Marcus - In lieu of my usual longwinded diatribe, maybe a good summary of what your point evokes in me might be:
The first rule of RuggedIndividualistsAnonymous is - "Admit that your Rugged Individualism is a problem to you and your loved ones and trust in the Emergent Collective". This path toward collective consciousness we are on *might* turn out to be more like Her <https://slate.com/culture/2014/01/her-movie-by-spike-jonze-with-joaquin-phoenix-and-scarlett-johansson-lacks-a-real-woman.html> than Lawnmower Man <https://en.wikipedia.org/wiki/The_Lawnmower_Man_(film)> or Virtuosity. <https://en.wikipedia.org/wiki/Virtuosity> Do we individual members of any such self-organizing collective have anything to say about it looks like on the other side of such a phase transition (do fatty acids know anything about a lipid membrane before they find themselves part of one?) With the December 37th 2020 Capitol Riots as evidence, I'm not sure how to apply such abstractions to current event... - SteveS > What if the Ratchet is, overall, a good thing? Harnessing and > controlling volatile individual passions into larger self-interested > collectives that are, in general, behaving in more intelligent ways? > Some or even many of these ratchets are corrupt, like in the case of > Putin. But that forces the population under him to create better > ratcheting systems; market forces create inequities which are > inefficiencies for the society to sort out, but some of them are > unavoidable and even good. > > > > *From:* Friam <[email protected]> *On Behalf Of *Merle Lefkoff > *Sent:* Saturday, January 30, 2021 10:37 AM > *To:* The Friday Morning Applied Complexity Coffee Group > <[email protected]> > *Subject:* Re: [FRIAM] Strawman/Steelman > > > > Thank you Steve, and especially Eric. As I study new economic models > for the real economy, such as the "circular economy" and the "doughnut > economy", I am also paying more attention to the financial economy and > especially the wild and wooly stock market. I know it's > unsustainable, but my hopes are constantly dashed every time I think > it's going to crash and it demonstrates its robustness once more. > > > > On Sat, Jan 30, 2021 at 10:56 AM Steve Smith <[email protected] > <mailto:[email protected]>> wrote: > > Eric - > > You lay this out so well. > > Some random observations. > > 1. Minsky's Ratchet is very compelling as an explanation. As we > know I'm a sucker for understanding by analogy with mechanical > technology as a common source domain. I *think* Minsky's > Ratchet is a correlate of what you later call game-of-chicken > gambling? It was the first applied (discrete) math problem I > remember being offered at college... that among the myriad > "rich-get-richer" mechanisms, the "empty pockets ratchet" is a > big one... a fair game generates a random walk which > ultimately ends when one players pockets are empty... the > smaller pockets (esp. by orders of magnitude) almost always go > empty first. "It's ratchets, levers, wheels, and connecting > rods all the way down?" > 2. I was caught off guard by your coining "an oligopoly of little > fish", my usual binding of oligopoly to "a small number", but > your point of course, and the crux of the event, is that the > "little fish" schooled effectively, as if an apex > predator-shark wandered too far up the Amazon and encountered > a school of pirahna. The culture-war story, of course is a > combination of the "underdog" and the caution of the potential > of "collective action"... as you point out, this one > encounter may indicate that a few sharks may yet get stripped > of flesh by schools of tiny fish, but there is no indication > that they will lose their niche in the oceans and reefs to such. > 3. Your tentative analysis of EW and AOC also really struck me as > I (contingently) hold them both up as culture-war heroes to > the underdogs I regularly cheer for. I don't feel I have my > own dog in either of their fights, but the larger culture I > want to live