Clunky Flow

Its a classic Irish problem. You love that cosy little pub. Especially on a Thursday night. But last time you were there. It wasn’t cosy. It was crowded. Which is a whole different kettle of fish.

And its Thursday again. Should you stay or should you go? Will it be crowded? Will it be cosy? Is everyone else wondering the same thing? Is it possible to second guess them?

A classic Irish problem. One of the great imponderables. And negotiated by a typical Irishman with a happy-go-lucky shrug and the following of a hunch.

Except for this Irishman. W. Brian Arthur, who recognised this as a classic problem of complex adaptive systems. And he wrote a famous and highly influential paper on the subject in 1993. And this class of problem has become known as an EFBP, or El Farol Bar Problem.

After the El Farol bar Santa Fe, New Mexico which was especially popular on Thursday nights when they offered Irish music. Meaning that every Thursday, the people who were considering going to the bar were also left wondering whether or not it would be overcrowded that night.

Arthur used this example to draw attention to a certain paradox of deductive reasoning - of the idea that there always exists a “best solution” that can be determined by logic. The El Farol problem cannot have a standard, generally agreed, “rational” solution. There cannot be one strategy, the best strategy, that everyone can use. If everyone uses the same strategy for deciding whether or not to go to the bar the bar will be either full or empty each night. Everyone would lose all the time.

So in summary: If everyone acts rationally. Then everyone will lose. And the pub will go out of business.

What society needs. Is for everyone to act irrationally, in accordance with whatever personal hunch they have at that time. And then, everything will work out in the end. And society will be able to support a vibrant pub scene. Now this makes perfect instinctive sense to an Irishman. But I can’t begin to tell you what heresy this kind of thinking was to your typical economist.

This kind of situation is one where people want to be on the minority side. Modeling dynamics of situations such as those captured by the ‘El Farol bar problem‘ was a new direction in the context of game theory and this kind of game has became known as a ‘Minority Game’.

Minority Games have implications for our understanding of the phenomena of crowding and herding, bubbles and crashes and any situation where the collective behaviour of agents in influenced by the fact that they have to compete through adaptation for a finite resource.

And while the Irishmen were working on how best to decide which bar to visit on which night, Damien Challet and Yi-Cheng Zhang sparked a lot of attention by applying EFBP to financing, creating a new field of study called “econophysics” in the process.

In the Challet and Zhang financing game, the choice between A and B does not involve going to a bar but selling or buying stock. When one makes financial speculations one has to buy before everybody is crowding to buy (thus driving the price up) and to sell before everybody starts selling (thus driving the price down). Thus, the big winners are always managing to be part of the minority.

There has been a lot of interest in developing the mathematics of this game. The reason for this interest is not only practical, physicists trying to get rich, but also theoretical. The models have yielded surprising features showing under which conditions cooperation appears spontaneously in a group, and the field also proved to be a generalization of the type of game theory simulations modeling the Darwinian evolution.

So there you have it. A common problem. Some lateral seemingly irrational thinking. And a surprising solution. Of wide ranging applicability. Very Irish. Don’t you think?

With thanks to David Lane, a sometimes co-author of W. Brian Arthur, for referencing the Irish connection to “El Farol Bar Problem” during his keynote at the Innovation in Complex Social Systems conference yesterday and to Damien Mulley for getting me a ticket.

No Comments »

I’ve been thinking about the way things change. And the way they stay the same.

I’ve been thinking about the way we think of their physical body as a fairly permanent structure, while we also know that our bodies are undergoing constant renewal. As they say there’s a whole new you every 7 years. But the new you is easily recognizable to almost anyone who knew the old you.

Which means that we ought to see ourselves not as an immutable, permanent structure, but more like a standing wave.

Kinda like this one on the Eisbach river running through Munich’s Englishergarten.

But what is true for the individual. Is true for society and its structures and organisations. Multi-national corporations have emerged and remained highly recognisable as structures and entities over long periods of time.

The same is true of social, political and legal systems. Even though all the people that made up these social institutions have been replaced over and over again the system, like a standing wave has kept its essential recognisable character.

Institutions appear permanent and solidly fixed. But what we are actually seeing is a robust standing wave. Ever changing. Robust and dynamic. Most of the time. But also predictably susceptible to unexpected collapses. Permanent, robust, ever-present institutions are not as solid a rock but as collapsable as a wave.

I suppose, this is what Heraclitus was getting at when he said “All is flux” “Everything flows, nothing stands still.”

I also like to think that the tradition of periodically rebuilding the Ise Shinto Shrines in Japan touches on this view of permanence. The Ise Shrine is a wooden structure that has existed for thousands of years because it is periodically dismantled and rebuilt in a meticulous manner. Making the Shrine forever new and forever ancient. The Shrine stands as a demonstration and testament to the fact that lasting permanence can be supported on the back of a standing wave of social and cultural traditions.

So maybe, the next time we are thinking of building and maintaining something robust and long-lasting. Maybe we should consider adopting a standing wave as a metaphor. Instead of a rock.

1 Comment »

I’m currently reading and re-reading.

The Wealth of Networks. Yochai Benkler. (2006)
A dense and immensely satisfying work from the leading intellectual of the internet age. Bonus link: Its also freely available in many formats including wiki, remixes and formats where you can take and share notes as you read.

Complex Adaptive Systems. Miller and Page (2007).

The focus here is specifically on society as a complex adaptive system. A great romp through the key concepts and experimental approaches demonstrating how complex economic, political, organisational systems emerge ‘bottom up’ from the activity of agents following simple interactional rules.

Social Emergence. R. Keith Sawyer (2005).

Another book focusing on societies as complex dynamical systems. In this book Sawyer presents a critical review of sociological theories through the ages resurrects and redevelops ideas first put forward by Durkheim (swarm intelligence) and combines insights derived from computational agent-based models (more on these below) with insights of his own developed from his work with improvisational theater groups.

Growing Artificial Societies (1996) Epstein and Axtell. The authors both member of the Sante Fe institute bring the reader through groundbreaking landmark Sugarscape model to demonstrate that a wide range of important social phenomena can emerge from the interaction of individual agents following a few simple rules. More on Epstein. More on Axtell.

Generative Social Science (2006) Epstein. A powerful consolidation of the research activity relevant to society as a complex adaptive systems in the decade since the publication of Growing Artificial Societies.

Emergence (2001) Steven Johnson. Popular science book. Very good. For the most part the focus in on physical structures that emerge from stigmergic interaction eg anthills, cities, network structures on the internet as opposed to explaining emergent phenomena that give rise to sophisticated social, political and economical structures. (Bonus link: StevenBerlinJohnson’s blog. where I discovered he is the co-founder of Web2.0 startup outside.in )

No Comments »

Your a Web2.0 company. You are genuine and authentic. You want to create instant emotional connection. No cheese.

If it’s easy, it must be cheesy. Right? Wrong!!

Dopplr shows that way:

On the anniversary of a trip, it issues you an email reminder.
Cue flashflood of fond memories and reminisces.

That’s pretty goddam simple. And a massive ROI for a genuine and authentic service.

And. Its easy to access for EVERY* Web2.0 company.

*I am so sure that this generalisation holds that I am willing to offer a portfolio of high grade structured leverage funds at a knock down price for anyone who can come up with a Web2.0 proposition that constitutes a true exception ;)

No Comments »