Musings Report #5 2-2-13 A Failure of Imagination?
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A Failure of Imagination?
The conventional view seeks quantifiable measures of things: the health of the economy, how much children have learned, and so on. Sometimes this is good science and sometimes it is more a mimicry of science designed to convince the rest of us that a pre-selected position is actually backed by "serious data."
There are intrinsic limits to any data-driven model of understanding the human experience. For example: Is there any way to measure a failure of imagination? How can we measure what is absent? Yet what if the core problem is indeed a complete failure of imagination? If so, reams of data and econometrics are totally useless in identifying the problem or assessing its fundamental nature.
What does "A Failure of Imagination" describe? Most obviously, it describes the inability of those within industries and institutions to think outside existing conventions. There are several dynamics behind this inability.
One is the education system is tasked with training people to work productively within the system. This leads to a general world view that "this is the only possible way the system can work." It also naturally discourages independent inquiry and thinking as counter-productive to the task at hand, which is preparing workers, managers, and technicians to serve the existing institutions.
Another is the immensely powerful drive to protect one's job and turf within the existing system. Any innovation that threatens to radically transform the Status Quo is an immediate threat to everything people are depending on the Status Quo to produce: profit margins, pay checks, capital accumulation and institutional security.
To protect this monumental investment, anyone within the institution who dares to question its structure is either driven out or marginalized as a threat. Independent analysis and imagination is ruthlessly winnowed out.
As a result, only those outside the institution are free to imagine a system that is radically faster, better and cheaper.
There is an ironic natural selection process at work in institutions stripped of innovation and imagination: as resistance to anything other than trivial reform builds, this robs the institution of vitality and the ability to adapt to changing conditions. This institutional resistance leave the organization (and entire sector) sclerotic, brittle and vulnerable to systemic over-reach, mission creep and failure.
In other words, by suppressing the imagining of an entirely different way of doing things, the Status Quo has stripped itself of the elements that enable the healthy experimentation, adaptation and innovation that any enterprise or institution needs to survive a constantly changing world.
Lastly, resistance to threatening ideas and concepts breeds self-reinforcing group-think. Those at the top of the managerial pyramid all share the same world view and reinforce this shared understanding. The management of the institution thus becomes an intellectual monoculture devoid of any understanding of alternatives.
Alternatives are studied only to be dismissed with the justification that "we looked at that in depth and it won't work."
The three most costly systems in the State (other than Social Security) are national defense, healthcare and education. Each is suffering from massive institutional failure of imagination, defense of failed systems and group-think.
Massively open online classes (MOOCs) are the future foundation of education on a global scale. yes, there will still be teachers, but the institutions of learning will be transformed in ways that destroy much or most of the friction and overhead built ito the current Status Quo.
There is much to be said about the ideas presented in this short article, but I will point to just two:
1) The president of MIT basically said that the real learning happens in the labs, not the classrooms, which leads him to conclude that MIT cannot charge $50,000 for undergraduate education. Once we start imagining another way of doing udnergraduate education, the cost rapidly drops to near-zero: what I have caklled the Nearly-Free University.
2) Muhammad Yunus, Nobel Peace Prize Winner and founder of the (outside the box) Grameen Bank, noted that It won't be done by current system. It will be done by people who have nothing to do with current system."
In other words, those within the Status Quo cannot imagine an alternative because to do so would threaten their livelihood, security and even identity. The transformative ideas will come from those outside the Status Quo institutions that stand to lose the most when the whirlwind of innovation sweeps through industries ripe for revolution.
We might also ask: what happens when the entire nation is vested in sustaining failed organizations?
Market Musings
As expected, the market has continued to rally smartly. Once again there are abundant signs that the rally is getting tired/long in tooth, yet also signs that there is more room to run. As I type, the Dow Jones Industrial Average (DJIA) has breached 14,000, the first time since October 2007.
Never mind that inflation since then would require an additional 12% rise to align nominal prices with real (adjusted) prices, but this shows the power of round numbers.
At this point, discretion is preferable to valor, and the value of the time-honored strategy of waiting for a decline and a rebound that tops out at a lower high comes to mind. If the market moves to new highs after a dip, then by all means, let's get out of the way of the train.
The danger in these situation in my view is trying to get fancy: the market is rallying, and until there is evidence it has topped out, then there's little payoff to making it more complicated than it already is.
If the market hits new highs in early February and sentiment measures remain at extremes, the market is certainly vulnerable to a "surprise" correction simply because buyers are already all in and no one dares go short. This may deprive the market of the short-covering that tends to soften declines.
If there is anything that looks unlikely to last much longer, it is the huge rally in the euro, which is highly correlated to the S&P 500: when the euro rises, so do U.S. stocks. The euro's rise is suspect on a number of counts, and once the euro tops out, that will likely mark the top of the U.S. stock rally as well.
What I am doing: holding my calls, preparing to sell on technical signals.
What I would do if I were managing $1 billion: protect my longs with cheap out-of-the-money puts and stay alert for signs of rally exhaustion in the FX (foreign exchange), energy and bond markets.
From Left Field
No wonder there's a line: Airplane Lavatory Self-Portraits: Nina Katchadourian whiles away long plane journeys by locking herself in the lavatory and pretending to be a 15th century Dutch painting, from "sad and useless".com (via Katharine K.)
Social Security: It’s Worse Than You Think--and I think their assumptions about millions of additional future jobs are absurdly rosy...
"Sometimes the Google Bus just seems like one face of Janus-headed capitalism; it contains the people too valuable even to use public transport or drive themselves. In the same spaces wander homeless people undeserving of private space, or the minimum comfort and security..."
Thanks for reading--
charles
