The tragedy of the commons

grazing cows and the tragedy of the commons“Don’t worry darling, there are plenty more fish in the sea ” said my mother as she comforted me after my girlfriend dumped me in 1983. It was little solace to my heartbreak then: a platitude worn thin by careless usage. It is even less use today, because it is no longer true. Sorry Mum. There aren’t plenty more fish in the sea.

Cefas, the government fisheries laboratory, has announced that  there are only one hundred adult cod left in the North Sea according to their estimates. Yes, that’s right only a hundred. Mature cod can live for up to 25 years and reach lengths of 6 foot. In 2011, a North Sea survey of catches showed not a single fish that was older than 13 years. Cod become more fertile as they get older. Most cod are caught when they have barely reached sexual maturity, on average when they are 4 years old. If there are no older fish, there are no eggs and larvae to perpetuate future generations. In the early 1970s, trawlers were catching 360,000 tons of cod a year in the North Sea. This year the catch is only 32,000, less than one tenth of the previous level but still 50% higher than the sustainable limit according to Cefas.

What makes this even sadder is that it is not a new story. It has happen before. In 1992, the Canadian Government finally banned all cod fishing in the Grand Banks following the complete collapse of the fish stocks. In Newfoundland, 35,000 fishermen became unemployed overnight, devastating the local economy and ending a traditional industry with a 500 year pedigree. The fishing moratorium was intended to last only 2 years to let the fish stocks recover. Sadly, this did not happen. It is only now, 20 years later, that cod stocks are recovering again but they are still at only 10% of previous levels. So the current collapse of the North Sea cod fishery is merely repeating a journey down a well worn tragic path*.

The crisis of the cod fisheries in both Newfoundland and now the North Sea were well flagged many years in advance. So the real question is  “Why didn’t someone do something about it before it was too late?” The short answer is that they couldn’t. The collapse in fish stocks had a ghastly inevitability; a high-sided luge track leading to disaster.  This phenomenon is known as the tragedy of the commons. Individuals acting in self interest deplete a common resource, even though it is in no one’s long term interest for this to happen. It was first observed by Thucydides and Aristotle, then resurfaced in the arguments over the British Enclosure Acts in the 18th Century but was most precisely defined in economic terms in a paper by the ecologist Garrett Hardin in 1968. It is also an excellent example of the reversal of virtue at a catataxic boundary.

In the tragedy of the commons, the word “tragedy” does not imply unhappiness and sorrow but rather the inevitableness of destiny, a remorseless working of logic to its inescapable conclusion. The logic working here is the economic concept of marginal utility. Picture an area of common ground – maybe a village green. Local cattle herdsmen have the right to graze their animals there. Gradually the number of cattle increase until the size of the herd is greater than the amount the grazing land can support. This is the catataxic boundary. The time when more of the same becomes different. Each individual herdsman is faced with a choice: should he put more cows on the pasture or fewer?  At this point the marginal utility equation comes into effect. He gains all the benefits of putting his extra cow on the common, but the negative effects are shared amongst all. He owns the cow but he does not own the commons. So the marginal utility to him as an individual is an overall positive: he gets all the upside, others share the downside. Therefore the logical course is for him is to keep putting more cows on the pasture until it is destroyed.

There are many examples of the tragedy of the commons and it is central to many of the problems of the modern world. Traffic congestion, email spam, the destruction of the rain forest, water shortages, pollution, global warming and overfishing all examples of the abuse of the commons. In each case, a slight gain to a self-interested individual results in a major detrimental effect to the larger community. So, for example, the new car owner gains some mobility but causes traffic congestion for everyone else. The online marketer gets a tiny positive hit rate as he clogs up the internet with spam. A farmer’s borehole to irrigate his parched crops lowers the water table for everyone else. Likewise,illegal logging, factory fishing fleets and toxic waste from chemical plants destroy the environment for every one else.

