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Newsletter cribnotes

Bowie, bonds and the bloodbath of banking

Dilemma of banking matching long term liability to short term risks. Making a spread which is the same thing as maintaining a capital buffer comma when your assets cannot go up in value and your liabilities cannot go down. Well evidence in silicon valley bank which locked itself into long-term assets at low interest rates, meaning it had absolutely no upside and significant Downside on them even without credit loss, while it's liabilities were deposits comma being extremely short term, were very sensitive to interest rates and could be withdrawn at the moment's notice. The trick to making the business work is to manage that gap semicolon this as we have seen it's partly a function of treasury competence and partly a function of market confidence petards and black ducks flap around.

This is of course hardly new to silicon valley bank and has been the perennial problem with which banks must wrestle. The classic bank lending activity is a mortgage: collateralized, secured over real estate, but long dated and something the bank must commit to for a long period of time stop banks generally fund these mortgages with short dated instruments such as deposits.

How to manage that risk? Largely, by diversity on both sides of the ledger. Banks would lend at scale to thousands or hundreds of thousands of homeowners and take deposits, x-scale from thousands hundreds of thousands or millions of depositors. The basic play was that such diversity would give the depositors confidence not to all withdrawal their money at once comma and on the asset side would give the bank confidence that not all homeowners would default on them mortgages at once. It became a matter of actual aerial management; Banks new that some part of its deposit base was liable to withdrawal bracket and deposit); and new that some part of its asset base was liable to default. It didn't need to know which part; it could manage actuarily on the assumption that, say, 5% of a mortgage portfolio might default over a given period.

Bank regulators would manage for that risk by requiring banks to hold a level of capital against its mortgage book that more than covered that default rate.

Banks grew more sophisticated, as did bank regulation, and different capital ratios might be applied to different trading and banking books based on this actuarial assessment of the embedded risk.

But how to manage, actuarily, that embedded risk? How, indeed, to know exactly what it was? As long as this risk was buried in the books of the financial institution there were experts who could model the probabilities based on historical defaults of similar mortgages. It's all very quantitative and analytical. Regulators would scrutinize this actuarial model, because it would determine capital calculations, but other than specific equity analysts, it held little interest outside the institution.

In essence what are bank risk analyst would be doing was analysing the incidence of defaults over a given economic cycle and extrapolating from that a likely worst case scenario for defaults on the portfolio within a “liquidity period” — the time it would take the bank to foreclose on its loan get out of its risk position.

The likelihood of default of course varies through the economic cycle: for most of it, secured lending is very safe: known to value ratios traditionally were not often greater than 70 percent, meaning a bank would be covered for its whole claim in every situation except where the property value dropped more than 30%. and defaults are almost nil. During stressed parts of the cycle (following financial crashes and so on) that default level can rise to five or possibly ten percent of the portfolio.

This meant that even in a stressed situation the great majority of the portfolio was completely safe.

But, which 10% was not? Therein the dilemma; therein the problem. Since I don't know which thousand of my 10,000 mortgages will default, we must apply a capital charge against to all of them. If only we could know definitively that these 9000 mortgage would not default we could apply a lower capital rating.

Needless to say, obviously impossible: one cannot predict the future.

Banks head to problems then: long-term liabilities that could stretch over several economic cycles and which were hard to quickly liquidate, and which attracted a hefty capital charge despite, in most times, being relatively safe Investments.

Hence the rise of the rating agency: independent Financial experts applying independent models to portfolios and calculating probabilities of default comma from which the rating agencies could derive ratings. Rating methods are of course opaque and in scrutable, but the general idea was that a triple A instrument was unimpeciably safe, and therefore would attract a lower or even zero capital charge)

The independent private rating agencies gradually became embedded into the US regulatory system such that what mattered comma more than one's internal appreciation of risk, was the rating that could be applied to one's security. Near line back to our mortgage portfolios and say one has a mortgage portfolio of 10,000 properties of which any could, conceivably, default in a given period. Even in a period of extreme stress perhaps 10% would be likely to default no more.

Music royalties

This same problem of predictability of future income streams applies in many areas of finance. Credit card receivables, automobile loans, and even songwriting royalties.

Imagine you are an otherworldly, androgynous, boundary pushing British musician from the 1970s. Buy the 1990s you have behind you 25 error defining albums and about catalogue of music which has defined a generation of which the JC proudly declares membership. People still listen to your music and you have a healthy forward flow of royalty income. But it's in determinate, and it's in the future. Cash in hand is so much better than cash you may or may not be paid in a year's time.

Rokos short primer

... Punting on interest rates

Hammer of the gods

When the lender of last resort is a small guy with a dog. What happened to landsbanki and glitnir

Bad apples 2

The fannies that Gary lineker is going to be second back from football coverage on account of his is political expression, and JP Morgan will be seeking to call back 7 years pay from jazz Staley, I thought we would go a bit further into the barrel of bad apples.

Particular the curious recent phenomenon of corporations transmogrify in themselves into moral guardians.

There once was a time that corporations Harvard no illusions that their role on the planet was the comparatively a moral one of generating returns for their shareholders.

