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The Better Letter: Unintended Consequences
Nothing works out as planned and everything has unintended consequences.
Inflation is roaring, putting pressure on the economic recovery and raising the stakes for the Federal Reserve. The Consumer Price Index, which measures the cost of a wide-ranging basket of goods and services, rose at a 6.8 percent pace on a year-over-year basis last month, the fastest rate since June 1982.
The Producer Price Index, which measures what suppliers are charging their customers, increased at a 9.6 percent annualized rate in November, the largest such figure on record since the data was first collected in 2010. A longer-lived but narrower index, which measures prices for finished goods and the materials that go into them, posted its biggest annual gain since 1982.
Today’s inflation is a function of both demand and supply pressures. In part, the supply pressures are an unintended consequence of ever-larger container ships. Really.
The laws of cause and effect are relentless. Every action has a consequence, and each consequence has another consequence. Thus, every change made to a complex system will have second-order effects, which may affect the system’s functionality in unknown and unexpected ways.
This week’s TBL will consider the problem of unintended consequences.
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American chewing gum sales fell 15 per cent over the decade commencing in 2007. That happened just as 220 million American adults bought their first smartphones. It wasn’t a coincidence.
When people wait in line at a store, they would once have spent the time looking at the goodies for sale at the counter – “impulse” items – and gum was a frequent purchase. Suddenly, customers were responding to a different impulse. They were doom-scrolling. Gum sales plummeted.
Global economies are profoundly complex and complex adaptive systems are intrinsically and unavoidably prone to catastrophe, both large and small. They are unstable and fragile – at the border of stability and chaos. Thus, systems fail, storms intensify, and markets crash.
School doesn’t teach it. But children quickly learn from stories that every choice brings unintended consequences. The teenager in the horror movie who decides to hide in the root cellar won’t get out alive. Perhaps worse, these failures – and they are most often failures, although sometimes we pick up a nickel in front of the steamroller – are inherently immune to prediction.
Seventy-six Kentuckians died last week (16 more are still missing) from a terrible series of tornados. Covid-19 has killed over 10,000 citizens of Kentucky thus far. Both the tragedy and the statistic are the result of this unpredictability.
These sorts of disasters can have enormous consequences which, over time, lead to the creation of defenses against them. Such defenses may be technological (backup systems, “safety” features) human (training, education), or organizational (policies and procedures, mandated certifications, work rules).
These measures provide a series of shields that typically work pretty well. There are many more failure opportunities than system failures. Catastrophic failure happens when small, seemingly innocuous failures cascade into a systemic disaster.
On the morning of June 28, 1914, Archduke Franz Ferdinand was assassinated by Gavrilo Princip in Sarajevo — an act that became the cause of World War I. The shooting occurred after the driver of the Archduke’s car made a wrong turn off a main street and into a narrow passageway, pulling right in front of Princip, a member of the Serbian terrorist organization, Black Hand. Princip recognized the passengers, drew his pistol, and shot the Archduke and his wife dead.
The resulting chain reaction proved catastrophic. Austria began planning an invasion of Serbia. Russia guaranteed the Serbs protection. Germany offered to help Austria if Russia jumped in, and so on.
World War I was on.
The favored narrative at the time — a future of peace governed by reason — was shown to be dreadfully and cruelly false. By the time the war ended five horrific years later, ten million people had died. Multiple competing explanations have since been offered as to why the war broke out. Beforehand, no experts were predicting an imminent conflagration of global proportion.
Much of our world is poised on the bleeding edge on instability. This critical state makes us inherently susceptible to disaster from even an exceedingly mild disruption. A spark on a hillside can lead to a raging inferno. A piece of straw can break a camel’s back. A wrong turn in Sarajevo can lead to world war.
Despite myriad opportunities for disaster, complex systems keep working most of the time.
Complex adaptive systems can keep operating despite multiple flaws. An assembly line doesn’t fail when an operator is out sick. It is impossible in such (man-made) systems to eliminate every latent failure and, even if it were possible, doing so would be too expensive or too much hassle. Work-arounds work.