So what is the solution? In 18th century England the answer was obvious. Put the commons into private ownership. If the same man owns both the cow and the land, there is an economic incentive for effective stewardship. He owns all the upside and all the downside and so will manage both to positive effect. This was the argument behind the hugely unpopular “Inclosure Acts”: acts of parliament that allowed large landowners to expropriate  common land, turfing off peasant farmers and enriching themselves in the process. The Highlands of Scotland were cleared of crofters who then emigrated to the USA and in turn expropriated land from the native indians through similar trickery with title deeds. In England, a landless working class was created to feed the newly emerging “dark satanic mills” depicted in Danny Boyle’s Olympic opening ceremony. Karl Marx, living in London and watching from the sidelines, saw this as the first act in the class struggle that would eventually lead to the triumph of the proletariat. He outlined a different solution to the tragedy of the commons. He believed that the commons should be owned by the state not private individuals; hence, communism.

Since then, more nuanced solutions have emerged. Elinor Ostrom, who sadly died this June, won the Nobel Prize for Economics in 2009 for her work on the tragedy of the commons problem. Her solution was neither private nor state ownership, but local, communal ownership. She call such a solution “common pool resource” (CPR) management.  After years studying pasture management systems in villages in Africa and Nepal, she codified a set of rules which would enable common resources to be exploited in a sustainable way. In essence, these involve clear cut boundaries between entitled locals and outsiders and a strong set of property rights and sanctions administered in a self determined way by the local community. To some, this CPR solution is the holy grail: a temperate middle path between the twin evils of rapacious capitalism and spirit-crushing communism. But others will notice that this solution the problem requires the introduction of a different type of evil: xenophobia.

CPR requires a clear division between locals who have ownership rights and outsiders who don’t. There needs to be a line drawn between “us” and “them”. Through rose tinted spectacles, CPR is the idealised English village community; good neighbours, earnest vicars, friendly grocers, church fetes, a good local school and a cracking village pub. Take off those spectacles and you see small mindedness, nimby attitudes, petty chauvinism, corrupt local councillors, disapproving frowns from behind twitching lace curtain and the all the ghastly wrangling of the local housing committee.

Any system that encourages the demonisation of outsiders and foreigners is surely to be deplored. One headline in the weekend press was more tragic than the story about disappearing cod. It was the killing of the US Ambassador in Libya. J.Christopher Stevens was  a Peace Corps veteran, fluent in arabic with a deep knowledge of the Middle East; surely just the type of of ambassador Libya should welcome. He was killed by militant Islamists enraged by an offensive movie put on YouTube by a US citizen on the West Coast. It seems so unfair that a sympathetic arabist in Libya should be killed in retaliation for the actions of a crazed bigot in California, but to a xenophobe all foreigners are the same.

So the tragedy of the commons has three solutions, all with potentially negative side effects. Is there nothing positive to be said? Yes, there is. Let’s look at the mirror image of the tragedy which we could term the “comedy” of the commons or the “inverse commons”. This is where a small negative to an individual results in a major positive benefit to the community. Those who believe in the economic utility function would classify this self-harming, altruistic behaviour as impossible. But not only does it exist, it is the basis of a lot of successful business models in the new information economy.  The best example is Wikipedia where individuals contribute their knowledge for free for the good of the greater community. The “inverse commons” concept is also at the heart of the “facebook” social networking revolution and open source software movement.

On a lighter note, even cod shortage may have a silver lining. Fewer cod has meant a boom in the population of the crustacea that the cod feed on. It looks like you will be swapping your “cod and chips” for “scampi and chips” in the future…

* For those who are interested in further reading on the subject, I highly recommend Cod by Mark Kurlansky (Vintage, 1999) and The End of The Line by Charles Clover (Ebury Press, 2004).

Death’s upside: the diamond skull

This morning is the first day back at work after the Easter break. Having overindulged on chocolate eggs on the weekend, I decide to get some exercise and walk to my Mayfair office from London Bridge station. As a result, I happen to be passing the Tate Modern as they open and pop in to see the Damian Hirst show on impulse. There is a huge queue for tickets but no queue or tickets required to see the ‘diamond skull’. The whole of the huge turbine hall is given over for the display of this one tiny piece.

