticipated have rolled over us. Developments that were expected have not occurred. One statement characterized by disappointment that recently went viral (incidentally, a word that didn’t appear in any forecast of the future just 20 years ago) was “they promised us flying cars and all we got was an iPhone.” It is not without a certain irony that flying cars are, so to speak, just around the corner. Only, we don’t call them cars but rather passenger drones. Now, the starting point for forecasting the future is of course a different one from 1970. Yet, while we believe that we now stand on a higher hill than in 1970 and, therefore, should be able to see farther and clearer ahead we simply don’t. We merely succumb to the illusion that we do. When you open a newspaper these days, it seems to be totally clear where we are heading. Climate change is a reality, but our elites are managing this with wind turbines and solar panels. The banks are in dreadful shape, but our elites have regulated them into calmer waters. Digitization will change many things, but our politicians will make sure all goes smoothly by paying a universal basic income. We will fund this out of a machine tax. Quantum computers are rather esoteric, but they will keep the machine, which enhances our electronic toys every year, running for a while yet. Robots will soon be ubiquitous, but some of them will be sexy and provide a cure for all those lonely people who have become firmly attached to their electronic pacifiers and have swapped the real world for the virtual reality of social media. So, please don’t worry. Terrorism is spreading, but we have global surveillance to keep it in check as we do with cybercrime. The only real military threat is posed by North Korea, but we hold the revolver that is nuclear deterrence to its temple. Immigration is not out of control, because we have decided to adopt it. All will be well. Dream on. Our perception has been drowned out by the illusion of linear trends, which do not allow us to recognize the force of the exponential trends that are driving key developments, especially in technology. Moreover, we do not possess the power of imagination to grasp the consequences of the mutual interference of trends. Furthermore, we would appear to be lacking in any sort of sensory apparatus that is able to detect imbalances lurking beneath the surface of the water like a crocodile in a swampy pool. Because our political elites hate it when citizens worry about things (by definition, this makes the elites look stupid and inept) they try to smooth over anything that looks like trouble or volatility. No nasty images, please. The welfare state will take care of your problems from the cradle to the grave and even into the grave. A general aversion to risk is thus instilled into people. Risk is viewed as something archaic, a relic from the dark ages when humans were still exposed to hunger, war, diseases and plagues. In our civilized technology-ruled societies the individual risks are in fact much smaller than they have ever been because the level of our prosperity and the resources available to us are infinitely greater when compared with any other generation in human history. Risk and volatility are more likely to find their expression in the question of whether economic growth will be 1% or 2% and, thus, whether we will be able to buy the latest 70-inch QLED monitor already in October, or if we will have to wait until Christmas. All the same, politicians hate volatility of any kind and try to gloss over it, usually with borrowed money or – if that is not available – freshly printed money. However, you cannot get rid of volatility by spending money, at most, you can sweep it under the rug. You can shut it up in a repository from which it will eventually escape, like the slimy ghosts in the movie Ghost Busters. History can provide numerous examples of attempts to suppress volatility that merely led to its accumulation and subsequent concentrated discharging. The biggest experiment of this type was the Soviet Union. It flaunted the supposed strength that it saw in the superiority of its planned economy because it didn’t generate business cycles or financial crises but merely consistent growth. This was driven in the engine room of Gosplan’s 5-year plans, which advanced the prosperity of the comrades from one great leap to the next. We all know how this ended. The volatility that had accumulated over 70 years had created imbalances big enough to consign one of the biggest, nuclear-armed and seemingly invincible empires to the dust heap of history, in a matter of months, once the pent-up pressure had found its way out and had escaped. And yet, there are object lessons of a wholly practical nature that could have been used to study this. In the great wilderness of North America wildfires were a common event for many thousands, indeed probably for millions of years. They occurred frequently, every year. They were triggered by strokes of lightning, hot weather and drought. They were normal events and nature was obviously able to cope with them. However, at some point, not too long ago, the nature of this phenomenon changed. Wildfires became large, very large. In fact, they became so large that they could be seen from space without optical instruments. Why? In the 1930s, increasing settlement and the related expensive infrastructure led to the view that wildfires were not a good thing, but rather an undesirable event that should be prevented. With the introduction of planes that were able to detect fires at an early stage and extinguish them it became possible to suppress them while they were still small. The volatility had been managed and subdued – brought under control using the means of human technology. Or so it seemed at least. Over the years, the dead wood and brushwood, which would normally have been burned in the periodic wildfires, started to accumulate at a rate that was faster than the natural decomposition rate because the climate is very dry. This accumulation of dry, easily combustible wood was the imbalance that piled up beneath the threshold of perception. At some point, this amount reached a critical mass and it just needed a lightning stroke or a littered bottle, acting as a magnifying glass, to spark off a wildfire of enormous proportions and force that ate its way through forests, villages and fields, leapt over rivers and roads, turning everything in its path to ash. The accumulated volatility was violently unleashed. Our society has found countless ways and means to suppress volatility in the mistaken belief that it is possible to do so with impunity and that the volatility will then go away without taking its revenge. We apply Keynesian debt-financed spending policies to smooth out the business cycle in order to avoid unemployment and bankruptcies, we loosen the purse strings of the almighty central banks in order to stabilize financial markets and avoid crashes and the bursting of speculative bubbles. Over the course of the business cycle, we prevent companies from firing people that they had previously hired and thus protect their employees from the consequences of structural change. We have even regulated free speech and political ideas under the delusion that we have banned what we classify as hate speech or fake news and, in this way, provoke the very hatred that we purportedly wished to subdue. All these measures work for a while. The imbalance grows. It reaches a critical point and critical pressure. Then suddenly the container ruptures and the volatility is released like the energy in an explosion. The impacts on the welfare of people are then more far-reaching and worse than the benefit, achieved over time, that was obtained by quashing the risks. The explosion, the discontinuity, is then amplified by two effects. Firstly, it creates huge disorientation as it is much more difficult for people to adapt to sudden extreme changes. Secondly, people who are no longer adept at dealing with the consequences of volatility because they have been shielded from it for years are no longer equipped to deal with it psychologically and in terms of their expertise and knowledge. And there is an additional danger. As we have suppressed so many different types of volatility over so many decades, the risk of correlation has arisen, thus, the possibility that several big imbalances reach breaking point simultaneously. This could happen either accidentally or by mutual causal reinforcement. One big discontinuity would trigger the next. A chain reaction would be initiated that society could no longer circumvent. Its tried and tested instruments would break down and its internal functional processes would come to a grinding halt. At this point revolutionary change would be easily possible. In risk management, types of risk can be divided into categories according to their behaviors. One of the possible dimensions here is a scale between flat or granular and cluster risks. Flat risks...