within (with various forms of assertive equality > and equanimity) is the one I try to support as best I can. I > am more implicated as a cause of their causes than a victim. > Understanding EW and AOC more better seems to me to be > important in pursuing my aspirations to undermine my own undue > advantages. I suppose I "expect more" of EW as a veteran, as > a scholar, as a senior statesperson, and I accept AOC's > decision to play to her strengths (emotional appeals in the > culture war) but also appreciate her having a little deeper > intellectual stake (BA in Econ?) than her affect/appearance > suggests. I understand (but do not sympathize with) the olde > guarde in congress being acutely skeered of getting double > teamed by AOC and Katy Porter. I look forward to more of > those "wild kingdom" takedowns on CSPAN. I don't think badly > of EW's role/position, just disappointed that she might not be > achieving her full potential? > 4. Your practical description of the "pyramid scheme" and > "exhaustion" are a very good thumbnail for where I think this > is going myself. I suppose there IS a chance that a new > species of oligopolist will emerge in the form of swarms > (school, flock, pack, ...), but I don't think we are at the > edge of a phase change yet. I'm not sure if all significant > radiation events are paired with extinction events? > 5. Someone made a slightly different correlation than the COVID > stay-at-home free-time-to-conspire on Reddit with a COVID > stimulus-check-in-hand free energy(cash) one. Anecdotal at > best I'd guess. > > 'nuff for now, > > -Steve > > On 1/30/21 4:19 AM, David Eric Smith wrote: > > So I have been watching this, and it looks just like one more > wealth-concentrator on the long term, with smaller shifts in the short term > that people get caught up looking at because they involve personality > conflicts. > > > > Will somebody tell me where I am wrong in the following? > > > > 1. We start with the usual state of affairs, in which hedge funds of > various sizes take short positions; in what and how much depends on the > capital they hold to cover the short, relative to their other options. They > are “big” actors, in the sense that decisions of individual firms can involve > moderately large amounts of money. They assume they are the full landscape > of big actors, and although they act with cognizance of each other, since > they are all using similar research, they do much the same thing. > > > > 2. A new “oligopolistic actor” comes in that changes the landscape of > participants, which is a group of Reddit-coordinated little fish. They can > put a short squeeze on the hedge funds. Those that took too large a position > either with too little capital to cover the squeeze until it bursts, or with > too little interest in this stock to be willing to take much of a loss on it, > will sell off at a loss, and the various little fish will make a little money > each, but it will look like a decent chunk when you take them together. The > smaller or medium-sized hedge funds that can’t wait this out could be forced > into low enough overall returns that their clients will want to withdraw from > them, putting them in further trouble, perhaps driving some of them out of > business. > > > > 3. Meanwhile: the oligopoly move is an ordinary pyramid scheme, and > it only works as long as the pool of new buyers remains large enough to pay > off the earlier buyers surfing the bubble. Considering that relief and > unemployment checks amounted to many hundreds of billions of dollars, if even > a modest amount of this is in the hands of the young men who were gamers and > are now stuck at home, it can look as if that bubble can continue to inflate > for a while. We might even be able to estimate, however, from the overall > amount of free money spent into the system, and the part of the public that > this young-male demographic accounts for, what the potential size of total > gambling capital is for this thing. > > > > 4. While