Cycles, relativity and behaviours

This week I strayed into the absolutist world of free-banking enthusiasts.

Now, it’s not like I haven’t come across these guys before — they lurk everywhere — but this week I discovered they don’t just represent an extreme economic faction, they (like goldbugs, bitcoiners etc) seem to be reason and logic deniers.

I’ve written about this before so I don’t want to bore people. But the main issue I have with them is that they appear to have no understanding or appreciation of the cyclicality of systems or the fact that whenever we’ve had free-banking systems they’ve resulted in chaos or alternatively co-beneficial collusion to the point the system is not free by the standard definition of free.

It’s really not a difficult point to understand. Systems are cyclical. And as Chris Cook always says there is a fundamental paradox inherent in the system which drives that cyclicality: namely, if it’s liquid it’s not neutral and if it’s neutral it’s not liquid.

This comes down to the fact that value is based on asymmetry.

Nor do the free-banking enthusiasts appreciate that central banks are mostly the product of private cartels. Nor do they appreciate that most economies already feature a huge plethora and mix of public and private monies that trade side by side. Nor do they appreciate that it was standardizing certain subjective values like weights, distances, time itself that has allowed society to cooperate, grow and thrive. (If we all had a different understanding of when 3pm is, there would be chaos.)

Last of all, and the thing that really annoys me is that they don’t seem to realise that stability is assured by the private sector acting in opposition to the public sector, both keeping each other honest, (so acting more riskily and competitively if the public sector is proving too rigid, and acting more prudently and wisely if the public sector is corrupt and behaving too imprudently). And it goes without saying that the public sector offers a similar counterbalance the other way.

There’s another issue that came up, which is caveat emptor society. Free bankers seem to want society to be free to make mistakes on its own. They consequently advocate a Wild West model where no one can trust anyone and everyone has to do the due diligence themselves, and because you’re so busy not trusting anyone nothing useful, beautiful or constructive can get done.

They also think it’s a perfectly logical proposition to have people reconcile all scams and fraud on an ex post-facto basis via private arbitration. i.e they don’t think people should be protected by laws or promises of recourse to higher bodies.

To me this is nuts for two reasons: 1) ex post-facto justice is usually a luxury that only the elite can afford, or in the best-case scenario is provided to the poor only if large amounts of them are ripped off in the same way allowing for a class action suit. 2) are they really trying to tell us that it’s better for society to implement punishment on a post-facto basis only and forget about prevention?

Furthermore they seem to completely forget the part about enforcement.

I’m not saying that ex post-facto “you have to get burned so as to learn from the experience” justice isn’t appropriate in many instances, especially when it comes to crimes and frauds that regulators and authorities haven’t anticipated yet. I’m just saying society should — as ever — be a blend of both systems: preventative and caveat emptor. We need both and in varying degrees, because as one begins to over dominate the other it needs to be snapped back and tested, and so on.

 

Noted for later: liquidity, up front costs, privacy, AI (and more)

Have been madly rushed for time all month but wanted to quickly jot down a few topics which are on my mind and which I plan to address in detail at some point.

1) I have a few points to add to Tracy Alloway’s sterling work on liquidity risk, namely of the “this is what the regulators always intended” variety and “the whole point was always to educate the buyside/asset management industry about how the banks really make money in a bid to change their behaviours and expectations about instant liquidity”.

2) on the back off point 1. the situation inevitably sets the asset management industry up for a major liquidity fail in the not to distant future and does so intentionally. Call it the Taleb/Rasputin anti-fragile approach to resilience. We need a few sacrificial lambs so that behaviours are changed in the minds of regulators.

3) up-front costs are the new big thing and I expect this will apply to newspapers as much as banking services. People are fed up with not knowing what the true cost of things is. This fact has made me change my mind rather dramatically about so-called “zero marginal” cost products. I don’t think they really exist precisely because there is always a cost buried somewhere, and if it’s not monetary it’s based on you being manipulated or disinformed and/or exploited outright. If you’re happy to settle for less and/or for the prospect of having your choices made for you for the sake of a simple happy life that’s fine, but let’s not pretend this doesn’t come at the cost or your placement on the global hierarchy ladder.

