Service as a Service

Synopsis:

Argument from authority fallacy plagues Socioeconomics. The natural predisposition to elect and reward leaders is accompanied by the will to grant them authority; whether or not that authority is warranted in a meritocratic sense. The complexity of socioeconomic systems is such that merit can be mired in multiple orders of logic; obscuring the lack there of. The observer effect is sufficient and simple enough to explain it; in accordance with Occams’ Razor. It appears to be the product of an approach that many generations have been born into. This of course suggests more general conditioning. Even at that, the conditions have improved immensely over the past several thousand years. A species that is in essence a hunter/gatherer is making great progress with this experiment we refer to as civilization. This progress has come from repeatedly questioning the approach; and using that critical thought to adapt to the challenges over the millennia. From the Pharaohs of Ancient Egypt who were the living embodyment of deities, to the royal families who were ordained by God, to the more accurate notion of elected officials, the view of leaders has become much more realistic over time. This has allowed for the realization that leaders are fallible humans and thus can be questioned.

What is the essence of leadership though? What is it that the population is trusting them in and rewarding them for? What is in the populations’ interest to invest in them? It’s clear that it’s services they provide. Some elected officials are even referred to as civil servants. Where this is not the case, as of yet, is where the greatest concern may lie. It is clearly not the case in the financial sectors. There the failures are mired in the layers of complexity and the orders of logic. Those failures are almost never attributed to the institutions that produced them. Too often those institutions never even establish themselves officially; but that fact doesn’t require conspiracy theory to model. It’s just allegiance between established financial institutions. The problem appears to be that institutions take initiative and then no responsibility for that outcome. There is always blame; and it almost never falls upon those whos’ pathological behaviors were the largest influence in the unfavorable outcomes. This is clearly a hangover from the past. There are institutions that in this day and age cannot be criticized. So, what is the expected view from these institutions? How would we expect the views of these institutions to affect their observations? My contention is that there is still some degree of reversal of roles in financial institutions; where the population serves the interests of those institutions.

War and Debt:

Financial Acquisition:

There should be some concern over the projected outcome of the war in Ukraine. Ukraine is now out of money and the aid is going to result in a large debt to the IMF. This is partly influenced by lack of will for diplomacy with Russia. The wests’ unwillingness to negotiate with Russia, in an effort to save Ukraine from destruction has led to Ukrains’ destruction and a large debt to the IMF. The wage for the west is continued conflict with Russia and a financial presence in Ukraine; over the enormous debt. The wage for Ukraine is being war torn and in debt to the west; but maybe not being taken over by Russia. The wage for Russia is continued western sanctions, an expensive fruitless war and the prospect of new, destroyed land with an expensive lean on it. The model suggests a strategy to promote austerity in Ukraine to prevent Russian conquest; as opposed to diplomacy to prevent both destruction and conquest… because there was no attempt at diplomacy.

The US shipped $7 billion worth of military equipment to Afghanistan to help fight against extremist militias. This was however not a gift; and the Afghani government was aware of this. It of course had a very high probability of resulting in austerity. The Afghani government however sided with the militias and the $7 billion in equipment was stolen instead.

Financial Warfare:

During the formation of the European Union, there was growing will in France for austerity in Germany. This was of course taken seriously in Germany and a financial war began. Most of this account came out through the experiences of Yanis Varoufakis; who was the Greek Minister of Finance. Greece was under German austerity at the time; but was solvent before joining the EU. The agreement of course began with a predatory loan. Though Greeces’ finances were in order, their economy did have some concerning weaknesses. There wasn’t enough diversification. It was based primarily on its’ tourism industry. This failure led to the austerity and the high costs that helped Germany fight its’ financial war with France; that France started, by threatening Germany with austerity.

Financial Responsibility (or the tack there of):

All of the countries in the two sections above are now suffering in a global crisis. The behaviors described are rooted in a need for domestic security. The outcome is indeed a failure; as the outcome in no way corresponds to the needs the strategies were rooted in. The lack of diplomacy and careless aggression resulted in the general suffering of all parties. This is something that can be easily modeled with Game Theory; with a model of extended lack of cooperation.

