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How to Fix the System

2011 August 31

Pissed off at the system?  Most people are, as they should be.  Systems suck.  Anybody who says he likes the system is either a liar, a fool or the guy who created it in the first place.

The system favors some over others, overlooks important, sometimes crucial information and has so many rules that they end up contradicting each other. What a mess!

All of those things are true, but we run into even bigger trouble when we confuse problems with the particular system we are mad at with ones general to systems themselves.  We end up tearing down the old system in favor of a new one which is often just as bad and sometimes worse.  We lose time and incur costs along the way.

When The Wall Came Tumbling Down

There probably wasn’t ever a system more broken than the one that existed in the Soviet Union.  Economists have estimated that total factor productivity turned negative sometime in the 60’s, meaning that the economy’s outputs were worth less than the inputs.  In hindsight, it was always bound to collapse, it was just a matter of time.

Nevertheless, Vladimir Putin has said that the fall of the Soviet state was one of the greatest calamities in world history.  What’s more, many Russians agree with him.  Under Communism, ordinary people were poor, downtrodden and exploited.  However, today they are poor, downtrodden and exploited without access to many services they had in Soviet times.

Of course, some people have become fabulously rich and millions of others have entered the middle class, can travel, buy foreign products and do lots of other things that were impossible under the rule of the Politburo.  Both systems are deeply dysfunctional, which is worse is a matter of perspective more than anything else.

Formal and Informal Systems

One thing no one can deny is that the years immediately following the fall of the Soviet Union were horrible.  Long bread lines snaked across the country.  Crime was rampant. Gangs of thugs ran amok and billions of dollars of state capital evaporated only to reappear in numbered Swiss bank accounts.

A system that seemed like it couldn’t get any worse, did.  How did it happen?  The answer lies in the informal systems that grew up around the dysfunctional formal one.

For instance, if you wanted to build a house and needed nails, you might go and buy a cake.  You would then take that cake and give it to the lady who worked at the meat store. She would allow you to buy meat and then you would give it to someone who could get you nails.  It wasn’t a particularly good system, but in the end, you got your nails.

Such informal systems are all around us.  When researchers study the networks within organizations, they often find that influence lies not in the executive suite, but with smokers.  For similar reasons, anti-corruption drives often do more harm than good. Once the do-gooders have cleaned house, who do you bribe to get what you need done?

When we alter a formal system that isn’t working, we need to take care not to sweep away informal systems that are.

The Perfect System

Probably the closest thing we have seen to a perfect system is Aristotle’s logic, which reigned for more than 200 years as a standard for determining validity.  As late as the 18th century, Immanuel Kant referred to it as essentially “finished and complete.”

However, by early the 20th century, it became clear that his rigid system of syllogisms could not account for some of the quirks of common discourse.  Bertrand Russell and A.N. Whitehead tried to solve the problem in 1911 with their Principia Mathematica, but their solution was soon found wanting, as was that of David Hilbert a decade later.

The search for a logical solution continued. It was an exasperating problem.  A rational society depends greatly on logical validity and the fact that some of the greatest minds of the day could not envision a system that would not contradict itself was unnerving, to say the least.

Finally in 1931, a young logician named Kurt Gödel published his incompleteness theorems, which proved that every closed system is necessarily inconsistent.  In other words, every program eventually crashes, every system can be gamed.  The quest for perfect logic and rationality had been a fool’s errand all along.

Evolutionary Systems

So what to do?  If every system is flawed, is there an answer beyond nihilism and anarchy? It seems that there is.  Even Gödel famous proof had a crucial flaw.  He postulated a closed system, but there is no reason that the systems we inhabit can’t be open and many of the most thoughtful answers to the problem exploit this opportunity.

Joseph Schumpeter cited creative destruction as the grease in the wheels of capitalist societies.  More recently, Kevin Kelly, in his book What Technology Wants, drew parallels between biological evolution and technological evolution. Economist Tim Harford has drawn the same connections between biology and industry in his bestselling Adapt.

In the end, to paraphrase Leibniz, we don’t need perfect systems, just the best ones possible. We can always improve them, borrow aspects of others and continue to experiment ad infinitum.  Much like Zeno’s famous paradox, we are always traveling half the distance to a destination we will never reach.

The Confused Ape

There is no system more complex than that of the universe and probably no one who peered its depths more thoroughly than Richard Feynman.  So it’s interesting, as well as instructive, that he had this to say about his approach to problems.

Of course, he was being modest.  Very few have seen matters with such clarity.  In a speech in 1959, he not only foresaw the coming of nanotechnology, but described in detail how it would be made to work.  He was a pioneer in parallel computing and later, quantum computing.  His QED theory was the most accurate in the history of science.

What made him special, however, was not his intelligence, (he had an IQ of 125, above average but not at all unusual), but his passion for problems.  He sought them out, reveled in them and, of course, often solved them.

He was able to do so not through clever banter, obscure acronyms or even his talent for complex thought, but with his understanding of a simple truth: We fix systems not by making them perfect, but by adapting them to the problems at hand.

– Greg

6 Responses leave one →
  1. August 31, 2011

    Hi Greg,

    An interesting coincidence as I just commented on your previous post mentioning Kurt Goedel and his theorem and then read this post.

    I agree with your argumentation both for Soviet Union (am originally form Armenia and lived in times when the lines for bread were stretching for 200m or more) and completeness/perfection of any system.

    This post also reminded me of another by now dogmatic approach to systems. Milton Friedman and his shock doctrine whereby they try to get rid of previous system (non-democratic) and put in place a new system (democratic). Central American states in 1970s, Afghanistan, Iraq bore the brunt of his intellectual musings turned into actions.. Underlying justification was always the same, except it never once turned out to be true. Countries were left worse off after than they were before..

    Graduality, adjustment and speed of reaction is what matters when improving systems.

  2. August 31, 2011

    Thx. have you read Hernando De Soto? he advocates formalizing informal ownership as a way to improve poverty in poor countries. Interesting idea.

    – Greg

  3. August 31, 2011

    No, I haven’t read de Soto. Any particular book/article you could recommend?

  4. September 4, 2011

    Yes another very interesting page Greg and I will spend time looking at the links.

    Whilst on the subject of politico-economics what all these theoreticians did was to make the greatest mistake that you can make in reforming a system – changing the spending patterns within the economy suddenly. The Chinese have more sense.

    That is one of the main theorems that I have proposed in my principles of macro-economic design. And I look forward to seeing my ideas improved upon in open innovation as you say is the way of the future.

    There are very few things that can be written in economics that do not have a bearing on the principles that I have proposed as guidelines for policy makers. And from my observations they do bear the test of time, as in this example.

  5. September 4, 2011

    Interesting ideas. Thanks Edward!


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