4) non-cash payments and equity floor protection measures and how they relate to banks using their liabilities as money. Won’t expand now, but it goes back to points I made in a previous post about how the best sign of distress at a bank is if its equity breaks through the par value of the currency of its domiciled address, because it shows the bank can no longer issue liabilities which are worth at least as much as the currency base. Also why drawing against your own equity via, say, a repurchase deal is tantamount to swapping volatile purchasing power for socialized stable purchasing power.

5) what a world where we all got paid in our organizations own equity might look like. Would you need money at all if the conversation mechanisms were instantaneous and low cost, and could allow everyone to see their relative value to everything else without the use of an intermediary common float ?

6) why I think number five is technically possible and does represent a step towards the elimination of cash, but there is a cost and that cost is likely the end of privacy/freedom as we know it.

7) why programmable self-issued money (what many of the tech far right are advocating) actually represents rules-based conditionality and restriction-based society. We could end up in a future where it doesn’t matter how much money you have, it’s your online history and known public reputation/contribution which determines how many oranges or shoes you are entitled to purchase, or what house you live in. How this is determined, however, is harder to ascertain. Whoever gets to programme your money, becomes the puppet master with the capability to block access to your house/car etc.

8) why are we outraged by FX rigging but perfectly happy to cheerlead the propagation of brand new industries that do the same thing or worse?

9) is it reasonable to champion a retail financial model that basically treats consumers as gamblers? By that I mean it advocates the notion that if they’re stupid enough to trust predatory institutions on the hopes of getting rich quick and don’t read up on why the odds are against them, that their losses are their own stupid fault? Especially if such institutions are cleverly portrayed as being reputable entities to the masses by means of clever advertising and marketing, and the growing ease with which it is possible to portray yourself as a legit organisation (all you need is a website and an app innit?).

10) do we want to create a society where resilience is ensured by the fact that no one can trust anyone, and that absolutely everyone has to do their own legwork to avoid the risk of being manipulated, conned or scammed? Is that really better than living in a benevolent hierarchy that protects the interests and freedoms of those who would prefer to spend their mental resources doing more creative things or simply enjoying life/raising families/looking after the sick? Or which generally facilitates the expertise. If everyone has to be an expert on how finance, IT, or cryptography works they won’t have time to be experts in much else.

11) have a big thing on AI as well.

The dark inventory in your social media

I did a presentation the other day for the New Putney Debates series focused on media transformation, information asymmetry and how all this relates to the financial infrastructure around us (I was especially asked to bring up my dark inventory series).

I’ve been reading a lot of Marshall McLuhan recently so you might detect some McLuhanisms in the structure of the PPT. Propaganda and the manufacture of consent also factor into the whole thing as well.

The key point I was trying to convey is that the financial system depends on information asymmetry because this is what allows one part of society to transfer wealth, respect, belief to the other in a beneficial or non-beneficial way.

If the transfer empowers those transferring the wealth, chances are it has in some way disempowered the rest of the world. If it empowers those to whom the wealth has been transferred, it’s likely to have disempowered the wealth holders. The financial system sits in the middle and takes a position based on its better understanding of which side is likely to lose or win. If there isn’t an asymmetry between the two sides it has to be created artificially to give the middlemen purpose. Symmetry by definition otherwise implies a positive sum scenario for all, or alternatively a negative sum scenario for all.

Anyway here’s the PPT. It’s fairly “right hemispherical” so it may not make sense without an audio voiceover, which I may do over the weekend if I have time.

To conclude: the digital medium lacks peripheral context, which means hearts and minds must be captured directly if asymmetry is to be preserved. To achieve this a persuasive message must be buried ever more cleverly and subliminally (i.e. so that you think you yourself made the decision about the content you consume ). To navigate such a minefield without losing command of one’s free will one has to question everything, apply critical analysis to everything and invest ever greater amounts of time and energy to filtering out the rubbish from the quality (objective) content. Those who can be bothered to do this, whilst questioning everything they read — a la the Socratic education method — have the potential to become the most informed generation ever. Those who can’t be bothered, risk losing control of their consciousness if not their individualism.