Some kind of mandate drift with slippage over the last 20-years which is seen corporations increasingly anxious to project and signal social and political values. These things do not come from shareholders, but are generated in the executive.

This has created at least three kinds of dissonance

1 is is a kind of judgemental overreach where by corporations feel entitled to impinge on and evaluate the behaviour of their employees outside the parameters of their professional role.

2 is an old kind of dissociation of The corporation from the actions of its employees inside there professional roles. This is the bad apple fillongley where the corporations manage to control themselves not as perpetrator common examples the Wells Fargo false accounting comma and more recently checked and Morgan study horror at the behaviour of it's former investment bank chief executive Jes Staley

The third is a dissonance between the the public museums of the organisation particularly in The social justice and esg space and its actual behaviour, which may take in facilitating money laundering, financing terrorism drugs and and chips, evading tax and assisting clients to evade tax and bracket as per above the food in its own customers on a fairly systematic scale.

2022

Machines of Loving Grace - John Markoff Buckminster Fuller, Marshall McLuhan and Peter Drucker Whole Earth Catalog

Blockchain and the financialisation of everything. How block chain commits the daycare fallacy - David Graeber’s debt analysis

Superstition → a belief based on a fear of the unknown and faith in magic or luck. Actions based on that belief can lead to ’'malign outcomes (e.g. ritual sacrifice) benign/neutral outcomes (touching wood, rubbing David Hume’s toe) or a method for undertaking a task you had to do anyway (putting your cricket pads on in a certain order before batting: you have to put your pads on in some order and neither is (objectively) worse than the other, so from a rationalist perspective the superstition here has no practical effect on the world at all.

On the other hand acting out a superstition can have unintended psychosomatic consequences (my confidence my pads went on in the lucky way may trigger for getting into system 2? - no opportunity cost ... ) CF hubris: missing the humility of acknowledging there's something bigger than all of us out there pascal’s wager → opportunity cost and importance of psychological safety and community consensus (believing God in salt lake City) → modern day superstition netting ESG (motivated irrationality = the livelihoods one can make from believing stupid things

Paradigm = system. Explains the multiple paradigms in Kuhn's model ... They are all paradigms - interlocking systems

2021

Variation margin as source of systemic risk. Would it not be better to manage margin exposure by declining to trade? Thanks do not provide margin on the upside, so that puts a natural cap on on clients preparedness to transact. Thanks still call margin on the downside reflecting at this is fundamentally a lending business and the use of bilateral contracts banks role and regulation and capital is the primary systemic risk mitigant.

The interplay with netting being a a giveaway: variation margin + netting = worse xposure The bilateral nature of ISDA being a great misconception

The shitness of netting

The power of Ignorance: The most powerful response to a contrary idea is to ignore it.

“we love automation. We can automating complex things”. WRONG QUESTION DUDE.

It's structural questions, its new clauses its new schedules. The complexity is mind bending.”

Big ideas... Your tech needs to make the process better, bit just accelerate or anaesthetise existing process

Contracts and processes as formal and informal structures in systems

Claryllis

Ricky, listen, maybe, maybe death wasn’t the right word, I meant you know, he's still here, Ricky, he 's still here, he still exists in the space time continuum. The way it works is like when he's ceased to be, he actually turned into a different type of energy — space-time continuum — and the way the universe up there, the black holes and everything, they wrap around, there’s string theory, that can prove that different things, that he can live here in the space-time continuum, I mean that’s how the universe works, Ricky, black holes and thermodynamics can fold over time space like that so he's actually still, existing.

logical undecidability of libertariaism. John highs example of the right to choose which side of the road to drive on.

• Average being comprised of individuals. There is no magic, no emergence from the average. Just because cour category performs, on average, differently to another category doesn't mean you perform differently to him.
• Categories are as hoc and non-exclusive. The Simpson paradox
• The category error
• That guy
• Opportunity cost

Dear lord and father of mankind is the back end of a poem written during a hallucinogenic trip brought on by drinking Soma in some vedic ritual: https://en.wikisource.org/wiki/The_Brewing_of_Soma

Soma was a sacred ritual drink in Vedic religion, going back to Proto-Indo-Iranian times (ca. 2000 BC), possibly with hallucinogenic properties.

Modernism vs. pragmatism

• Vertex vs. edge
• Text vs. meaning
• Algorithm vs. heuristic
• Formal vs. informal
• Tool vs. application
• Innate vs. emergent
• Obvious vs. subtle
• God vs. Darwin
• Simple vs. complex
• Quantitative vs. qualitative
• Calculated vs. interpreted
• Static vs. dynamic
• Stocks vs. flows
• Structure vs. interaction
• Nouns vs. verbs
• Trees vs. wood
• Permanent vs. ephemeral
• Autocratic Vs. Anarchic

{{Quote|Modernism failed because it is autocratic. It prioritises [[function over form, wrongly presuming the designer has a better idea of function than the occupier.

— Some wag on Twitter}}

What is the difference between substance over form and function over form? They are different managing of the word “form”. Rent payers as implicated as rent extractors.

“I should explain that in the Soviet scientific community in those days, mechanistic determinism held sway over all other approaches. Researchers believed that the natural world was governed by the iron law of cause and effect. This mentality was a product of the political environment.”

