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Over the
holidays we tempted fate by booking a multi-stage plane trip … and
ended up with cancelled flights, missed connections, and blank-faced airline
employees who sincerely didn't care if we spent a night or a week on the
terminal floor.
While I
wallowed in self pity over this loss of control, my
wife noted that it's not just the airlines. Big Food, Big Pharma,
and the big banks, among others, are all just as customer-unfriendly. This
distracted me from my rage and I spent some time thinking about how strange
it is that in a time when Apple is creating Star Trek-level gadgets that
streamline and simplify their users' lives, and Amazon is making shopping
almost supernaturally easy, there are huge industries that seem to go out of
their way to make their customers' lives complicated and hard.
Why do they
do this when it makes so many people so mad? A pharmaceutical company CEO,
for instance, probably can't leave the house without someone accusing him of
doubling the price of a crucial prescription drug while spending millions
marketing erectile dysfunction pills to TV football viewers. An industrial
food company exec can't attend a cocktail party without being cornered by
someone who reads labels and is appalled by trans fat,
high fructose corn syrup-laden "food". Goldman Sachs execs must
cringe every time they pass a newsstand where the latest Rolling Stone is calling their
company a "vampire squid".
And airline
employees, of course, must be abused non-stop by people like me who have had
their vacations turned into exercises in enforced patience and asymmetrical
negotiation. South Park caught the general mood
perfectly with this (warning: very rude) episode:
Editor's
Note: This video may not be available to residents outside the USA.
The Entity
Get More: SOUTH
PARK
Anyhow, on a
different vacation this line of thought might have been nothing more than a
way to occupy a pissed-off mind for an hour or so. But this time I had James Rickards' new book Currency Wars on my Kindle (a device
from customer-friendly Amazon that makes my life simpler and easier), and
while waiting for a flight I came across this:
The third
principal is that complex systems run on exponentially greater amounts of
energy. This energy can take many forms, but the point is that when you
increase the system scale by a factor of ten, you increase the energy
requirements by a factor of a thousand, and so on. The fourth principal is
that complex systems are prone to catastrophic collapse. The third and fourth
principals are related. When the system reaches a certain scale, the energy
inputs dry up because the exponential relationship between scale and inputs
exhausts the available resources. In a nutshell, complex systems arise
spontaneously, behave unpredictably, exhaust resources and collapse
catastrophically.
That's a
pretty good framework for understanding these huge, complex, mostly
dysfunctional industries. They've spent decades consolidating and
concentrating and now have to generate sales on pretty much any terms, no
matter how questionable, in order to avoid death by complexity. The customer
takes a back seat to the desperate institutional need to survive and the
product gets crappier and crappier until the production/delivery system
breaks down.
The same
dynamic is at work in the global financial system, says Rickards.
In the US, a dollar of new debt produced nearly that much in new GDP in the
1960s. But today the return on new debt is negative. From here on, we can
borrow as much as we want and the only result will be more debt. Wealth won't
increase at all. But we can't stop; as with any other Ponzi scheme, the
choice is more debt or instant bankruptcy.
This stage is
generally followed by catastrophic failure, with the only question being what
else the financial system takes down with it. As Rickards
puts it:
A
considerable challenge arises when one considers the interaction of human
behavior and market dynamics. The complexity of human nature sits like a
turbocharger on top of the complexity of markets. Human nature, markets and
civilization more broadly are all complex systems nested inside one another
like so many Russian matryoshka
dolls….When you apply this paradigm to finance, you begin to see where
the currency wars are headed.
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