Though China has been the global economic star of the last low-growth decade, it remains a totalitarian dictatorship, with its economy shrouded in state secrecy. What we’re encountering in this crisis is the spectacle of a closed society colliding with the forces of complex, free-market capitalism. If we look beyond China, we can find a long history of these collisions, dating back hundreds of years, as both closed societies and capitalism evolved and became more complex. And the history has a clear but unsettling lesson to offer: When such a collision happens, it’s a moment to genuinely worry. ... Since the dawn of capitalism, closed societies with repressive governments have — much like China — been capable of remarkable growth and innovation. Sixteenth-century Spain was a great imperial power, with a massive navy and extensive industry such as shipbuilding and mining. One could say the same thing about Louis XIV’s France during the 17th century, which also had vast wealth, burgeoning industry and a sprawling empire. ... But both countries were also secretive, absolute monarchies, and they found themselves thrust into competition with the freer countries Holland and Great Britain. Holland, in particular, with a government that didn’t try to control information, became the information center of Europe — the place traders went to find out vital information which they then used as the basis of their projects and investments. The large empires, on the other hand, had economies so centrally planned that the monarch himself would often make detailed economic decisions. As these secretive monarchies tried to prop up their economies, they ended up in unsustainable positions that invariably led to bankruptcy, collapse and conflict. ... China is a new case, for it has mixed capitalism and totalitarianism in a unique way. ... The government may not be able to control the stock market, but it does successfully keep a veil over state finances. This is what closed, authoritarian governments have done since the 16th century. ... what we are seeing in this current financial crisis is likely to be only the beginning of the political and societal crisis brought about by a dictatorship’s efforts to simulate the performance of a capitalist economy — but one that only grows. ... There is no historical example of a closed imperial economy facing large capital-driven, open states and sustainably competing over a long term.
The internet promised to feed our minds with knowledge. What have we learned? That our minds need more than that ... My point is not that we should return to some romanticised preindustrial past: I mean only to draw attention to contradictions that still shape our post-industrial present. The physical violence of the 19th-century factory might be gone, at least in the countries where industrialisation began, but the alienation inherent in these ways of organising work remains. ... When the internet arrived, it seemed to promise a liberation from the boredom of industrial society, a psychedelic jet-spray of information into every otherwise tedious corner of our lives. In fact, at its best, it is something else: a remarkable helper in the search for meaningful connections. But if the deep roots of boredom are in a lack of meaning, rather than a shortage of stimuli, and if there is a subtle, multilayered process by which information can give rise to meaning, then the constant flow of information to which we are becoming habituated cannot deliver on such a promise. At best, it allows us to distract ourselves with the potentially endless deferral of clicking from one link to another. Yet sooner or later we wash up downstream in some far corner of the web, wondering where the time went. The experience of being carried on these currents is quite different to the patient, unpredictable process that leads towards meaning.
Conventional wisdom says that globalization has stalled. But although the global goods trade has flattened and cross-border capital flows have declined sharply since 2008, globalization is not heading into reverse. Rather, it is entering a new phase defined by soaring flows of data and information. ... Remarkably, digital flows—which were practically nonexistent just 15 years ago—now exert a larger impact on GDP growth than the centuries-old trade in goods ... although this shift makes it possible for companies to reach international markets with less capital-intensive business models, it poses new risks and policy challenges as well. ... The world is more connected than ever, but the nature of its connections has changed in a fundamental way. The amount of cross-border bandwidth that is used has grown 45 times larger since 2005. It is projected to increase by an additional nine times over the next five years as flows of information, searches, communication, video, transactions, and intracompany traffic continue to surge. In addition to transmitting valuable streams of information and ideas in their own right, data flows enable the movement of goods, services, finance, and people. Virtually every type of cross-border transaction now has a digital component.
Wisdom of crowds is an old concept. It goes back to Ancient Greek and, later, Enlightenment thinkers who argued that democracy is not just a nice idea, but a mathematically proven way to make good decisions. Even a citizenry of knaves collectively outperforms the shrewdest monarch, according to this proposition. What the knaves lack in personal knowledge, they make up for in diversity. In the 1990s, crowd wisdom became a pop-culture obsession, providing a rationale for wikis, crowdsourcing, prediction markets and popularity-based search algorithms. ... That endorsement came with a big caveat, however: even proponents admitted that crowds are as apt to be witless as well as wise. The good democrats of Athens marched into a ruinous war with Sparta. French Revolutionary mobs killed the Enlightenment. In the years leading up to 2008, the herd of Wall Street forgot the most basic principles of risk management. Then there was my little Skittles contest. It was precisely the type of problem that crowds are supposed to do well on: a quiet pooling of diverse and independent assessments, without any group discussion that a single person might dominate. Nevertheless, my crowd failed.