But what an astonishing piece. Inside a small completely dark room the platinum skull, studded with diamonds, is the only thing visible. It is brilliantly lit and walking around it you see the scintillating, inner fire of all those diamonds shimmering at you. The effect is quite breathtaking. It is much smaller than I imagined and I was surprised by the strength of my emotional response. In the darkness, you feel torn between a push-back of revulsion and the tug of desire. The middle aged matrons next to me are completely hypnotised by it: rabbits in front of a snake. The only time I have felt a similar feeling is when my aunt took me to see Tutankamun’s golden death mask in the exhibition at the British Museum in 1972.

Both objects seem to be saying the same thing. Exquisitely crafted from priceless materials, they are simultaneously a celebration of death and a bid for immortality. In Hirst’s case there is another angle: the obsession of the art world with money.  The value of the diamonds is reputedly £14m and the asking price when it was displayed at the White Cube gallery was £50m. There is still some confusion about whether it was actually “sold” and it is apparently owned today by an anonymous consortium which includes Hirst himself. So there is catataxic debate about whether the whole is worth more than the sum of its parts. How much value has the artist added? If you were to sell it today in the open market would it be worth more than the value of the diamonds that make it up?

I don’t want to go too far down that path because there is a different catataxic angle that I want to explore. In the train this morning, I read two articles in the newspaper, both of which are obliquely connected to the diamond skull. The first was a warning by the Financial Services Authority (FSA) that thousands of Britons face a “mortgage time bomb”. The second was about Shandong Helon, a Chinese chemical company teetering on the edge of bankruptcy.

Let’s look at the mortgage time bomb first. Banks in the UK have been transferring customers over to “interest only” mortgages and these now make up 35% of the market. Many homeowners have been struggling to meet payments on traditional mortgages. Rather than calling in the loans, the banks have rescheduled them and switched their customers over to “interest only” products where the monthly payments are much less. A £200,000 mortgage would typically cost £1,000 a month if it was a traditional product but only £600 a month if it was “interest only”. They are cheaper because, as the name suggests, you are only repaying the interest and not the capital sum. The problem is that your debt is not reducing, so at the end of the mortgage period you are faced with a huge bill: the whole value of the amount you originally borrowed.

Why are the banks being so helpful? It may be that they have such a poor profile in the media right now that they want to avoid headlines about evicting impoverished homeowners, especially since half of them are now government owned. But the other reason is that if they repossessed the houses of the defaulting customers and sold them off they would drive house prices down thereby damaging their own balance sheets. It’s much better for all concerned for the loans to be classified as “in forbearance” rather than “in default”. Homeowners keep their house, the banks’ assets look better than they really are and house prices are kept artificially high.

There is a downside though. All this ‘benevolent’ activity is just storing up problems for the future. When interest rates finally rise, all hell will break loose. If people are struggling when base rates are 0.5%, what will it be like when they go up fourfold and return to a long term norm of 2%? In America, banks have been much more ruthless about mortgage foreclosures. House prices have halved, causing painful adjustments in the economy. But that is all history now, and the banks, having written off all their bad loans, are lending again driving growth in the economy. In contrast, the UK seems to be following the same path as Japan in the 1990s. Japanese banks hid their bad loans and the resulting drag on the economy meant no growth for more than a decade.

The second article about Shandong Helon has a similar theme. This Chinese chemical company has to repay 400m renmenbi  on April 15th. The market has been assuming that it will default; the first ever default in China’s fledgeling domestic corporate bond market. But a brief statement today confirmed that the bond will be repaid in full. No Default. Strangely, this is not good news at all. The problem with China’s bond market is that it has developed under the assumption that companies will always be bailed out by the state in the end (just like the EU Greek crisis). That means that risk has been badly mispriced.  So plenty of people were secretly hoping that Shandong Helon would default, thereby resetting the market’s sense of risk and allowing the market to function properly for the first time.