— Cixin Liu, Ball Lightning

A running theme in the JC is the distinction between top-down and bottom-up of organisation models, particularly where it comes to dealing with existential risk.

We are in the swoon of an obsession with data, technology and the algorithm. Thought leaders perceive an inevitable, short, path to a singularity where everything can be calculated, everything planned and we will no longer have to rely on irrational, costly, inconstant, error-prone meatsacks. Only crusty old refuseniks can’t see it.

Now I am just such a crusty old refusenik, and while that is largely borne of self-interest — I am an irrational, costly, inconstant, error-prone meatsack, after all — before mortgaging our futures to the machine, it is worth nutting through the digital prophecies to see if they hold water.

We start with a fundamental, philosophical divide between, on on hand, modernism: in a deterministic world wherein the causal principle holds it follows that, in theory, we can calculate all outcomes from first principles. In this world the main challenge is outright data processing capacity and the sophistication of our model. Encouraged by the success of artificial intelligence in solving problems not long ago considered intractable — chess, alpha go, self-driving cars, facial recognition, chatbots and so on — modernists extrapolate to a world where risk is atomised and calculated out of existence.

On the other hand is pragmatism: whether or not the causal principle holds, and however good robots may get at chess, they cannot manage non-linear interactions and dynamic environments which present “wicked problems” and complex systems. Not only can formal logical tools not deal with rapidly emerging risk situations, they can’t even see them. It’s better to live with uncertainty, deploy experts, proceed with caution, keep slack in the system and use practical rules of thumb to which we have no great metaphysical attachment to address contingencies. We should live on our wits and figure things out as we go. There is no certainty, but humility is no bad defence.

Determinism begets modernism and sees centralisation and automation as the highest good. We should aggregate and optimise processing power. The main role of the executive is orderly administration and maintenance of a machine which, by cold operation of logic, will dispense optimal outcomes by itself. The less we interfere the better.

Pragmatism begets systems thinking and aspires to decentralisation: the world is fundamentally unpredictable; it is best dealt with by experienced experts; management’s main function is to empower and equip experts and optimise their ability to communicate. Pragmatists prioritise relationships and interactions and over equipment and structure.

So; centralised algorithms versus distributed heuristics.

Perfection versus good enough.

Determinists are from Mars; pragmatists from Venus.

Modernism

“Modernists” view organisations, and systems, as complicated machines. Formal design is important, and follows (centrally-determined) function; the more efficient your contraption is, the better it will navigate the crises and opportunities presented by its environment — the market. Modernism regards the market as an extremely complicated mathematical problem: hard, but— theoretically — calculable. Modellable. Should a model not work, one must refine it.

Shortcomings in current technology mean we cannot — yet — fully solve that problem. We still need humans to make sure the machine operates as best it can, but the further humans are from that central executive function, and the better the algorithm gets, the more humans resemble a maintenance crew. Their task is to ensure the orderly functioning of the plant. As technology advances, human agency can be progressively decommissioned.

Business, and government, suffers from a kind of physics envy. It wants the world to be the kind of place where the input and the change are proportionate: everything is numerically expressible and the amount you spend on something is proportionate to the scale of your success.

—Rory Sutherland

The modernist narrative focusses on what it can see, which is necessarily limited to the formal inputs and outputs of its own model. There are at least two consequences of this.

Modernism only sees what it can see

Firstly, modernism cannot “see” informal, but vital, interactions between components of the system that are not in its model: random acts of kindness, the star seller’s sales technique, the time every staff member spends building lateral relationships, the value of those relationships, the necessary work beyond the service catalogue, the work-arounds that the machine going; the ad-hoc tricks that make up the difference between meaningful performance and work-to-rule. The critical call that clinched the deal.

Theory: it is not an organisation’s form or structure, but its interactions that determine its outcomes. A badly organised firm that interacts well with its customers will perform better than a perfectly organised firm that interacts poorly:

“You are in a queue. an operator will be with you shortly. Your call is important to us.”

An organisation is a system. Systems are comprised of stocks, flows and feedback loops. Key are their interactions: components that don’t interact are not in a system. A system’s behaviour emerges from how its components interact, not what it is made of or how it is arranged. In other words, a system is defined by its “flows”, not its “stocks”. Flows create feedback loops. Feedback loops create, or deplete stocks. Stocks — formal, structural capacities — only facilitate flows. But formal structures are easier to see than interactions. Yet modernism focuses on formal structure, organisation lines — mostly vertical — not functional communications, which are mostly horizontal.

Modernism as a negative sum game

Secondly, thanks to its physics envy, modernism is a negative sum game: its baseline is immediate, costless, faultless performance. Positive variance from this baseline is not possible: the goal is to lose as little energy as you can. But friction, gravity, heat, entropic energy loss means in the real world, the system loses energy. We can minimise entropic loss with engineering and environmental control but it remains practically impossible to conserve energy, and theoretically impossible to create it.

Human operators create a great deal more entropic loss than unattended algorithms. If the only gauge is accurate, efficient execution of instructions, humans must be worse at that than machines. Modernism cannot give credit to insight, diagnosis, model revision or reimagination because there is nothing to reimagine. There is no such thing as a valid alternative model. Economics is a kind of physics. There are no “alternative facts”.

