The 10 principles are stolen directly from Nassim Nicholas Taleb article in Today's FT. Taleb, a veteran trader and dinstinguished professor. And views economies as complex adaptive systems. So it'll come as no surprise that I'm a fan. He has also published two very famous books in The Black Swan: The Impact of the Highly Improbable and "Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets" The original article is here. Its already very short and sweet. I highly recommend it. If you haven't clicked through yet. Here's an even shorter version.

1. What is fragile should break early while it is still small . Nothing should ever become too big to fail.

2. No socialisation of losses and privatisation of gains. Whatever may need to be bailed out should be nationalised; whatever does not need a bail-out should be free, small and risk-bearing.

3. People who were driving a school bus blindfolded (and crashed it) should never be given a new bus. It is irresponsible and foolish to put our trust in the ability of such experts to get us out of this mess. Instead, find the smart people whose hands are clean.

4. Do not let someone making an "incentive" bonus manage a nuclear plant - or your financial risks . No incentives without disincentives: capitalism is about rewards and punishments, not just rewards.

5. Counter-balance complexity with simplicity. Complexity from globalisation...needs to be countered by simplicity in financial products.

6. Do not give children sticks of dynamite, even if they come with a warning. Complex derivatives need to be banned because nobody understands them and few are rational enough to know it.

7. Only Ponzi schemes should depend on confidence. Governments should never need to "restore confidence". Governments cannot stop the rumours.

8. Do not give an addict more drugs if he has withdrawal pains. Using leverage to cure the problems of too much leverage is not homeopathy, it is denial. We need rehab.

9. Citizens should not depend on financial assets or fallible "expert" advice for their retirement. Citizens should experience anxiety about their own businesses (which they control), not their investments (which they do not control).

10. Make an omelette with the broken eggs. This crisis cannot be fixed with makeshift repairs. [Apply these principles and] we will see an economic life closer to our biological environment: smaller companies, richer ecology, no leverage. A world in which entrepreneurs, not bankers, take the risks and companies are born and die every day without making the news.

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.

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 )