Monthly Archives: July 2015

The Fermi Paradox and the Hubris Hypothesis

The Fermi Paradox and the Hubris Hypothesis.
The great Enrico Fermi proposed the following paradox. Given the size of the universe and evidence of intelligent life on Earth making it non-zero probability for intelligent life elsewhere, how come have we not been visited by aliens? “Where is everybody?”, he asked. No matter how minute the probability of such life, the size should bring the probability to 1. (In fact we should have been visited a high number of times: see the Kolmogorov and Borel zero-one laws.)
Plenty of reasons have been offered; a hypothesis is that:
+ With intelligence comes hubris in risk-taking hence intelligent life leads to extinction.
+ As technology increases, misunderstanding of ruin by a small segment of the population is sufficient to guarantee ruin.
Think how close humanity was to extinction in the 1960s with several near-misses of nuclear holocausts. Think of humans as intelligent enough to do genetic modifications of the environment with GMOs but not intelligent enough to realize that we do not understand complex causal links. Many like Steven Pinker are intelligent enough to write a grammatical sentence but not intelligent enough to distinguish between absence of evidence and evidence of absence. We are intelligent enough to conceive of political and legal systems but let lobbyists run them. Humans are like children intelligent enough to unscrew a computer but not enough to avoid damaging it. And we are intelligent enough to produce information but unable to use it and get chronically fooled by randomness in some domain (even when aware of it in other domains). +
Acknowledgments: I thank Alessandro Riolo.

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SKIN IN THE GAME and The reasons for firms to exist.

SKIN IN THE GAME and The reasons for firms to exist.
The great Ronald Coase, in 1937, came up with the theory of the firm which “offered an economic explanation of why individuals choose to form partnerships, companies and other business entities rather than trading bilaterally through contracts on a market.” His idea is that there are costs to having firms but that transaction costs are lower within a firm, by which he meant cost of searching, bargaining time, secrets, etc. These are supposed to outweigh some the benefits of competition. So competition works, but it is optimal to have firms competing than just smaller units.
+ A simple extension related to SITM: firms exist because employees have more skin in the game as they have more to lose in some situations. For instance, a contractor has many clients, an employee is the equivalent of a person with a single client. You can have a complicated chain where one supplier can put you in trouble because another supplier is now frozen. The supplier cares about you but he has other clients and doesn’t need ALL of them to be satisfied, just MOST of them (not even).
+ In fact employees are rather insecure and although they may have slack and inefficiencies, they are more dependent precisely because they are inefficient and after years of employment are no longer able to work independent of a protector of job security. So it is this insecurity that makes them loyal, and escape the ubercompetitive system of contracts.
+Great literature beyond Coase: Alchian, Dempsetz, Williamson, etc. This idea came to me listening to a podcast by Russel Roberts.
+ Relational vs Transactional capitalism.

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https://twitter.com/nntaleb/status/621124693056192512

https://twitter.com/nntaleb/status/621329266026917888

https://twitter.com/nntaleb/status/621672988547616768

Quick proof used to show why systemic risk with GMOs not with bottom up processes. Adding to PP.
It is the author of the article who is a fraud. Missed crucial point on risk of GMOs.
Simple derivation of tail risks showing how GMOs can increase the risk of ecocide by >trillion times.

Another ‘Too Big to Fail’ System in G.M.O.s | NY Times

Fifth, and what is most worrisome, is that the risk of G.M.O.s are more severe than those of finance. They can lead to complex chains of unpredictable changes in the ecosystem, while the methods of risk management with G.M.O.s — unlike finance, where some effort was made — are not even primitive.

The G.M.O. experiment, carried out in real time and with our entire food and ecological system as its laboratory, is perhaps the greatest case of human hubris ever. It creates yet another systemic, “too big too fail” enterprise — but one for which no bailouts will be possible when it fails.

Source: Another ‘Too Big to Fail’ System in G.M.O.s

Relation to the curse of dimensionality, etc.

https://twitter.com/nntaleb/status/619997332575256576

https://twitter.com/nntaleb/status/618743378944114689

https://twitter.com/nntaleb/status/618395832757321728

A simple explanation of the explosive errors, found connection to curse of dim
J’ACCUSE: Louise Mensch exposes the lack of due process & mendacity in the Tim Hunt affair. Trial by twitter. http://unfashionista.com/2015/07/07/the-tim-hunt-reporting-was-false-royal-society-please-give-him-due-process/ 
BBC defends “rights” to wave an ISIS flag & trashes a scientist for a misunderstood joke. Hypocrites! @LouiseMensch http://www.breitbart.com/london/2015/07/06/bbc-jumps-in-to-defend-man-carrying-isis-flag-and-feckless-police/ 
Retweet: @nntaleb Not surprised – Eric Holder Returns as Hero to Law Firm That Lobbies for Big Banks http://interc.pt/1M7F1BS  by @lhfang