In 1609, Galileo wowed Venice’s big cheeses by letting them use his telescope to see ships way out at sea, a good two hours before their owners would see them enter the port. The Venetians were impressed (they doubled Galileo’s salary and gave him lifetime tenure at the University of Padua) because they immediately saw the huge financial and military advantages offered by this visionary device. A few hundred years later, we are on the cusp of an equally radical transformation in how information is gathered, analyzed and monetized. ... Seattle-based BlackSky Global is planning to launch six spacecraft; Terra Bella, a Google-Alphabet subsidiary, has two satellites in orbit and promises video that can “see objects up to the size of a car,” while Spire owns 17 orbiting satellites and plans to track ships in the world’s oceans. These and other upstarts are chasing imaging giants like DigitalGlobe, and Airbus, who have hundreds of millions of dollars of hardware floating miles above our heads. But no one has launched as fast and as often as Planet, a startup running out of an old gray warehouse in San Francisco’s Mission District. In a neighborhood filled mostly with vintage furniture stores, hip restaurants and coffee shops, Planet has 62 satellites in orbit, the world’s largest private collection, and by the end of the year it will have 100, enough that every nook, cranny and keyhole on Earth will get its own medium-resolution photo every single day. This avalanche of images will create an unprecedented database of the entire planet, one that can be used to stop forest fires and maybe even wars.
For a decade and a half, I’d been a web obsessive, publishing blog posts multiple times a day, seven days a week, and ultimately corralling a team that curated the web every 20 minutes during peak hours. Each morning began with a full immersion in the stream of internet consciousness and news, jumping from site to site, tweet to tweet, breaking news story to hottest take, scanning countless images and videos, catching up with multiple memes. Throughout the day, I’d cough up an insight or an argument or a joke about what had just occurred or what was happening right now. And at times, as events took over, I’d spend weeks manically grabbing every tiny scrap of a developing story in order to fuse them into a narrative in real time. I was in an unending dialogue with readers who were caviling, praising, booing, correcting. My brain had never been so occupied so insistently by so many different subjects and in so public a way for so long. ... I was, in other words, a very early adopter of what we might now call living-in-the-web. And as the years went by, I realized I was no longer alone. Facebook soon gave everyone the equivalent of their own blog and their own audience. More and more people got a smartphone — connecting them instantly to a deluge of febrile content, forcing them to cull and absorb and assimilate the online torrent as relentlessly as I had once. ... Then the apps descended, like the rain, to inundate what was left of our free time. It was ubiquitous now, this virtual living, this never-stopping, this always-updating. ... the insanity was now banality ... e almost forget that ten years ago, there were no smartphones, and as recently as 2011, only a third of Americans owned one. Now nearly two-thirds do. That figure reaches 85 percent when you’re only counting young adults. And 46 percent of Americans told Pew surveyors last year a simple but remarkable thing: They could not live without one. ... By rapidly substituting virtual reality for reality, we are diminishing the scope of this interaction even as we multiply the number of people with whom we interact.
Consider the number of networked cameras that capture data about you as you go about your day. Surveillance cameras are mounted in offices, stores, public transportation; on city streets, ATM machines, and car dashboards. You or your neighbors may have installed cameras to watch over your front door; you may have a webcam watching over your valuables—perhaps even your children. Security cameras are virtually everywhere, installed both to provide a record if a crime is committed and to deter people from committing a crime in the first place. Based on an exhaustive survey of the number of such cameras in one English county in 2011, it was estimated there were 2 million surveillance cameras in the United Kingdom alone—about one camera for every thirty people. ... Generalizing this to the rest of the world, there are about 100 million cameras watching public spaces, all day and all night. Yet, this is only one-tenth of the 1 billion cameras on smartphones. Within the next few years, there will be one networked camera for every single person on the planet. ... If technology continues to follow Moore’s Law, doubling the computing power available at the same price every 18 months, we will very likely be sharing the world with roughly 1 trillion sensors by 2020, in line with projections from Bosch, HP, IBM, and others. ... If everything is recorded, will it encourage "better" behavior? And how will the lack of any recording be interpreted?
Biological systems don’t defy physical laws, of course — but neither do they seem to be predicted by them. In contrast, they are goal-directed: survive and reproduce. We can say that they have a purpose — or what philosophers have traditionally called a teleology — that guides their behavior. ... By the same token, physics now lets us predict, starting from the state of the universe a billionth of a second after the Big Bang, what it looks like today. But no one imagines that the appearance of the first primitive cells on Earth led predictably to the human race. Laws do not, it seems, dictate the course of evolution. ... Animals are drawn to water not by some magnetic attraction, but because of their instinct, their intention, to survive. Legs serve the purpose of, among other things, taking us to the water. ... there appears to be a kind of physics of things doing stuff, and evolving to do stuff. Meaning and intention — thought to be the defining characteristics of living systems — may then emerge naturally through the laws of thermodynamics and statistical mechanics.
