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Jeff Schweitzer

Jeff Schweitzer

Posted: November 23, 2009 01:55 AM

Tomares, Typhoons and Terrorism

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Blind determinism is humankind’s greatest disease.  The first and most dangerous symptom of the malady is religion, which began by confusing correlation with causation as first-order determinism.  Doing a dance in hopes of rain just prior to a deluge convinced primitives that dancing caused the precipitation.   A Cro-Magnon mind would believe that human action led to the outcome by asking the gods to intervene, which resulted in rain as an answered prayer.  Sadly, we have learned little in the past 100,000 years, for we are as easily fooled today as were in the Stone Age.

Like our ancestors anxious for a drought to end, people today are readily persuaded that the cause of any event can be traced back through an unbroken series of antecedents.   The fallacy is embedded in the false distinction between theory and practice.  We know that a butterfly in the genus Tomares beating his wings in southern France could cause a typhoon in the Philippines two years later.  The microscopic eddies caused by the insect’s delicate flight could indeed initiate a chain of meteorological events that conclude with a monster storm in the Pacific.  But determinism fails retrospectively and prospectively in this example, and every other except in the simplest of systems.  An entomologist observing our butterfly could never predict the storm two years hence.  Likewise, in witnessing the storm we could never trace back through the trillions of possible paths to the original causative puff of air in southern Europe.  The storm is deterministic in that the winds really were caused by a butterfly wing, but indeterminable because in practice the cause can never be discerned.  The fact of determinism is made irrelevant by the reality of nearly infinite possibilities.

This butterfly effect is cited so frequently that the example has become trite, which is too bad because society still behaves as if the phenomenon does not exist.  The lessons from our butterfly are profound, but ignored.  Our personal behavior, all of our financial institutions and all governments operate on the assumption of predictive determinism.  We pretend we live in a Gaussian world of norms in which we can predict the future based on averages.  We delude ourselves into thinking that past trends will continue, giving us a little glimpse ahead. We ignore outliers that swamp and invalidate all that has come before.  And therefore we pretend we can predict the future.  We cannot.

These considerations of blind determinism are not some academic exercise but the real reason why we remain vulnerable to terrorist attack, why we ignore climate change and why Wall Street remains incapable of stable growth without cyclical crashes.  Let’s see why.

We first must understand the fallacy of averages.  By focusing on averages, we ignore improbable events that overwhelm our assumptions and invalidate our predictions.  In our peek to the future we exclude from our analysis for example an asteroid impact or a monster tsunami on the eastern seaboard.   If an asteroid hits, our predictions about the housing market and projected federal deficit will be invalid, widely off the mark.  But events need not be so extreme.  The attack on 9/11 rendered moot every economic forecast made prior to that day.  The collapse of banks in the 1980s created losses that exceeded the sum of all prior earnings, invalidating all projections of growth no matter how sophisticated the models.  Nobody predicted the impact of the Internet on commerce, social networking or globalization.  These events are not “exceptions” but in fact the driving forces in our lives; and they are inherently and deeply unpredictable in both time and magnitude.  Meaning the future is inherently unpredictable since these outliers drive events.  The “average” is the exception, an illusion that should be ignored. 

This conclusion that unpredictable outliers drive our future has real impact.  Everything you think you know about Wall Street is wrong.  Everything.  The only valid statement is:  buying U.S. Treasury bonds is relatively safer than any other financial instrument on earth.  Anything else you hear from Wall Street is a blatant lie.  All the sophisticated models, statistics, performance predictions, fundamentals, research, analysis, charts, strategies, risk assessments, pro forma statements, and annual report projections are complete, utter, absolute nonsense with no value except to make you feel good.  Wall Street is a massive fraud sanctioned by a society deluded into the false idea of a predictable future based on Gaussian norms that do not exist in the real world.   

We next must understand the problem of obsessive focus, another symptom of blind determinism.  Following the World Trade Center attack, we reasonably diverted our collective attention to the issue of terrorism.  But we soon unreasonably went too far.  The event was beforehand an outlier beyond our comfortable norm, and therefore ignored in our predictions of the future.  But soon afterward we fell into the trap of shifting to the opposite extreme, making terrorism the new average, the new norm, when it is nothing of the sort.  We quickly lost all perspective, and therefore lost sight of where we remain most vulnerable to future attacks.  An outlier remains so even when it happens; it does not define a new set point; it was always there.  We just made the mistake of pretending otherwise.  Blind to the possibilities of the unknown, we react in panic when something outside our comfortable norm hits.  As a consequence we divert resources from threats of greater dimension.  We have spent $1 trillion in Iraq, a country not even remotely involved with the 9/11 attacks, yet we spend almost nothing on protecting our ports.  We still only inspect 10% of cargo entering the country.  Our food and water remain largely unprotected and vulnerable to terrorism.  We have underfunded efforts to control loose nukes.  Pathetically, we take our shoes off in the airport security line. The evil act taking 3,000 lives on that terrible day in New York represents a threat to society no greater than that from smoking, obesity, train crossings, or H1N1. 

Finally, we must understand the consequences of deterministic obstructionism.  We just saw how we set ourselves up to overreact when an outlier occasionally but significantly impacts our lives:  we create a false new average instead of understanding the unanticipated event for what it really is – an outlier that was always present as a threat.  But we also do damage by appealing to blind determinism in the other direction as well:  demanding incontrovertible proof of an outlier’s impact before we take any ameliorating action.  This is the untenable position of those who oppose actions to address climate change.  These folks are so convinced of our ability to predict the future, on the basis of determinism, that they demand precision in those predictions.  (But fail to demand that same predictive precision before supporting missile defense systems or invading Iraq). The problem is that in disparaging uncertainty, they ironically willingly ignore the uncertain and potentially disproportionate consequences of inaction.  We can, after all, reasonably anticipate that something will be bad without knowing the details.  When I go to a poor foreign country, I know that eating uncooked food from street vendors would likely make me sick.  I do not know what vendors would cause me harm, or how sick I would become, or exactly what form the illness would take on, but I know enough even with that uncertainty to avoid certain foods.

Nobody exemplifies the dark side of determinism demanding precise predictions of the future before taking any preventative action better than Sen. James Inhofe.  "I proudly declare 2009 as the 'Year of the Skeptic,' the year in which scientists who question the so-called global warming consensus are being heard.”  He is celebrating the apparent demise of any global climate change treaty this year.  (I hope he lives long enough to see the destruction wrought by his irresponsibility.  I wonder if he will say he is sorry to his grandchildren).

So with leaders like Inhofe, we as a society recognize the existence of the outlier of climate change, but take no action because we cannot precisely predict the timing or magnitude of its consequences.  But as with 9/11, when the impact of climate change is felt, when the seas rise, weather patterns change and millions are displaced in wars for retreating resources, the same people who now deny the problem will react in panic, diverting resources away from areas of greatest need.  We expose our stocking feet at the airport to thwart a shoe bomber, but do nothing as we fundamentally alter our atmospheric chemistry -- because terrorism has become the false new normal even as we ignore the next outlier staring us in the face.

Perhaps the human brain is simply incapable of accounting for the fact that our future results primarily as a consequence of improbable but high impact events that are largely unpredictable. Our descendants, if we have any, will find out soon enough. 


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