Knowing and Making

Bruce Schneier ( via Farnam Street ) makes the by-now-unoriginal observation * that: ...we pick a defense, and then the terrorists look at our defense and pick an attack designed to get around it. Our security measures only work if we happen to guess the plot correctly. If we get it wrong, we’ve wasted our money. This isn’t security; it’s security theater. Probably true. But then, terrorism isn't exactly "real" either: by design, it's a theatrical exercise too. Or perhaps a reality TV show. The clue is in the name - terrorism isn't designed to kill people, it's designed to make them scared . Thus, if we design this game for terrorists to play, they can win it just by smuggling a bomb through the security measures, regardless of whether it goes off. Notice that all the recently-discovered terrorist plots - the shoe bomber, the underpants bomber, the soft-drinks bomber, the printer-ink bomber - have failed? If the goal is simply to make us worry, make us r...

I went on a day pass to a new gym today. One of those gyms where the lockers are secured with the members' own padlocks instead of with built-in locks. As expected, the men's changing rooms were full of padlocked lockers. It didn't occur to me that there could be any other way. Turns out, as I discovered later, the women's lockers are not secured at all. Perhaps one locker in the whole room had a padlock. The rest just live on trust. Are men more likely to steal things? Or do men just not trust one another? Who's being irrational here? Readers who attend a gym are invited to report back the results from their own establishment. Just in case, probably best not to say which  gym you're in.

There are lots of reasons why finance is different from normal markets, but I am particularly interested in why it is difficult to model economically. It's not fundamentally because "finance markets deal with money, which is essential to all other markets". On this basis, energy markets would have the same problems, as no other markets can operate without energy; equally, computer hardware or telephones. Instead, it's because finance has a special characteristic in information-theoretic terms: it creates contracts which operate on other contracts, which in turn operate on the first contract again. This is what George Soros calls reflexivity - but I will use another term: self-referential . Self-referential systems behave very differently to "normal" systems. Douglas Hofstadter has made a whole career out of analysing them. In his famous book Gödel, Escher, Bach he compares the self-referential patterns in Escher's art and Bach's music to Gödel...