The fact that certain institutions cannot be criticized in an effective manner contributed strongly to the outcome. The institutions have a view that there are essentially no consequences for their behaviors. This has a negative effect on their ability to make realistic observations and thus forming strategies. The fact that the consequences tend to be long term, meaning in windows of decades, suggests that the consequences aren’t so obvious to institutions that tend to deal in more short term strategies of 2 to 5 years. This of course has a negative effect on their ability to make observations as well; as the consequences are outside of their temporal scope.

This experiment in civilization is of course what almost all modern societies have been born into. The approach has been and needs to continue to be criticized; in order for those who are chosen to serve to do it effectively. The systems are clearly imperfect and often hinder the abilities of leaders to not only secure the populations they represent, but also to even make cogent observations. This is of course an enormous problem. It appears that leaders are struggling with being misled by previous leaders. We are endeavoring to remove the destructive disorder from this new way of human life; and the existing disorder is a high hurdle to that. The result is of course destruction; that begs for risk management.

The Myth of Owning Money:

Currency is an exchange medium. Ideally, it would represent the value of products and services in an economy; so that it could function as a numeraire, but it is required to be liquid in order to serve its’ function. When someone “has” x amount of bank notes, what they actually have is that amount of positive credit… until there is so much that it becomes infeasible.

Senator Bernie Sanders was quoted saying that “billionaires shouldn’t exist”; and in reality they don’t. The money is in their name but they have little to no access to it… and it doesn’t last. The money is in accounts that banks use to cover liquidity for investments. The money never really changes hands; the names of those who it is attributed to does. If all of that money were to be stored, the financial system would immediately collapse. It is entirely infeasible for someone to legitimately own billions of dollars. It just doesn’t work in reality. For instance, if Elon Musk were to buy twitter, the money exchanged would still serve the same purpose as it did before the acquisition. The money would never change hands. It’s just too much money. It stays where it is; doing what it does. What Elon would have accomplished would have been gaining enough positive credit to take over twitter. No money would change hands. The only time money changes hands is when it’s either small amounts or when banks need to transfer funds to cover a percentage of their holdings. Banks don’t hold the money on their books. They are only required to hold a percentage of it; to facilitate withdrawls. That being said, it’s illegal to withdraw it and destroy it; because it’s not the property of the one holding it. It’s never the property of the one holding it.

Those layers of complexity and orders of logic can mire the understanding of how compensation is acquired and how it’s managed. It becomes even more complex when considering the volatility of currency. Understanding that money is positive credit can help with observations and strategies. Just having that little bit of information can open up opportunities and prevent mistakes that lead someone to a life they didn’t know they were signing up for. There is a large functional difference between owning large amounts of money and the reality of having large amounts of conditional, temporary, positive credit. It’s likely that very few prospective CEOs are aware of this when they pitch for an IPO. It’s unlikely that prospective CEOs are aware of the inevitability of market saturation and the pressure that will be placed on them to continue producing dividends; when the company no longer has room to grow in the market. It’s unlikely that CEOs are aware that parliaments may try to tax them heavily for the positive credit that they will probably never have access to. They have been born into a world and coerced into a system that they were never taught to understand. This of course is an enormous problem for making observations and thus forming strategies.

The average person making withdrawls in bulk has the same effect as a very large sum being stored. Banks use that money to cover liquidity and credit as well. Large numbers of people making relatively large withdrawls is enough to send an economy into severe depression. Just as large numbers of investors selling off their stocks can crash the stock market and thus the economy, large numbers of withdrawls can add up to enough to have the same overall effect. The idea of behaving in self interest tends to have a negative impact on economies; because of how easily the term is manipulated and misunderstood. The consequences of both are in no ones’ interest. Removing the economies’ funding increases the severity of the crisis and decreases the probability of savings getting individuals through it. This is another instance of an institutionalized perception that prevents coherent observations and thus effective strategies and solutions.

Conclusion:

In order for humans to be most effective in our environment, we are required to be most realistic about the conditions of our environment. Since we are so capable at creating environments, this includes the environments that we have created. It’s important to our ability to survive and thrive in those environments to have a realistic understanding of how they function. This is something that finance has fallen far behind on; and it accrues a great deal of risk. The observer effect is applicable here as the lack of our best attempt to understand finance is resulting in an inability to make predictive observations and thus form effective strategies.

Unrealistic views of how our systems function eventually puts everyone at a disadvantage. At this point in time, misunderstanding how our financial systems function is leading to an instance of global crisis; where everyone will suffer consequences that not only oppose their pursuit of happiness, but also increase the probability of existential threats.