The alternative is a complete loss of asymmetry. But this leads to the paradox of perfect information, which loosely states once perfect information has been achieved no-one has an incentive to work to obtain information, which inevitably leads to asymmetry.

To me this sums up exactly why distributed systems will never be fully empowering, because they lead mainly to segmented and biased viewpoints, and individuals who are blinkered to the bigger picture around them unless they use their initiative to search beyond their filter bubble. To be truly empowered having unrestricted access to information isn’t enough, you need to be able to process all the information in a “I know Kung Fu” sense and filter for yourself. Since this is physiologically impossible (unless we become cyborgs) all that leaves distributed systems doing is passing the filters over to another type of biased agent: likeminded communities or agenda-driven communities — which may or may not have all the facts and expertise to hand — as opposed to establishment institutions — which tend to have more familiarity with the process of critical analysis.

The upside to all this distribution is that all the different silos can happily ignore each other and work away at their own agendas, at least until the system as a whole is threatened. Then everyone takes notice and the big theme enters into the processing system of all the varying distributed systems. This is what the “viral” meme phenomenon is about. The loose notion that if the information is important enough it will get to you. That you can’t help but take notice because it’s being replicated so intensely everywhere. That which doesn’t get replicated, meanwhile, just ends up being treated as junk.

I liken all this to how the body works on both a conscious and unconscious level. The distributed closed-off networks relate to the unconscious part which focuses on a specialist area, taking instruction from the conscious part — the bit that sees the whole picture, and processes the most important signals from all the different distributed networks — only if it’s worth their attention. This is usually when the knowledge gleaned from the pattern recognition process executed by the “higher mind” is relevant to all networks.

So a bit like the body’s conscious mind thinking about doing something, deciding to do that thing and the relevant parts of the body complying according to the degrees that the thought affects them (some a lot, others not at all). In this way, to the conscious brain, the body’s compliance with its will appears to be an unconscious dynamic process. In reality it’s the conclusion of a sophisticated signal filtering framework that leads from the mind.

What it also implies, however, is that “embodiment” depends on the informed maintaining direct influence over a subservient unconscious mass which is unconcerned by the big picture and happy to specialise. Or as the mystics might say, a true case of “mind over matter”.

Here are a couple of McLuhan quotes for pondering on the back of that:

From “Understanding Media”:

“All media are extensions of some human faculty- psychic or physical”

“the wheel is an extension of the foot, the book is an extension of the eye, clothing, an extension of the skin, electric circuitry, an extension of the central nervous system”

Screen Shot 2014-10-29 at 21.49.38

 

That’s from “The medium is the massage”.

 

Screen Shot 2014-10-29 at 22.43.32

And from “The Gutenberg Galaxy”

Liquid gold

Here’s another shot of a piece of art from Frieze which caught my eye: photo 2I love it. Not only do I think it’s very clever, I think it expresses the goldbug confusion better than any single image or piece of writing ever could.

Gold is not the thing of value. It’s the ability to process something like gold into liquidity which has value.

What the image expresses is gold’s power to suck value out of everything around it and concentrate it in just a few hands.

Think of a big sucking sound, ssssoooop, which hoovers up all the oddly shaped, hard to value, random pieces of gold in the vicinity which no merchant would ever be prepared to accept due to the complexity of figuring a value transfer with something so odd and unstandardised, and transforms it into a nice standardised coupon which everyone understands the value of.

And the reason that shop has the power to do that is because there’s a portion of society which is happy to provide useful liquidity coupons that give access to anything to a shop that promises to homogenise all the different trinkets of gold still outstanding by literally liquefying them until they can be valued on standardised terms.

In other words, the goldbugs are paying for something illiquid to be made more liquid, with coupons which are even more liquid, not realising that no matter how much they pay up to standardise the world’s gold, it will never become as liquid or as efficient at transmitting value in a digital world as a dematerialised coupon.