attention is on the oligopoly of small fish, and the > unprepared mid-sized or small hedge funds that might go bankrupt, there are > always larger actors who are well capitalized and can wait out bubbles. They > may not have taken positions in this before, when it wasn’t all that > interesting, but now seeing that there is a bubble afoot, they had a reason > to get in and go short early. They can outlast the short squeeze, and have a > reason to do so because of point 5 (next): > > > > 5. The pyramid will end when the new buyers are exhausted, and that > will be the end of any power for the little-fish oligopoly. At that point > everybody who is leveraged will be underwater. Because a lot of this money > was in options, the unwinding will be very fast, much faster than if it were > just driven by a sell-off of the underlying. The last wave of buyers in will > lose essentially whatever they spent. Whichever little fish happened to get > out of the bubble before that will collect some of the money from that last > wave, and the larger hedge funds who were waiting out the short squeeze will > then collect the rest. > > > > > > So, when the dust settles, the net effect? Some money will have > changed hands in a quasi-random way, from many small fish who gambled the > rent and couldn’t afford to lose it, to a smaller number of other small fish > who will collect at varying multiples, but still not enough to meaningfully > alter their life trajectories. The Reddit board-makers might collect enough > to happily go on to the next scam, but they will not be breaking into any > Forbes lists. However, in the net, there will have been a flow of money out > of both the oligopoly of small fish and the small or mid-sized hedge funds > that didn’t see it coming, and into the wealth of the large funds. In > addition to the direct winnings of the large players, because their returns > to their clients will go up, they will collect new clients that jumped ship > from the hedge funds that bought back out of the short squeeze at a loss. > > > > So the macro-thing that will happen is the macro-thing that happens > through every other mechanism: whoever has the most capital can wait out the > largest spectrum of risks, and will on average gain more capital. This is > the ratchet that works through everything. It is not a Fama-French efficient > market mechanism, because it works through differential action of > constraints, not through Arrow-Debreu “complete” price systems. It is not > quite the same, but still related to, the bubble-bailout cycles that I have > termed Minsky’s Ratchet, from the arguments made by Hyman Minsky in > Stabilizing an Unstable Economy. > > > https://www.amazon.com/Stabilizing-Unstable-Economy-Hyman-Minsky/dp/0071592997 > > <https://www.amazon.com/Stabilizing-Unstable-Economy-Hyman-Minsky/dp/0071592997> > > > > > > For AOC to be seeking media attention, when there was an early > trading freeze, to criticize the hedge funds for looking for protection > against the oligopoly doesn’t surprise me, because this is a culture-war > thing and responding in the moment to that is what she does. But for Warren > (Elizabeth, not Buffett) to allow that to be her caught-on-camera moment > surprises me, and seems regrettable. Yes, EW is as motivated as AOC to > criticize the use of access by the hedge funds to seek protection when they > get beat at their own game, and both are right to mock them and welcome them > to go under. But EW’s career has been about how the ratchet of unequal > capital constraints moves capital from the small to the large, and if what I > said above is correct, I would assume this would be the biggest picture in > her view. In the long term, the people who will get hurt mainly are just the > people she has made a profession of trying to protect. I would think she > would want her on-camera moment to be about not getting distracted from that, > and worrying that, yes, market regulations and taxation that encourage > game-of-chicken