Now, if bettering an algorithm is impossible, it stands to reason: meatware is expensive and inconstant: the largest risk to the organisation is human error, thus the strategic direction of an organisation’s development is to eliminate it where possible. Where that is not possible, human activity should be constrained by rigid guidelines and policies to reduce the probability of mishap, and monitored and audited to record and correct those errors that do happen top prevent them happening again. To the modernist, malfunction and human error are overarching business risks.

This worldview is one that appeals to many people in business management. Others might find it it rather desolate. But desolation is no argument against it if it is correct.

Pragmatism

When a man throws a ball high in the air and catches it again, he behaves as if he had solved a set of differential equations in predicting the trajectory of the ball. He may neither know nor care what a differential equation is, but this does not affect his skill with the ball. At some subconscious level, something functionally equivalent to the mathematical calculations is going on.

—Richard Dawkins, The Selfish Gene (1976).

When you get too close to your material, sometimes you can’t see an absurdity even if it pinches you on the nose. Not only does a person catching a cricket ball not solve differential equations, or anything “functionally equivalent”, but she can’t. She would need the inputs for every differential equation in play. Just to determine a trajectory is: Y = H + X * tan(α) - G * X² / 2 * V₀² * cos²(α).

To be clear: it is’t simply that she is doing this subconsciously, somehow, in a way she can’t apprehend: she doesn’t know, even subconsciously, the velocity, angle, vector, or starting coordinates of the ball. She would need all of these just to perform that differential equation. She is doing something else: she’s using a subconscious heuristic: keep your eye on the ball, run towards it, and keep the angle of your gaze as constant as you can. It is called the “gaze heuristic”. No cosines or tangents required.

Bottom-up models are, for want of a better world, “pragmatic”. They see the organisation as a constantly changing organism operating with incomplete, ambiguous information in an environment that is also constantly in flux. To survive, firms must respond dynamically and imaginatively to unpredictable, non-linear interactions in the environment which is constantly shape-shifting into new configurations in unexpected, and unexpectable, ways. For a pragmatist, practical control must be exercised at the points where the organisation interacts with its environment. A firm should have talented, empowered, well-equipped people — subject matter experts — to handle those interactions. Those in the central management function have a holistic view of the environment and can provide aspiration and tools to the subject matter experts, but real decision making is done by those experts at the edges, not the the management function in the middle.

Intellectually, the battle ought to have been won by the pragmatists long since (systems theory, complexity theory, even, for all its obsession with algorithms, evolutionary theory line up with pragmatism), but modernism keeps devising new ways of getting itself back in the game, and over the last twenty years has been winning. What with the giant strides of the information revolution, the forthcoming singularity, technological unemployment, the abolition of boom and bust in 2005, and the effective management and distribution of financial risks through sophisticated financial derivatives (amirite?), it is easy to be lulled into a sense of security.

Getting down amongst the elephants and turtles is not to everyone’s taste, but if you do it helps to see the planet on top of it more clearly. Here’s a distinction to draw: between things and interactions between things. Nouns versus verbs.

The illusion of permanence and the Ship of Theseus

We see that even many of the markers we treat as formal, fixed and permanent are really temporary: the Dread Pirate Roberts effect: the personnel comprising a corporation change over time. Likewise institutions: corporations merge, change business models, change locations, move into different markets. IBM of 2021 is very different from the IBM of 1971.

But the individuals may be fleeting and transitory; the residue they leave behind is not: The corporation’s devotion to the formal means that successive individuals become progressively constrained by their predecessors actions and decisions — even if, in the mean time the dynamic considerations that led to the decision no longer prevail. A rule that has been there for a long time, but that no-one knows the provenance of, acquires a kind of mystical quality. I think this is the inverse of the “Lindy effect”.

Psychology in negotiating

Why you should call call before writing.

If you wanted to persuade someone of a a course of action, wouldn't you you first explain it to them?

What works better, a pitch or a deck?

Standard operating practice amongst professional negotiators is to proceed almost entirely in written form. There are a few selfish grounds for doing so: firstly it's a bit like pre preparing a performance. You don't need to be perfect, you don't need to react to to expected turns of events, and you have time to prepare the perfect answer.

Calling and debating live requires confidence, preparedness, and a greater command of the technical material over which you are negotiating. This is intimidating . Effective interpersonal communication also requires empathy, psychology and wit: these are are skills one generally acquires with experience and and expertise and they are generally not available from school leavers in Bucharest operating with a PlayBook on their lap.

So negotiators have evolved away of operating which best suits they are degree of skill and experience, and more or less guarantees and ongoing stream of work. The the orderly, leisurely, thorough exchange of correspondence. One can ensure all boxes are ticked, or processes followed, without tension comic conflict unexpected crisis or or risk of inadvertent error.

The cost is is the speed and waste it generates as an a inevitable by-product. The unnecessary trials of correspondence. The waiting, the over detailed drafting as each side tries to unpick the others goal. All of this can be circumvented by direct conversation.