 

Raison d’etre consensus

Steve Randy Waldman has a nice thing about consensus forming applications in his most recent article on open science, econometrics and cryptocurrency.

I’ve done a more formal thing about it for AV which should be out on Monday, but I wanted to expand here because some of the stuff he says happens to complement my interest in power consolidation through propaganda and mythmaking.

In fact, I was telling xxhshste (cryptographically obscured) the other day as we were meandering through the Frieze art fair — a fair I find fascinating precisely because of the cultism and mythmaking at hand — about my undergraduate academic thesis on the significance of Apollo to Augustus. I shan’t bore you with too many of the details, suffice to say Augustus identified with Apollo so that the public would come to associate the god’s key attributes with the Augustan era, Pavlovian style.

 

photo 1

(A piece of art at Frieze which drew my eye.)

The Augustan approach was thus a hugely successful exercise in reverse psychology and subtle persuasion/brainwashing of the masses. And it succeeded precisely because the symbols and associations were never too overt. Augustus didn’t want to tell people he was the divinely favoured son of Apollo –a.k.a the light of the sun personified. He wanted them to make the association themselves. This is because he knew that a man who arrives at a belief via his own “proof of work” is much more likely to trust the conclusion.

Augustus’ great genius, consequently, lay in the realisation that if he planted just enough seeds in the public consciousness or dropped just enough clues in public art and infrastructure — not too few, not too many — he could guide the public’s factual evaluation and decision-making processes. Which, of course, amounted to the manufacture of consent.

Augustus in that sense was a pioneer in the art of using subliminal messaging to skew and corrupt public consensus.

The technique was so effective it changed the minds of a people who were so profoundly distrustful of absolute monarchy (that they had structured all their social systems to never allow it to manifest) into accepting absolute rule open heartedly.

And while publicly Augustus tried to make it look very much like leadership was a heavy burden to bear, privately, absolute rule was always his aim.

And this sort of thing is exactly what I worry about whenever anyone suggests consensus-based applications are the future.

Now, I don’t want to rehash the same old arguments I’ve already made about Bitcoin (in particular) being a bait and switch re-enactment of Animal Far which exploits public gullibility to create an even more oppressive system than the one it is on the surface trying to get rid of. I’ve written plenty about this before.

What I want to explore, on the back of Waldman’s post, is why so many highly intelligent people seem to believe that the blockchain consensus-forming technology behind Bitcoin, might be a revolutionary technology in and of its own right.

I think the use of the word “revolutionary” is the clue here.

That’s because it suggests none of this is really about technology, money or assets at all. But rather that it’s really about politics, hierarchy and anacyclosis.

On that basis “belief” in the potential of the blockchain is just another manifestation of the age old desire to transfer power from the elite to the masses.

The only difference is that for some reason people seem to think that because our communication tools are better this time around the revolution might actually be effective. And by effective I mean that it creates a new order which doesn’t open itself to a whole new corruptive influence on the back of it.

At this point I would like to state for the record that I have absolutely nothing but respect for anyone who wishes to make a fairer or more just system. But I remain skeptical about the blockchain as a path to empowerment because I think too many people mistake it as being the sort of technology that leads to absolute outcomes, when really it’s about using technology to better organise a still highly fallible human race.

Xxhshste said to me that the reason he’s excited about the blockchain is because he thinks there’s a real need to have a distributed publicly owned backup of all the important stuff in the world that needs to be documented or tracked.

I don’t disagree. It would be lovely if I knew that a transaction I did with a corrupt individual who might otherwise “overlook” that the transaction ever happened could have recourse to a public ledger that could stand by my version of events.

But there are two issues at hand. The first is, so what?! Just because something is documented doesn’t mean people will believe it or act upon it.

None of this resolves the issue of enforcement.

Just look at all the vast amounts of people who routinely deny documented fact and science, despite benefiting from those publicly acknowledged discoveries on a day to day basis. Or, for that matter, who disregard the law unless it suits them. The great irony of libertarians’ fascination with blockchain is that the blockchain only works for a civilised and subservient society which agrees to honour its findings and succumb to its protocol.