gambling are The Urgent — and structural — Problem. Whether > some gambling hedge funds get caught and go under is a sideshow. AOC, too, > of course is plenty smart to understand all this (if what I have said above > is not wrong), and I expect she probably does. (She was an econ major in > college, right?). But her media incentives are a bit different, so for her to > mostly emphasize the culture-war thing doesn’t seem strange. > > > > So is the above roughly correct? Or do I misunderstand the structure > badly enough that I am drawing the wrong macro-conclusion? > > > > Eric > > > > > > On Jan 29, 2021, at 6:45 PM, uǝlƃ ↙↙↙ <[email protected]> > <mailto:[email protected]> wrote: > > > > Yep. I've logged into my TD Ameritrade account several times to > see if they've limited purchases of GME. Supposedly Robinhood did limit > purchases. It looked like I could always buy on TDA... but I'm not sure. I > would never actually buy GME, *except* to screw The Man. 8^D > > > > On 1/29/21 3:41 PM, Merle Lefkoff wrote: > > Has anyone been watching what's happening in the stock market > with GameStop? > > -- > > ↙↙↙ uǝlƃ > > > > - .... . -..-. . -. -.. -..-. .. ... -..-. .... . .-. . > > FRIAM Applied Complexity Group listserv > > Zoom Fridays 9:30a-12p Mtn GMT-6 bit.ly/virtualfriam > <http://bit.ly/virtualfriamun/subscribe> > > un/subscribe <http://bit.ly/virtualfriamun/subscribe> > https://linkprotect.cudasvc.com/url?a=http%3a%2f%2fredfish.com%2fmailman%2flistinfo%2ffriam_redfish.com&c=E,1,vjPYuWV_SOqXmjm9v6nfchPYvTQOERJqzYuZ2EvGnKR7L9JjDHkhv09DfpBYVvGe1tHPFt0RRGwq0ChNxd4eziP-rcFnAxXsqnUAkkBW&typo=1 > > <https://linkprotect.cudasvc.com/url?a=http%3a%2f%2fredfish.com%2fmailman%2flistinfo%2ffriam_redfish.com&c=E,1,vjPYuWV_SOqXmjm9v6nfchPYvTQOERJqzYuZ2EvGnKR7L9JjDHkhv09DfpBYVvGe1tHPFt0RRGwq0ChNxd4eziP-rcFnAxXsqnUAkkBW&typo=1> > > FRIAM-COMIC > https://linkprotect.cudasvc.com/url?a=http%3a%2f%2ffriam-comic.blogspot.com%2f&c=E,1,Ng1EbcI2wHi1MUdaZwXmDZg2LgvtvJqHf7DOlh3YY2zT6TsytRdo9rGgU_AUtySrheyJhbod7GCSTftIa0Lyq26aHcwK5Q1ssH2dO5zJRMKCITI,&typo=1 > > <https://linkprotect.cudasvc.com/url?a=http%3a%2f%2ffriam-comic.blogspot.com%2f&c=E,1,Ng1EbcI2wHi1MUdaZwXmDZg2LgvtvJqHf7DOlh3YY2zT6TsytRdo9rGgU_AUtySrheyJhbod7GCSTftIa0Lyq26aHcwK5Q1ssH2dO5zJRMKCITI,&typo=1> > > archives: http://friam.471366.n2.nabble.com/ > <http://friam.471366.n2.nabble.com/> > > - .... . -..-. . -. -.. -..-. .. ... -..-. .... . .-. . > > FRIAM Applied Complexity Group listserv > > Zoom Fridays 9:30a-12p Mtn GMT-6 bit.ly/virtualfriam > <http://bit.ly/virtualfriamun/subscribe> > > un/subscribe <http://bit.ly/virtualfriamun/subscribe> > http://redfish.com/mailman/listinfo/friam_redfish.com > <http://redfish.com/mailman/listinfo/friam_redfish.com> > > FRIAM-COMIC http://friam-comic.blogspot.com/ > <http://friam-comic.blogspot.com/> > > archives: http://friam.471366.n2.nabble.com/ > <http://friam.471366.n2.nabble.com/> > > > > - .... . -..-. . -. -.. -..-. .. ... -..-. .... . .-. . > FRIAM Applied Complexity Group listserv > Zoom Fridays 9:30a-12p Mtn GMT-6 bit.ly/virtualfriam > <http://bit.ly/virtualfriam> > un/subscribe http://redfish.com/mailman/listinfo/friam_redfish.com > <http://redfish.com/mailman/listinfo/friam_redfish.com> > FRIAM-COMIC http://friam-comic.blogspot.com/ > <http://friam-comic.blogspot.com/> > archives: http://friam.471366.n2.nabble.com/ > <http://friam.471366.n2.nabble.com/> > > > > > -- > > Merle Lefkoff, Ph.D. > Center for Emergent Diplomacy > emergentdiplomacy.org <http://emergentdiplomacy.org> > > Santa Fe, New Mexico, USA > > > mobile: (303) 859-5609 > skype: merle.lelfkoff2 > > twitter: @merle110 > > > > > - .... . -..-. . -. -.. -..-. .. ... -..-. .... . .-. . > FRIAM Applied Complexity Group listserv > Zoom Fridays 9:30a-12p Mtn GMT-6 bit.ly/virtualfriam > un/subscribe http://redfish.com/mailman/listinfo/friam_redfish.com > FRIAM-COMIC http://friam-comic.blogspot.com/ > archives: http://friam.471366.n2.nabble.com/
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