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The complexity gap at the New York Stock exchange was stretched to the breaking point in the autumn of 2008.
VIENNA, Austria--The past couple of years have seen a flood of books and articles foretelling the end of life as we know it once the ancient Mayan calendar runs its course on Dec. 21. It's anyone's guess why we should take this particular prediction any more seriously than dozens of previously failed apocalyptic musings. Of course, more than 99 percent of all species that have inhabited the planet are now extinct, so our day will almost certainly arrive. But this extinction process has been under way for more than 4 billion years. So, it takes a very big gulp to swallow the idea that a humanity-destroying event of the sort that sent the dinosaurs packing 65 million years ago is just a few weeks away.
Nevertheless, there is a germ of truth hidden in the snowstorm of Mayan-calendar-based warnings. Today, humankind faces a variety of challenges heretofore unprecedented in the history of our species. Failure to meet these global problems could indeed throw a big monkey wrench into our post-industrial way of life, if not our continued existence as one of the dominant species on the planet. The global "might happen" catastrophes run the gamut from threats sent our way by nature, solar flares that would short out our electronic gadgetry and climatic events like global warming that may flood most major cities and shrink agricultural production to starvation levels in many parts of the world.
Then there are the even more interesting demons of our own design, such as a global pandemic, a nuclear holocaust and/or a failure of the electrical power grid, any one of which could easily crash our current lifestyles just as effectively as anything "Mother Nature" might throw our way.
Since, for the most part, there is little we can do about a super volcano or a killer asteroid other than try to prepare to survive it, let me focus here on the human-caused variety of extreme events, what I like to call
THE COMPLEXITY GAP
At first glance, it may appear as if there is little common cause linking an X-event like a full-scale crash of the Internet, a collapse of the power grid, or a meltdown of the financial system. They seem to live in entirely different universes and look as if they arise from causes specific to that world. But surface appearances can be deceiving, and it turns out that complexity science offers an argument as to why these seemingly different styles of X-events actual do all stem from the same root cause. That "causus causorum" is simply too much complexity in the system confronting too little complexity in its regulator. In short, bad things happen when these complexity levels get out of balance in what I'll term a "complexity gap."
To illustrate the idea, consider the ongoing financial crisis in the western world. On the one side, we have the system composed of the global financial sector--brokerage houses, hedge funds, investment banks, and the like. On the other side, there is the collection of agencies charged with regulating the financial services industry--the SEC, the rules of the financial exchange, et al. As the financial houses created ever more complex financial instruments for investors, the complexity of this system rose to a level that even the creators of the instruments didn't themselves
While all this was going on, the regulatory agencies were pretty much frozen in place at a much lower level of complexity, having no good options for reining in the high-flying "masters of the universe." We all know the end result. The complexity gap was stretched to the breaking point in the autumn of 2008. But by then it was much too late for either the finance sector to voluntarily downsize or for the regulators to upsize. As a result, human nature had to step in and do the job instead--in the form of an X-event, the crash of October 2008.
A RUBBER BAND
The complexity gap leading to the financial crash of 2008 is nothing special; rather, it's the typical way a complexity imbalance is rectified by the occurrence of an X-event. The complexity gap between two systems in interaction rises and falls over the course of time. If that gap gets too large, the systems involved become stressed. And unless the gap is narrowed voluntarily the linkage between the systems breaks, the agency of that break being an X-event.
A good image to keep in mind for this is to imagine stretching a rubber band. You can feel the elastic stress in the band growing as the tension in the muscles of your arms becomes greater as the band is pulled apart. At some point, the limit of elasticity is reached and the band snaps in what is certainly an X-event, at least for the rubber band. In my book "X-Events," I give a detailed account of how this same complexity gap argument leads to human-caused X-events, running the gamut from last year's collapse of entrenched political regimes in North Africa to the dramatic rise in food prices around the world this year, and a lot of other
While it's virtually impossible to predict the precise moment when the trend in behavior of linked systems is going to flip to its polar opposite, the complexity gap between the interacting systems provides a tool for anticipating when that flip is imminent. Thus, it serves as a way of characterizing the risk of an X-event in situations where we have little or no data upon which to employ probability and statistics for measuring the likelihood of something big taking place.
THE PARTY'S OVER?
Returning to Dec. 21, our day of reckoning with the cosmos. I don't think it's yet quite time for us to turn out the lights and declare the party's over. But it is definitely time to start creating a new paradigm for anticipating the risk of major life-changing X-events. It's also time to begin laying in plans for how humankind is not only going to survive those events, but be adaptive enough to benefit from the opportunities those disasters will present us in the post X-event world.
And it's well past time for us to stop thinking in terms of simply preserving the status quo, and to begin recognizing that the ancient Greeks had it right, after all: The only thing constant in life is change.
John Casti is director of The X-Center, a research institute focused on the study of human-caused extreme events. His most recent publication is the book "X-Events: The Collapse of Everything," published by HarperCollins/Morrow.