Unfortunately there will always be those who subscribe to it only when it suits them. And that’s because there will always be those who see it for the abstracted version of reality which it is.

The second issue is who forms the consensus anyway? And how can you be sure they won’t be skewed or biased by stronger forces?

In the current incarnation, the bias is controlled by the embedded payoff. Everyone has an interest in defending the ledger because there’s too much at stake if the system can be corrupted. So, for as long as there’s a payoff provided to those defending the system, and the system’s defence is the only thing that guarantees the value of that payoff, the thing is kept (relatively) honest.

But the payoff still has to come from somewhere. At the moment the payoff comes from the transfer of wealth into the system from outside. It originates from the product of someone else’s more conventional work, and flows to those expending real energy and resources keeping the blockchain honest. Which, by the way, is why there’s an arms race to attract ever greater transfers of wealth into the system.

All fine and dandy, except what happens when the cost of defending the blockchain gets so expensive it requires a disproportionately large transfer of real-world product (the product of someone else’s work) to the hands of those with the fastest computers?

Fine. Remove the payoff, you might say?

Well, that’s precisely what the new generation of blockchains are trying to do from scratch. Except you’ve guessed it. If you remove the payoff those expending time and energy defending the consensus-formation process must be compensated in some other way or else they’ll walk away leaving only the most cost-efficient processor defending the system.

The most obvious way is via transaction fees. Unfortunately, paying 1,000 people to simulate the processing job of Visa (and then to reach a consensus) is likely to make it 1,000x more expensive than Visa. What’s more their costs are unlikely to be uniform, so a universal fee will not be equally compensatory, meaning once again you end up with some getting more exploited than others, and the structure and control of the system orientating to the “defenders” with the lowest marginal costs.

Which is why if you remove the payoff the whole thing fails. You end up with a classic transaction fee led “business’, which due to the cost of operating the system inevitably reduces the many to the few (via the standard forces of monopolization), and we end up with a small number of people controlling the system, no better no worse.

So, raison d’etre consensus

The ethereum approach which Waldman references, of course, is to attach some form of raison d’etre to participation. Again, a highly noble endeavour. Except. How are you ever going to convince people that it’s really worth their time and energy to participate in defending the payments, contracts, registry system of the world. Why should their computer resources be overcrammed by processing transactions or contracts on the other side of the planet among a community of people they have no interest in?

Raison d’etre makes sense, but only on a local basis. And for that reason it can never scale, because as soon as you get a babysitters club blockchain running up too many costs due to the burden of processing all the world’s babysitting coupons, you will get fragmentation towards the local geography or pool.

The raison d’etre approach, in other words, can only exist with extremely selective and localised blockchains that are relevant to the individuals participating. And even then, there’s always going to be a business opportunity for anyone who comes along and says, “hey, don’t waste your time having to defend all these systems you participate in yourself, we’ll do it for you, you can trust us, and you go and play tennis, or whatever”.

The only raison d’etre approach that can ever work is if human self-determination and life itself depends on it. I.e. when the cost of not participating is so great, that it turns you into a manipulated drone with no privacy, no self-determination and/or when your life becomes meaningless from non-participation.

Unfortunately, however, there will always be a sector of society that will happily accept and even enjoy this sort of pre-packaged life. We know this, because it has always been so. And it will remain the case for as long as people can be convinced (through subtle persuasion) that their inferior life is the one they want, are responsible for and can’t change. And even better, if they can be persuaded to actually think they’re getting a bargain because they don’t have to work and all this stuff they get is free.

In my book treating blockchain as a revolutionary empowerment tool runs the risk of taking our eyes off the real power abuse issue. So what if some small section of society is empowered by the blockchain when the rest of society ends up being hopelessly exploited because there is and always will be an information asymmetry between those who can be bothered to defend their freedoms and those who are happy to trust others to do the heavy lifting for them.

Enough musings for now, I might be back with some choice extracts from the Chomsky classic, “Manufacturing Consent”.

