Tuesday, May 15, 2012

Fragile World

Tower of Cards
Complexity Creates Fragility
As technology increases our capability it also increases our vulnerability. This has become painfully obvious in the financial sector. Technology used in the financial system from computer automated trading, blamed for the Flash Crash, to complex investment instruments developed by Quants have created a very fragile financial environment. This highlights the danger of increased complexity as much as it does greed. The greater the complexity the easier it is to make a mistake. Now add greed to the mix and it becomes likely that mistakes will be deliberately ignored or worse the complexity will be used to cover them up.

The a fore mentioned financial innovations aside even money itself is technology. I don't even necessarily mean the digital money we carry in our wallets or the bits and bytes exchanged over the net, but rather even the concept of currency is technology. Money is an abstraction we place on top of things of real value. So instead of trading pigs for plumbing the hog farmer can sell his pork on the open market in exchange for money, then pay some of it to the plumber for his labor. This works great when the money supply is stable, but what happens when the supply of money suddenly shrinks. Now the hog farmer can't sell his pork which then means he can't pay the plumber who obviously won't be able to by any pork and you end up in a depression. The plumber wants to work and the hog farmer has pork to sell, but there's not enough money to facilitate the exchange. This is an over simplified example but you get the idea. The complexity of money creates dependence and dependence creates vulnerability.

Dependence Makes Us Vulnerable
Consider a more accessible example, the electric elevator. How many buildings over five stories do you think there would be without elevators? Not many. Being able to be whisked up 100 floors in a few seconds makes it possible to go vertical thus saving real estate space in congested cities. That's great, but what happens if there's a black out and you're on the 100th floor? Now imagine the countless other pieces of technology that we count on every day. Your car, ATMs, communication devices, just-in-time inventory at the grocery store. We just expect these things to work, and when they don't we often find ourselves with no backup plan. 

Sometimes when these things stop working its short lived and the damage is minimal. If your car breaks you can borrow a friend's. If the ATM is down you just use another one or wait till its fixed. If your cell phone dies you can recharge it. But what if the outage is larger and lasts longer. What if its not just one of these things that goes down, but instead the whole system goes down. What then?

System Collapse
You might think an event that could bring down the entire system is very unlikely. And you'd be right, sort of. At any given moment it is extremely unlikely, however eventually it is almost inevitable. There have even been events that have occurred in the not so distant past that could cause such a widespread outage. One such event was the solar storm of 1859. Back then the only technology that was damaged was telegraph wires. Read some of these reports from telegraph operators and imagine the damage that would take place today if such a storm were to occur.

    "During the aurora of August 28th, the intensity of the current evolved from it varied very much, being at times no stronger than an ordinary battery, and then, suddenly changing the poles of the magnets, it would sweep through them, charging them to their utmost capacity, and compelling a cessation of work while it continued.     On the morning of September 2d, at my request, the Philadelphia operator detached his battery, mine being already off. We then worked with each other at intervals as long as the auroral current continued, which varied from thirty to ninety seconds. During these working intervals we exchanged messages with much satisfaction, and we worked more steadily when the batteries were off than when they were attached.     On the night of August 28th the batteries were attached, and on breaking the circuit there were seen not only sparks (that do not appear in the normal condition of a working line), but at intervals regular streams of fire,which, had they been permitted to last more than an instant, would certainly have fused the platinum points of the key, and the helices became so hot that the hand could not be kept on them. These effects could not have been produced by the batteries." 
E. W. CULGAN, Telegraph Manager at Pittsburg, Pa.
    "On the evening of August 28th I had great difficulty in working the line to Richmond, Va. It seemed as if there was a storm at Richmond. I therefore abandoned that wire, and tried to work the northern wire, but met with the same difficulty. For five or ten minutes I would have no trouble; then the current would change, and become so weak that it could hardly be felt. It would then gradually change to a "ground" so strong that I could not lift the magnet. The aurora disappeared at a little after ten o'clock, after which we had no difficulty. During the auroral display, I was calling Richmond, and had one hand on the iron plate. Happening to lean towards the sounder, which is against the wall, my forehead grazed a ground wire. Immediately I received a very severe electric shock, which stunned me for an instant. An old man who was sitting facing me, and but a few feet distant, said that he saw a spark of fire jump from my forehead to the sounder." 
FREDERICK W. ROYCETelegraph Operator at Washington, D. C.
A storm like this today would fry satellites and electric grids over entire continents. One report estimates the damage would be around $1 trillion dollars. According to NASA 2012-2013 could see a solar storm of similar size. Are you prepared to be without power for days or weeks? You won't just be missing TV or your hair dryer. Water gets pumped from your well or the city with electric pumps. Fuel in underground tanks likewise requires electric pumps. Imagine traffic with no operating street lights. When ATMs and card readers shut down where will you get the money you need to exchange for life's necessities. If gas can't be pumped to run the trucks, how long will it be before those just-in-time inventory store shelves go bare, and how long before the frozen food in the refrigerators begins to thaw. Within hours people could  begin to panic as survival becomes a mounting concern. What in 1859 had been just a dazzling light show and curiosity, causing at worst a few burned telegraph lines and shocked operators would be a global cataclysm today.

This is just one possible scenario among many. There are also vulnerabilities to more earthbound natural disasters and even man made disasters. As technology continues to advance increasing our capability we become more dependent and the risks increase. In so many ways we are dependent not just on technological hardware but the processes and ways of life that have grown up around them.

Division of Labor
By division of labor, I don't mean the government department. No, I mean the way we all specialize in one trade or another with no one doing everything for themselves. There has been such a division for thousands of years, but it keeps increasing and exponentially so. This is beneficial because it makes it possible for someone to really progress in their field of study or craft. For example my being a computer programmer is only possible because I don't have to worry about growing my own food, sewing my own clothes, or building my own house. Its really this division of labor that is largely responsible for our current level of technology and prosperity as it frees up many people to do things beyond providing food and shelter.

Yet this also make us vulnerable. If I never acquire experience growing my own food I am now dependent on those that do. That's fine as long as they are willing and able to provide, but what happens if the system fails. Will I be able to just walk out in my suburban 1/10th acre and plant enough vegetables to live on? Not likely. Even if you had sufficient land, some suggest an acre for a family of four, you wouldn't have the experience to be successful. Likely it would take you 8-10 years to acquire the knowledge and skill necessary just to scrape by.

Plan B
It seems to me technology is a blessing and a curse. It obviously has many benefits, but there is a danger that often goes unnoticed. I like to keep aware of these dangers and look for ways to be prepared in case those things that always just work, someday just don't. Do you have a plan B to fall back on if the system goes down? Do you even have the knowledge and ability to implement a plan B? The best time to think about it is before disaster strikes - Prov 22:3.

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