A system’s failures keep changing because of changing technology, work organization, and ongoing improvement efforts. Complex systems often continue to function despite major shortcomings because they contain sufficient redundancies and/or because people (and evolution) are so creative. Sometimes it’s a mystery.
Yet disaster is always lurking. Things can seem to be going great and the wheels come off. Figuratively and literally.
On the afternoon of May 8, 1842, after a birthday celebration for King Louis Philippe I in Versailles, hundreds of spectators piled into train cars to depart, requiring two locomotives to pull. As the train was making its way back to Paris, without warning, the leading locomotive broke an axle. The wheels came off, causing the engine to derail. A chain reaction saw many of the trains cars pile onto each other and catch fire. Over 50 passengers died.
The cause of the rupture was metal fatigue – general degradation of the axel over time – leading to catastrophic failure. The Versailles accident marked the beginning of serious research into fatigue and fracture mechanics, which has allowed for the design and manufacture of safer, more durable goods and components. However, whenever we improve something, we inadvertently create additional failure modes to defend against.
Last week’s TBL looked at the “index mindset” – our tendency to hedge our bets, avoid risk, diversify, and buy insurance, sometimes improving aggregate outcomes but, because “[l]ong tails drive everything,” also limiting our potential upside across-the-board, often dramatically.
Does the index mindset create unintended consequences? Of course. I’ll mention just three of the many examples.
Many scientists claim that good ideas are getting harder to find. I suspect the problem is, instead, the index mindset. The economists Jay Bhattacharya and Mikko Packalen found that citations have become the key metric for evaluating scientific research, changing academic incentives. They further found that scientists increasingly “index” – they perform research and write papers designed to advance popular theses incrementally because they think their work will resonate with other scientists, including the proponents of the expanding theses, leading to citations and career advancement. Scientists are thus much less likely to “go big” by focusing on research that might be a dead-end but might also trigger a major advance or open a new field of study.
The index mindset is damaging the arts, too. Of the 10 top-grossing movies of 2019, the last pre-pandemic year, nine were sequels or live-action remakes of animated Disney movies. The seeming exception, Joker, was a gritty prequel of another superhero franchise. Two decades earlier, the top movies — films like Titanic, Saving Private Ryan, The Matrix, Star Wars, Shakespeare in Love, Good Will Hunting, The Truman Show, and There’s Something About Mary — were predominantly original screenplays. As I noted last week, we oh-so-eagerly proclaim that those who don’t learn from the past are doomed to repeat it – right before watching a movie with a numeral in the title. For the third time.
Our personal lives aren’t immune from the dangers of the index mindset, either. That I married up, big-time, is the primary reason I lead a happy, fulfilled life. Fewer of us seem to want that anymore. Or go for it.
Strong family ties foster the conditions for living a good life, including personal success. However, fewer and fewer Americans are choosing family life. As of 2021, 28 percent of Americans live alone, the most ever. Back in 1960, it was just 13 percent. An additional 11 million households are headed by a single parent, a number that has tripled since 1965. Overall, 31 percent of today’s U.S. adults identify as single (and, perhaps, entitled), which means not married, living with a partner, or in a committed relationship. Those who might be inclined to marry are waiting longer to do so and, the more education they have, the more likely they are to wait.
Until relatively recently, marriage was the rule and marriage at a young age was common, with partners committed until death parted them. Not anymore. Tinder and other dating apps allow people to diversify their relationship capital across an index of dozens of partners while avoiding a commitment to marriage and a family (if Mr. Tinder were any good, you’d think at least one of those dozens would have come back for seconds). Even though spouses in a good marriage are happier, healthier, and live longer, we are increasingly delaying, avoiding, and escaping the bonds of holy matrimony.
Adam Gopnik provides the lesson.
“What history actually shows is that nothing works out as planned, and that everything has unintentional consequences. History doesn’t show that we should never go to war — sometimes there’s no better alternative. But it does show that the results are entirely uncontrollable, and that we are far more likely to be made by history than to make it. History is past, and singular, and the same year never comes round twice.”