 

 

In which Tirole predicts the Ice Bucket thang

Looking back at Jean Tirole’s work on liquidity premia gives one a real insight into how his two-sided market theory and agency stuff came about. In particular the role fear plays in leading people to make what seem to be irrational pricing decisions.

But there’s also a treasure trove of stuff on belief-driven markets, and the real motives behind apparently selfless acts of altruism.

Hint, no such thing as a selfless act, although core values do play a role in pricing assets during periods of complete information darkness.

In any case keep in mind the Ice Bucket of 2014 thing when reading the below 2005 paper on prosocial behaviours:

B. Holier-than-thou competition
We saw that competition may reduce welfare by inducing excessive participation in prosocial activities that generate only moderate public-good benefits but have a high visibility. We will now see that it can reduce welfare (relative to a monopolist) even without any change in participation, by leading sponsors to screen contributors in inefficient ways. This result formalizes in particular the idea of religions and sects competing on orthodoxy, asceticism and other costly requirements for membership (e.g., Eli Berman (2000)). Another example of rapidly growing importance is that of charities sponsoring events where agents, instead of simply donating or raising money (or on top of it), engage time-intensive, strenuous activities such as a day-long walk, marathon or other test of endurance.

Public self flagellation is used as a means to disguise, obscure or distance oneself from the real motives of an overly altruistic donation which may be construed as being manipulative. (Oh Augustus and your false piety, what have you done!)

I find these insights particularly interesting because I’ve always wondered why it is that we’ve ended up with a charity system obsessed with linking donation to self flagellation. Why is it that we need to run a marathon to “raise” money for charity? If the cause is good enough and in tune with social values why doesn’t the money flow to that cause regardless of marathons etc?

The suggestion here (I think) is that anonymous donation is clearly economically inefficient, yet notoriety/publicity associated with public donation can begin to look suspicious (because it’s impossible to know if you are motivated by true values or a desire to gain public popularity through benevolent acts) thus you need to deserve the recognition you get, so at the very least go run a darn marathon or something to prove you’re not just a shameless publicity whore. Or at the very least throw an ice bucket on yourself to publicly shame/pillory yourself.

Here’s the conclusion of the paper in any case:

To gain a better understanding of prosocial behavior we sought, paraphrasing Adam Smith, to “thoroughly enter into all the passions and motives which influence it”. People’s actions indeed reflect a variable mix of altruistic motivation, material self-interest and social or self image concerns. Moreover, this mix varies across individuals and situations, presenting observers seeking to infer a person’s true values from his behavior (or an individual judging himself in retrospect) with a signal-extraction problem. Crucially, altering any of the three components of motivation, for instance through the use of extrinsic incentives or a greater publicity given to actions, changes the meaning attached to prosocial (or antisocial) behavior and hence feeds back onto the reputational incentive to engage in it.

This simple mechanism lead to many new insights concerning individuals’ contributions to public goods as well as the strategic decisions of public or private sponsors seeking to increase or capture these contributions. This line of research could be extended in several interesting directions. A first one concerns organizations, where high-powered incentives or performance pay could potentially conflict with agents’ signaling motives that arise from teamwork or career concerns. A second relates to the role and objectives of sponsors, who in practice often have their own signaling concerns. A third one, linked to the self-image interpretation of the model, is to the topic of identity and the many instances where people refuse transactions that seem to be in their best economic interest, but which they judge to be insulting to their dignity.

(That last direction btw relates to honourably declining gifts as a journalist, including Bitcoin tips.)

The sad conclusion once again is that there is no such thing as a free lunch, and if you think you’re getting something for free you probably are not, unless, of course, you have the remarkable good fortune of living in a microcosm in which everyone genuinely shares the same core values as yourself.

The Ice Bucket thang became so shamelessly self-promotional in the end, due to the eyeball factor it created, that the donations provided by the celebrities became inconsequential relative to the positive publicity they received as a result of participation.