Yes; this means having skilled negotiators and they are expensive. But avoiding that is a false economy.

Nepotism and networks of trust

Is nepotism the problem or is it lack of networks of trust? When when the bosses nephew gets that plum job, what is the value in it of the the credibility signal sent by the boss. I vouch for this person full stop my reputation is at stake if he he fails. In recommending him to you I have skin in the game.

By looking at at these arrangements purely from the perspective of unfair advantage and privileged access that they undoubtedly also have, we miss a trick. But it is true that children from lower socioeconomic backgrounds and deprived areas have much less opportunity of this kind. But if these reinforcing social vouching systems have value, and it seems that they do (otherwise privileged would not use them), then is not the answer to look for ways of constructing these vouchers systems amongst children who would otherwise not have them.

Many corporations have relationships with inner-city schools, for example, which run summer internships and similar programs. These are fantastic opportunities to create relationships of trust and recommendation. This is what networks like LinkedIn are basically designed to achieve. But are there other similar systems question mark if not, how could we invent them? Raising levels of trust in a community, however that is done, is clearly of value to the whole community.

Turtles

Talking Politics with Adam Curtis

The idea that the truth is in the patterns in the days that human cannot even see.

Money as an abstract token of value that has no intrinsic value

Advertising generates economic production, rather than economic production generating advertising.

Authenticity

The importance of authenticity. Why is it not the same when it isn't David gilmour playing that guitar solo?

The importance of effort. We should not underestimate how we we value the effort required to produce intellectual property. Many years ago go robotics engineers designed a contraction that could play the flight of the bumblebee on classical guitar. Undoubtedly the machine was extremely complex, the programming highly ingenious and it executed the police flawlessly at tempo, undoubtedly more perfectly then the finest classical guitarist could. But would you pay money to sit in a concert hall and watch a robot playing classical guitar? Once the technical problem has been solved and can be inexpensively replicated the value of the performance tends to 0. Even though we can can program robots to flawlessly play, at no cost, we will still pay good money to watch a human virtuoso doing the same thing less well than the machine.

The segues into a conversation about the meaning of value. The same way that meaning does not exist in the words on a page, value does not exist in in the technical performance of a skill, but lies somewhere between the performer and and it's audience. Similarly, science is not simply demarcation of the correct answers to questions, but is demarcation of the correct questions requiring answers. This is a dynamic. It is complex in the technical sense, the ground rules are approximate and shift without warning based on the attitudes of the conversants.

Leaving aside all the overpowering psychological reasons not to value an AI version of Pink Floyd, there is the bluntly practical one. They can only ever be a flawless moment it can recombine existing elements into a new you form. But it cannot create genuinely new you output because it is not the artist. Whatever the machine comes up with it will not be what nirvana's next album was going to be. Of course, we cannot know that, but consider an AI algorithm directed at The Beatles first four albums. Is there any chance it could have devised music resembling that on revolver or rubber soul let alone tough White album or sergeant pepper's? An AI analysing Pablo honey and The bends will not produce amnesiac or kid A.

Allegory, fairy stories and the hubris of taking things literally

We have been been warning ourselves since the dawn of civilization about the folly of using magic to take shortcuts. If we take Arthur C. Clarke at his word that any sufficiently advanced technology is indistinguishable from magic then are we forgetting our oldest lessons?

People of every age seem to be in a sort of post-truth scenario here, where I get to pick my own facts. There are a lot of facts out of there, I get to pick the ones that I like, and I can go with those, and nobody can really tell me that those aren’t the facts because it’s my truth. Those are my facts, and don’t tell me they’re not.

— Robert Prentice, quoted in Gabrielle Bluestone’s Hype

The world does not speak. Only we do. The world can, once we have programmed ourselves with a language, cause us to hold beliefs. But it cannot propose a language for us to speak. Only other human beings do that.

—Richard Rorty, “The Contingency of Language”

All the lies I told to you:
Some of them came true.

— Chris Isaak, Move Along

Things and propositions about things

Most conspiracy theories contain a grain of truth. Critical theory’s, ironically, is “there is no such thing as a grain of truth” The concept of “objective truth” makes no sense on its own terms. It is not wrong, so much as incoherent. We are captives of language. “Truth” being a propositional property of a sentence, exists within language and cannot transcend it. “Objective reality” — referentially a property of “the world out there” independent of language, itself is captive of language. There can be no “objective” truth the same way there can’t be a square triangle. It is a category error.

“Things” — rocks, wristwatches, aeroplanes — are artefacts in the external universe. We presume they have temporal continuity, whether we see them or not, and whether we talk about them or not. They are independent of us.

“Truths” are statements: linguistic propositions about external things. Propositions put things into a relationship with each other: “The cat sat on the mat”. “Gordon is a moron”. Sentences do not exist independently of us. They are not properties of the universe, but propositions, and propositions are properties of our language: prisoners of the vocabulary and grammatical rules of the language in which they are articulated.

Beyond that language, they are only marks on a page. Presuming for a moment, dear reader, that you do not have Persian, consider the following:

“گربه روی تشک نشست”

Unless you do have Persian that is not a sentence, but a string of elegant but unintelligible symbols on a page. (As far as JC knows, it says, “The cat sat on the mat.”)