Historians obsess over how a seemingly successful society could commit suicide on account of a wrong turn and spectacularly miss the point. Unintended consequences show us that we aren’t able to control history, even when we’re making it.
The universe is bigger and more complex than we imagine – than we can imagine. It is bizarrely complex. That means (1) There is a lot more to reality than we think – than we can think; (2) We cannot predict the future – there are too many variables; and (3) We have much less control over the future than we assume (it’s the “planning fallacy” writ large).
[Insert discussion of Friedrich Hayek’s warnings about the folly of planning here. As per the Yiddish proverb: “Der mentsh trakht un got lakht” (Man plans and God laughs).]
In the 1950s, China was riddled with infectious disease. In response, Mao and the “Great Leap Forward” government established a mass inoculation program, built sanitation infrastructure, and created the “Four Pests” campaign to eliminate mosquitos, rats, flies, and sparrows. The first three were singled out on account of their role in spreading malaria, typhoid, and the plague. Sparrows were included because they eat rice, fruit, and seeds in the fields. Citizens were called upon to shoot sparrows, destroy their nests, and even bang pots and pans to prevent them from nesting until the birds died of exhaustion.
The sparrow program was wildly successful. Mercilessly so. Over a billion sparrows died. However.
“The sparrow’s intrinsic role in the ecological balance was unrealized and resulted in an unmitigated, well-orchestrated environmental disaster. Locusts came in droves and devoured fields of grain, their feeding left unencumbered by watchful, hungry sparrows.”
This ecological imbalance was a key contributor to the Great Chinese Famine, which killed 25 million people or more between 1958-1962. The Chinese government eventually resorted to importing 250,000 sparrows from the Soviet Union to restore their population.
Never ignore or underestimate the power of unintended consequences. Second-order consequences can make a mess.
Totally Worth It
The following is what 35 combined Grammy awards (27 for Alison Krauss; 8 for Robert Plant) sound like. With a killer band.
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This is the best thing I saw or read this week. The worst. The most astute. The most terrifying. The most remarkable. The most ridiculous. The most incredible. The most disappointing. The most damning. The most striking. The most surprising. The saddest. The smartest. The quickest. The funniest. Flor-i-duh (election fraud edition here). Fair.
Have a look at all of Steph Curry’s threes below.
“We make men without chests and expect from them virtue and enterprise. We laugh at honor and are shocked to find traitors in our midst.”
~ C.S. Lewis, The Abolition of Man
Tse Chi Lop has created an astonishingly successful business. Revenues likely exceed $20 billion per year. This success was achieved by providing an well-crafted product at a fair price, careful industrialization, reducing costs, technological innovation, relentless focus on the customer experience, mastery of globalized logistics, and establishing well-maintained networks of key partnerships. In many ways, it’s a model business. There’s only one problem. He’s the Jeff Bezos of the drug trade.
Please send me your nominees for this space to rpseawright [at] gmail [dot] com or via Twitter (@rpseawright).
Oklahoma City’s Shai Gilgeous-Alexander made a heave to tie the game, then Pelicans guard Devonte’ Graham made a full-court shot to win it. All in four seconds.
The Spotify playlist of TBL music now includes more than 200 songs and about 15 hours of great music. I urge you to listen in and turn the volume up. Way up.
I am convicted by the words of Jeremiah.
“They dress the wound of my people as though it were not serious. ‘Peace, peace,’ they say, when there is no peace.”
In the Christmas story, the angels appear and are terrifying. But what do they proclaim? Peace. May it be so, no matter how scary it might be.
To those of us prone to wander, to those who are broken, to those who flee and fight in fear – which is every last lost one of us – there is a faith that offers hope. And may love have the last word. Now and forever. Amen.
Thanks for reading.
Issue 93 (December 17, 2021)
I am a political conservative due to theology first. Because humans are sinners prone to trying to rule others, we need a system that doesn’t overreach and protects minority rights. That said, the laws of unintended consequences, the limits of reform, and what Hayek called the “knowledge problem” are too powerful to overcome predictably and reliably no matter how well-intentioned the planning. Things can always get worse (a lot worse). These ideas support conservatism, too.