Some have argued, what’s the problem with that? Isn’t it a virtuous circle because at the end of the day a charity got money to help its cause even if a few celebs managed to exploit our sensibilities? Well, perhaps. But the issue really is whether we as a whole ended up being manipulated or not in the process. Did we make decisions based on perfect or imperfect information?

Someone benevolently giving for a cause without publicity is much more likely to research the credentials of the charity in hand, than someone taking advantage of a fad.

Also, is it economically efficient to over allocate money to one particular altruistic cause? What, in other words, was the cost to other charities (or businesses) of one particular charity’s over exposure in that particular time frame?

Brute force, trial and error systems vs imagination

From the New Scientist article Daydream Believers (from last week):

“I would love to know if chimpanzees can entertain the notion of a unicorn, but we have no idea,” he says. “As far as I can tell, we don’t even know whether they can entertain two possible scenarios to solve a problem.” In Call’s view, it is impossible to say whether the animals that solve problems without trial and error are consciously imagining different solutions, or subconsciously integrating information to come up with the correct solution. “I’m not saying animals can’t imagine two different scenarios,” he says. “I just don’t see the evidence for it.”

As I have been learning this week from AI experts, the ability to learn depends mostly on trial and error processes which strengthen neural pathways that lead to positive results.

But as I am also learning, the field of artificial intelligence is split between three different types of AI learning processes.

First there are big data systems. These aren’t really intelligent because they depend on pre-programming by intelligent agents. They’re effective only because of brute force approaches to problems, processing huge amounts of data. You can imagine the problem. It’s a very energy intensive way to achieve the optimum action, and it remains dependent on instructions on what to look for. Like finding a needle in a haystack by processing every single bit of hay and checking that it isn’t by chance a needle. This is brute force trial and error.

Then there’s proper AI which achieves intelligence through self-learning algorithms that reward the AI for reaching objectives of their own accord. These are a different type of trial and error process. You don’t have to know what the task is, you’re simply learning to deal with the environment you are faced with and every time you discover something exploitable you develop a neural pathway that teaches you this is a good way to approach that sort of problem.

Problem with this system is that, if an unexpected obstacle hits the AI (unexpected item in the bagging area), it can get stuck in blind alleys applying approaches it has found effective in the past until it finds a work around. This can take a while. But sometimes it may not work at all.

The third system — arguably the smartest — incorporates what i have come to understand as mental visualization/modeling. It’s a system that aims to replicate the way the human brain works.

This is achieved by the AI integrating a model of its perceived surroundings into its actions, so if and when it comes across an unexpected obstacle it can revert to its model and take a good intuitive guess about where the solution might be. In other words it uses its imagination to figure out a solution.

The more creative it is the more likely it is to think outside the proverbial box and find the sort of solution that a process-driven AI would never be able to imagine.

A lot of human intelligence thus seems to be linked to the ability to create a working internal model of surroundings and to be able to cut corners through processes which would otherwise take ages and/or loads of energy.

But I do wonder if perhaps we have inherited a dual system as reflected by the presence of both process-type thinkers and creative-type thinkers in society.

The latter of course are pattern recognizers and extrapolators. These are people who have a tendency to jump to conclusions based on instinct and hunches, without too much care for the process of how to arrive at that solution. These are the sort of people who are super intuitive, who at school didn’t have to study too hard to pass exams, because they found they could get away with getting good marks with only half the amount of work of everyone else.

The former, however, are dedicated to the process. If you provide them with an unexpected solution to a problem they won’t necessarily trust you until they have worked out for themselves the process by which you can arrive at that point. These are, in other words, book learners. At school they would have been the type that got incredibly good results but had to study hard (and probably enjoyed that studying) so as to get to that end result.

There are, of course, strengths and weaknesses in both systems.

The amazing strength of book learners (I.e. non visualization people) is that once they understand the process they become better than anyone at doing it. They can become human calculators. And are generally hugely efficient at whatever skill they learn, and don’t get bored easily.

Their weakness, however, is that they can get stuck in the little picture and go down blind alleys. Also, they tend to be scared of unexpected encounters or anything they are not used to. In the extreme they probably fall on the autistic side of the psychological spectrum. On the really extreme side they may have trouble recognizing faces and emotions because of poor pattern recognition skills.