“Things” aren’t true or false: only “propositions about things” are. We owe this to a beautifully clear exposition by the late philosopher Richard Rorty and his super book, Contingency, Irony, and Solidarity.

Oh come on, is that your best shot, JC?

This does not seem to go very far towards undermining the materialist tenets of Western European philosophy, I grant you. But it is far enough. The is argument used to play out between Christians and Atheists. It used to be fun, because — at least since the Spanish Inquisition — no one had got hurt or taken it too seriously. Now the critical theorists are involved it is less fun because they are easily hurt, so let’s pretend the Christians and Atheists are still slogging it out. Damnation for all eternity I can handle: cancellation by the woke mind virus is a bridge too far.

Airborne relativists

Don’t mistake regularity for truth.

At this point two self-refuting mythological creatures are cast into the ring: “atheists in foxholes”, and “postmodernists on aeroplanes”. Neither, according to the other, exists. Richard Dawkins huffs:

Show me a cultural relativist at thirty thousand feet and I’ll show you a hypocrite.

By the fact that he takes his argument no further, we expect Professor Dawkins believes he has won it, quod erat demonstrandum. There are objective truths, everyone knows it, and this postmodernist blather to the contrary is all a posture. Because — aeroplanes.

But Professor Dawkins misreads consensus for truth, and observation for explanation. Consensus tends to be limited to in-groups. Have a gander at Twitter if you don’t believe this.

Nor is it clear to which “transcendent truth” Professor Dawkins appeals when he complains about hypocritical relativists. It does not seem to be “the veracity of modern aerodynamics” — the finer points of which were not worked out when Richard Pearse took his first flight and are in any case quite lost on birds. In any case, most airline passengers won’t have the first idea. They just need a profound belief that a plane will fly.

We can have any number of reasons for believing that planes fly. take your pick:

“Scientists are clever, they have figured it out and I trust them”
“It’s magic!”
“St. Christopher watches over all travellers” or just
“A cursory glance at the statistics tells me there is now less than a one-in-a-million chance I’ll die on a passenger flight. I care not why.”

There is, that is to say, an element of faith.

The statistics were not always as good. We imagine fewer would have volunteered for a backsie on Pearse’s Improved Aerial Flying Machine in April 1903 than would be prepared to ride in an Airbus now — though maybe not a 737 MAX — and this has nothing to do with changes in the laws of aerodynamics.

Put it another way:

Show me a Simonyi Professor for the Public Understanding of Science who is not prepared to jump off the Eiger in a wingsuit, and I’ll show you a hypocrite.

In any case, the important belief for a given air traveller is not that “the general laws of aerodynamics reliably work like so,” but that “this particular plane I am getting in right now won’t fall out of the sky while I am in it”, and — inductive fallacy again — until that immediate future becomes the past and it turns out not to have, no one knows for sure whether the statement will turn out to be true.

Planes may fall out of the sky for reasons quite unrelated to aerodynamics. A passenger takes an awful lot of other things on trust: that the ground-crew remembered to fill the tank and replace the petrol cap. That there are no undetected stress fractures in the fuselage. That no surface-to-air-missiles are launched at the plane. That airline has not secretly changed the aircraft’s flight path without telling the pilot — and so on.

Experience tells us none of these things are certain, but all are highly unlikely.

On the subject of falling out of the sky: like the rest of you, we cultural relativists do not board planes at 30,000 feet but when they are on the ground. An aeroplane that could not fly would not get off the ground, and so would have a hard time falling back onto it. So, some aerodynamic principle must be at play to get a plane into the air. It does not matter what that principle is, nor even whether the aeroplane’s designer was mistaken about it, as long as it keeps working until the flight is over.

The fact — if we have to talk about facts — is this: millions of people get aboard giant compressed tubes and catapult themselves across the planet each year. If they think about it at all, it is not after considered reflection on the credibility of contemporary aerodynamics but because they have confidence, from experience, that everything will be okay if they do.

We trust the regularity of established systems. If we did not, we would not use them. But also, we would not get out of bed in the morning. (Trust is an important factor in all social relationships.)

Trust in others enables us to forgo retesting the laws of physics when we leave the house each day.

It isn’t like we need truth, after all. All relativism asks is that when we talk about “knowledge” we don’t overstate our case: that we downgrade unjustifiable statements about Platonic forms to pragmatic statements of present fitness. These are matters of consensus, not truth. Truth is a platonic, static forever that we are stuck with, for better or worse. We can tinker about with consensus.

Relegating ourselves to consensus is no great concession.

Controversial truths

Relativists don’t usually argue about laws of physics anyway.

In any case, as Professor Dawkins observes, relativists do get on planes. What they don’t do, generally, is quibble about how physical objects behave at everyday scales. When they fly they will expect their planes to set off and return safely, and we should not expect their conceptualisation of just why this is so to be any more developed than anyone else’s. So, making the point about it is, really a bit of a straw man. These are not the sorts of “truths” postmodernists tend to disagree about.

Controversial “truths” tend to have a human cast to them. They hail from social, not physical sciences. They are about history, sociology, psychology, politics, ethics and morality.