Investors are shifting their investment allocations from active to passive management. This trend has accelerated in recent years. The investors who are shifting from active to passive are less informed than those who stay. This is equivalent to the weak players leaving the poker table. Since the winners need losers, this can make the market even more efficient, and hence less attractive, for those who remain. If you can’t identify the patsy, or weak player, it’s probably you. ... Passive management has lower costs than active management and hence delivers higher returns per dollar invested than active management does in the aggregate. However, passive management introduces the possibility of market distortions, including crowding and illiquidity. Exchange-traded funds, in particular, are worth watching closely because of their explosive growth and high trading volume. ... Four drivers have led to the development of the mutual fund industry and, more recently, to the shift toward passive investing. These include regulation, the market environment, technology, and the balance between informed and uninformed investors.
For decades, poultry had been volatile in a frustratingly predictable way: When times started getting good, companies flooded the market with chicken, causing prices to crash. ... At first the transformation puzzled industry watchers. Some speculated that a merger spree during the 1980s and 1990s was responsible—with fewer decision-makers in charge and fewer competitors, the remaining companies could more easily survey and predict the landscape. But Sanderson’s conference call suggested another source for the shift: Agri Stats, a private service that gathers data from poultry processors, produces confidential weekly reports, and disseminates them back to companies that pay for subscriptions. ... Many industries, such as health care and retail, make use of information-sharing services, but Agri Stats provides chicken producers with a rare level of detail, in uncommonly timely fashion. ... Agri Stats has for years maintained that its reports don’t violate antitrust laws, in part because the information provided is historical. A typical report doesn’t say how much a company plans to charge for a cut of meat, only what it charged last month or last week. ... In 2013, according to SEC filings, Eli Lilly purchased Agri Stats for an undisclosed sum and folded it into its farm animal drug division. ... Illegal collusion occurs when companies plan with one another to cut production ahead of time with the specific intent of raising prices.
In the final weeks of the US presidential election, Veles attained a weird infamy in the most powerful nation on earth; stories in The Guardian and on BuzzFeed revealed that the Macedonian town of 55,000 was the registered home of at least 100 pro-Trump websites, many of them filled with sensationalist, utterly fake news. ... The sites’ ample traffic was rewarded handsomely by automated advertising engines, like Google’s AdSense. ... Within Veles itself, the young entrepreneurs behind these websites became subjects of tantalizing intrigue. Between August and November, Boris earned nearly $16,000 off his two pro-Trump websites. The average monthly salary in Macedonia is $371. ... It was once a town of modest glory, turning out revolutionaries and intellectuals and alive with industry. One of its largest factories, a ceramic works named Porcelanka, employed 4,000 people. For a time, its residents recall with perverse pride, Veles was the second-most polluted town in the former Yugoslavia.
As space exploration geared up in the 1960s, scientists were faced with a new dilemma. How could they recognize life on other planets, where it may have evolved very differently—and therefore have a different chemical signature—than it has on Earth? James Lovelock, father of the Gaia theory, gave this advice: Look for order. Every organism is a brief upwelling of structure from chaos, a self-assembled wonder that must jealously defend its order until the day it dies. Sophisticated information processing is necessary to preserve and pass down the rules for maintaining this order, yet life is built out of the messiest materials: tumbling chemicals, soft cells, and tangled polymers. Shouldn’t, therefore, information in biological systems be handled messily, and wasted? In fact, many biological computations are so perfect that they bump up against the mathematical limits of efficiency; genius is our inheritance.
He was, she remembered, preoccupied with the math problems he worked over in the evenings, and he was prone to writing down stray equations on napkins at restaurants in the middle of meals. He had few strong opinions about the war or politics, but many about this or that jazz musician. ... Oliver, Pierce, and Shannon—a genius clique, each secure enough in his own intellect to find comfort in the company of the others. They shared a fascination with the emerging field of digital communication and co-wrote a key paper explaining its advantages in accuracy and reliability. ... Partly, it seems, the distance between Shannon and his colleagues was a matter of sheer processing speed. ... Shannon’s response to colleagues who could not keep pace was simply to forget about them. ... George Henry Lewes once observed that “genius is rarely able to give an account of its own processes.” This seems to have been true of Shannon, who could neither explain himself to others, nor cared to. In his work life, he preferred solitude and kept his professional associations to a minimum. ... Shannon wouldn’t have been the first genius with an inward-looking temperament, but even among the brains of Bell Labs, he was a man apart. ... It was Shannon who made the final synthesis, who defined the concept of information and effectively solved the problem of noise. It was Shannon who was credited with gathering the threads into a new science. But he had important predecessors at Bell Labs, two engineers who had shaped his thinking since he discovered their work as an undergraduate at the University of Michigan, who were the first to consider how information might be put on a scientific footing, and whom Shannon’s landmark paper singled out as pioneers.