The amazing strength of creatives (people who can visualize from models) is that they can cut corners and find the most unexpected solution to problems and obstacles. That said they’re probably only efficient for short periods of time, with the efficiency highly linked to the out-of-box thinking process that leads them to an unexpected outcome. This may encourage an obsessive personality, I would imagine, which labours to prove that its pathway is correct. Nevertheless, they are very good at spotting patterns and are probably very good at visual representation, the arts and the subtleties of tones etc due to the power of their mind’s eye.

The downside, however, is that they do get bored easily by everything not related to their current preoccupation and can get carried away by their imaginations, never bothering to back up or update their models with actual confirmed processes from elsewhere. If they become too used to extrapolating, it can probably lead to extreme eccentricity and/or madness. Also, just because you can model internally doesn’t mean the model is necessarily correct. In the extreme scenario, you can imagine how eccentric some of these people may get and how much they may end up disregarding process, to the point of becoming non-functional or disruptive members of society. It seems quite likely to me (extrapolating madly, of course) that dyslexic types fall into this category.

The biggest advantage of the creative mind, however, is that it is labour-saving in terms of how many trial and error processes one has to go through to reach a conclusion. Consequently it is much more efficient, albeit not necessarily as accurate as the process-driven mind.

I imagine in society we need a good distribution of both types of brains because in the long run both are needed and both complement each other.

Give a creative mind a well formed model (I.e. One that has a wide range of data points/processes to draw on) and you get to some very special intelligence. And that presumably is the real potential of an artificial intelligence which has the capacity to model (visualize) but also has at its fingertips an expansive data set to feed those models. You go from brute force analysis of everything towards achieving action through dynamic real-time extrapolation that is more accurate than usual.

But I’ll have more on this, as well as the hierarchal architecture of the brain (which apparently features a fascinating competitive neural structure reminiscent of evolutionary game theory and competitive forces more generally) , when I actually sit down and read the papers which were given to me.

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Quick update. I think all the above explains the success of the Myers Briggs system. Not sure how Introvert vs extrovert comes into it, but intuitive vs sensing does make a lot of sense. A sensing agent is the process-driven one, while the intuitive one has a good working model. Thinking vs feeling probably reflects our ability to back up that intuition with fact. As an ENFP, I just run with whacky extrapolations rather than using that intuition to figure out the process. I just “feel” it must be right. Thankfully I’m only marginally feeling, so I do have a lot of respect for confirmation and if the facts prove my intuition wrong I will change my mind (begrudgingly!). If you are intuitive and extremely feeling you can imagine a tendency towards cultism. Last there is perceiving vs judging. I guess that applies to how you respond to extrapolated options. Interestingly I have a tendency to orientate towards other ENFPs and/or INTJ/P types in life. I can see how this is complementary. INTs probably have extremely good intuitive models so can understand what crazies like ENFPs are on about, but their respect for process means they are not only great at deducing solutions they are also great at proving them. INTJs tend to be rude with an ability to alienate other personality types (other than ENFPs). Small surprise INTJs are the least common personality type. INTPs are also rare.

But do check out the sort of people who tend to be INTJs here. And the sort who tend to be INTPs. Basically they’re mainly nice geniuses or asshole geniuses.

I think it’s pretty likely that if we do create an AI it will have the personality of an INTsomething.

ENFPs (my personality type) are all extreme extrapolators. Namely creative writers, journalists, idealists and err in some cases conspiracy theorists.

Although, obviously, hard to know how true those classifications are (especially for the historic figures).

But I do think it’s interesting that logic suggests the extreme opposite of the above should be an ISFJ type. Logic further suggests these types should be dedicated to process-focused actions and/or good at following orders. Funnily enough a) there aren’t as many famous ISFJs as other types, and those who are famous tend to be military people.

Process and brute force accompanied by “thinking” rather than “feeling” meanwhile allows for very effective, convincing and powerful leaders to emerge.