And it is not just post-modernists who disagree about these things. Everyone does. We do not worry about this kind of disagreement. We expect it. Society would break down without it. Much of economic theory, requires disagreement not just to be possible but imperative. A market can’t function without differing evaluations of the same goods: I can sell you something for more than it is worth to me; you can accept my price and buy it for less than it is worth to you. Neither of us is mistaken: we have both created value. Hence, commerce is not a zero-sum game.

Nor is this a happy mistake on either part. Say, due to the same manufacturing mishap, I have two right-footed shoes and you have two left-footed shoes. The mishap bankrupted the firm, so we can’t return the shoes, but as they are, the shoes are worthless to us. By swapping one, we each exchange something of no value for something of real value. Everyone wins. Value is not intrinsic.

So when social commentators exasperatedly blame postmodernism, or relativism for some failure to see the world in the plane terms it should be seen, we should hear alarms at once.

A complaint about post-truth degeneracy is its own post-truth degeneracy: it is an assertion if my truth over yours. These are the intractable arguments of politics, atheism and religion. They are fruitless because the conversants are each stuck in their own languages with their own sets of assumptions, values, priorities and norms.

The challenge in a civil society is accommodating contradicting assumptions, values, priorities and norms. The more they vary, the harder it is to accommodate them — but usually the more obvious the advantages of doing so. JC spends most of his time in London, which is about as diverse a settlement as you will find on the planet, and — for all the motivated hyperbole — an extraordinary oasis of tolerance. Londoners, by and large, are masters at embracing strangeness and newness that they like and minding their own business about strangeness they do not.

The key is to understanding that understanding your own truth is not the challenge when it comes to social interaction, but reading your interlocutor and accommodating hers. Social interaction is a creative exercise in forging commonality and a means of dialogue. You can’t do that by insisting on your own terms for the debate. This is true whether you are upset at apparent denial of settled science or about being being misgendered.

We cannot expect others to defer to, or respect our worldview. This is the consequence of post truth.

Tolerance does not require

“Zero-tolerance” is an ugly but popular adjective.

A complete failure to communicate

Old piece

Analytic and synthetic and propositions

Bear with me for a brief technical interlude:it won’t take long. There are two kinds of propositions: analytic and synthetic ones. “Analytic” propositions are true by definition. Synthetic propositions tell us about the world beyond the language they are expressed in. Analytical propositions are mathematical statements; synthetic propositions as scientific statements.

A square is a regular polygon having four sides of equal length that are joined at right angles.

This is analytically “true” because, in the language of Euclidean geometry, a polygon that does not meet those criteria is not a square.

The cat is sitting on the dog’s mat.

The “truth” of this proposition, if it has one, depends upon the world beyond the logical axioms of the language in which it is expressed. If the cat is not sitting on the mat, or it is not the dog’s mat, the proposition is false.

It is, of course, trivially true that mathematical truths are true. When we talk about “objective truths”, we are talking about synthetic — scientific —propositions only.

Objective truths

Show me a cultural relativist at thirty thousand feet and I’ll show you a hypocrite. Aeroplanes are built according to scientific principles and they work. They stay aloft and they get you to a chosen destination. Aeroplanes built to tribal or mythological specifications such as the dummy planes of the Cargo cults in jungle clearings or the bees-waxed wings of Icarus don’t.

—Richard Dawkins, River Out of Eden (1995)

When commentators like Richard Dawkins exasperate about the post-truth world, the “clinchers” they come up with tend to be these kinds of basic propositions concerning the physics of inert objects.

We will note, but leave aside for now, that cultural relativists tend not to disagree about the behaviour of inert objects. They tend, rather, to dispute social, cultural, economic, historical and political truths. These are truths of an entirely different category, so even if Dawkins could make out his claim about aeroplanes — and I don’t think he can — it would hardly win the argument.

But he’s raised this example, so let’s address it. His indubitable factual proposition could be one of three. If he can make any of them out he wins the argument.

1. Aeroplanes work (they reliably fly);
2. Aeroplanes are built according to scientific principles, or
3. The scientific principles by which aeroplanes are built truthfully describe the universe.

Let

“Transcendent truth”

A truth cannot “transcend” the language it is expressed in, because that language gives the proposition meaning. It doesn’t make sense for the truth to transcend it's medium. There is the further difficulty that “language” itself is an indeterminate, incomplete, unbounded thing; no two individuals share exactly the same vocabulary, let alone the same cultural experiences to map to that vocabulary, let alone the same metaphorical schemes. It is what James P. Carse would describe as “dramatic” and not “theatrical”. This makes the business of acquiring and communicating in a language — where meaning does not reside in the textual marks, but in the indeterminate cultural milieu in which the communication occurred — all the more mysterious. That we call it “communication”; that we infer from that a lossless transmission of information from one mind, is a deep well of mortal frustration.

This is its debt to post-modernism, and it is a proposition that contemporary rationalists find hard to accept, whether hailing from the right — see Douglas Murray’s The Madness of Crowds for an articulate example — or the left — see Helen Pluckrose’s patient and detailed examination in Cynical Theories.

The problem, all seem to agree, is this post-modern rejection of truth. And it isn’t by any means limited to the critical theorists: it lives in Kellyanne Conway’s “alternative facts”, in Elon Musk’s Twitter feed, and the generally relaxed attitude to rigorous fact-checking of the populist right.

At the same time we lament the death of “authenticity” — is it the same thing as truth? Is it what we mean by “truth”? — and with it, the terminal defection of logic from the mechanical operation of the world.

We think: what have we done? Have we syllogised truth away altogether? Have we passed a point of no return? Some kind of event horizon between truth and post truth; an invisible force-field from the outside in a collection of received veracities, which once you permeate it, once you cross its threshold all reality dissolves and it is suddenly the only visible truth that remains, in a twisting kaleidoscope of unfathomable nonsense — truth is no longer possible?

Nowhere is this more evident than the blockchain, and its two most startling, and contradictory creations: bitcoin on one hand: the utter rejection of any underlying reality: bitcoin unashamedly represents “value” as a totally abstracted essence; a theoretical quality, disconnected from our ugly Platonic cave, floating free of any messy, ugly corporeal, earthly extension that might taint it with mortal frailty; the non-fungible token on the other, a means vouchsafed by that very same essential abstraction from the earthen shores, of achieving unimpeachable authenticity. A non-fungible token cannot be replicated, it can’t be cloned, copied or imitated: it is immutably, eternally, digitally unique

The irony deepens, for defenders of the enlightenment bring critical theory to book for its ignorance of obvious truths, while critical theory itself has bootstrapped itself into assembling a new set of of objective truths, which happened to be different to the conventional enlightenment ones.

The deep problem that critical theory has, all agree (from Christopher Hitchens, Richard Dawkins, Helen Pluckrose, Douglas Murray and recently Matthew Syed) is that some things — physical sciences are a favourite example — just are true. No amount of identifying with an alternative theory of gravity will stop you from hitting the ground if you throw yourself out of a window.

On the other hand Jacob Howland made the interesting assertion recently that so completely has critical theory escaped its postmodern origins, that it has become captured by, of all people the high-modernists who inhabit an intellectual world that seeks to solve all problems by top-down taxonomies and computation.

An illiberal alliance of technological corporatism and progressivism is rapidly turning universities into a “talent pipeline” for the digital age. When fully constructed, this pipeline will deliver a large and steady flow of human capital, packaged in certifiable skill sets and monetised in social-impact or “pay-for-success” bonds. But the strongly particular or eccentric shapes of mind, character, and taste that make human beings, as John Stuart Mill says, “a noble and beautiful object of contemplation” would clog the talent pipeline.

Critical theory has escaped its usual confines in the liberal arts faculties of universities and is now inhabiting the management and human resource departments of corporations, and who are using their rationalist framework to advance what is a fairly radical political agenda. Critical theory is not an alternative narrative by which we can puncture the arrogant assumptions of the capitalist class: it has displaced them altogether and is making its own arrogant assumptions in their place.

That’s not altogether a bad thing — although the practical effects of the updated dogma seem more pronounced the further from the executive suite you go — but it seems to me to substitute one set of bad ideas with another.

The idea of transcendent truth — a truth that holds regardless of language, culture or power structure in which it is articulated — is not false (that would be a paradox right?) So much as incoherent. It is incoherent because, as Richard Rorty pointed out, truth is a property of a sentence about the world, not the world itself. Truth depends on language.

And languages are intrinsically ambiguous. This is the tragedy and the triumph of the human condition.

The statement there is no truth is not an article of postmodern faith, by the way: you can trace it back as far as David Hume, Adam Smith, Charles Darwin Friedrich Nietzsche, Karl Popper, Thomas Kuhn and Richard Rorty. I know, I know: all old, dead, white, men. And Nancy Cartwright.

If you accept the proposition that truth is a function of a sentence and therefore the language of that sentence, for there to be a transcendent truth the language in which it was uttered would necessarily need to be complete, comprehensive, and itself true. The nearest linguistic structures that we have to to complete languages are those of mathematics. Yet we know that mathematics is a necessarily incomplete language: from that we know that any natural language is necessarily incomplete; and in the case of science we know with certainty that science is not what a complete and comprehensive statement of the laws of the physical universe.

We haven’t solved the universe yet. There are large fundamental unknowns; dark matter; dark energy; the incommensurability of quantum mechanics and and special relativity. Even if the concept of transcendent truth were coherent we would have nothing like enough information to access it. In the same way that the fielder does not have enough physical information to calculate the trajectory of a cricket ball, and therefore pragmatically approximates it, so we do not have anything like enough information to confidently predict the scientific performance of the universe and therefore we pragmatically approximate it.

Pragmatic approximations, being provisional, contingent, and subject to revision at any time are are more tolerant, plural and liberal than concrete scientific calculations.

The lack of a a coherent concept of transcendent truth is a a roadmap to tolerance, pluralism, and liberalism. It obliges us to treat as contingent anything we know, to expect things to change and to be prepared for new and more effective ways of looking at the world. All it requires is that we substitute a certainty about how we view the world and ash that we see it as true with a pragmatism about how we view the world, seeing it as effective.