One of the five maxims of catataxis is  “virtue reverses at a catataxic boundary”. In other words, what is good for the individual is bad for the collective (and vice versa). Death (or default) is a good example of this. Death, from the individual perspective, is pretty much the worst thing that can happen. But from the collective perspective it is vitally important: a positive thing in that it allows the chemical elements of the life form to be broken down (through bacterial decay) and redistributed more profitably to other parts of the ecosystem. Ashes to ashes, dust to dust; it’s all part of the great circle of life. Similarly, in the economy,  the parallel to death is default, which, after the bad debts have been written off, allows capital to be redistributed to those who deserve it more.

So that’s the message that I take from Damian Hirst’s diamond skull. Death should be celebrated and not feared. It’s an important part of the process. Death has an upside.

Lynn Margulis and the Eukaryotic Cell

When you think of evolution what image first springs to mind? It’s probably a hall in the Natural History Museum filled with fossils. All the dinosaurs, trilobites, coelacanths and ammonites together make an awesome menagerie of extinct creatures. The stepping stones of evolution are laid out before you in rock and bone. But there is something wrong with this picture – it’s just depicting animal evolution which means it is only telling part of the story. There are five other kingdoms of life (plants, fungi, protozoa, bacteria and archaea) and animals showed up relatively recently. Life on Earth started 4 billion years ago but the first animals evolved 0.5 billion years ago, half-way through the last quarter of the game. So that fossil hall in the museum is like a history of the world that only covers one continent in recent time. A history of the world that starts with American Independence and never strays beyond its borders. (Yes. I know. For many Americans that really is the history of the world but bear with me)

Most famous evolutionary biologists (Dawkins, Gould, Haldane, Maynard Smith, etc) come from a background in zoology. Their expertise is in the comparative study of animals. Lynn Margulis, who died aged 73 in November last year, was different. She was a microbiologist who focused on the evolution of eukaryotic cells (cells with a nucleus) and became convinced that the scientific consensus was wrong. The mainstream thinking was that the engine driving the evolution of species was random genetic mutation in which only the fittest survived. Margulis agreed that natural selection picked winners but disagreed about how the competing variants were created. She believed that evolution was driven by the symbiotic cooperation of organisms: the competitors in the race worked together rather than competed with each other. The mainstream saw the creation of new species as a divergent process; just as twigs and branches diverge from the trunk of a tree. Margulis believed that new species were created by a process of fusion and merger. She wrote a paper about it in 1966 called “ Symbiogenesis: the origin of eukaryotic cells”.

And then nothing happened. In fact, worse than nothing. Fifteen academic journals rejected her paper. One actually said “Your research is crap. Don’t ever bother to apply again”. Maybe it was because she was a woman. Maybe it was her abrasive personality and appalling temper. After extensive reworking, she finally managed to get her paper published in the Journal of Theoretical Biology. It was a groundbreaking piece of work. For the first time, the evolution of cells had been properly examined: a history of a continent that was not America had been published. The response from the mainstream was…..complete silence. No one bothered to respond because no one really cared.

And then, very gradually, the years passed and data began to trickle in to support her theory. A single cell is more complex than you might imagine; it’s more than a nucleus in a little sack of protoplasm. The diagram below shows that there are 13 different entities inside it. The crucial evidence to support her theory came when scientists discovered that some of these entities had DNA that was different from the nucleus. The DNA of mitochondria, chloroplasts, basal granules and plastids is not the same as the DNA in the nucleus. This implies that a cell, the fundamental building block of all animals, is a fusion of different bacteria-like creatures. At some time in the past, a group of different bacteria clumped together to form a eukaryotic cell. This cell was dramatically more successful that the individuals composing it and became the basis of all higher lifeforms. The living creatures that we see around us all stem from that initial cooperative merger. Nature is not wholly “red in tooth and claw”.

1. Nucleolus
2. Nucleus
3. Ribosome
4. Vesicle
5. Rough endoplasmic reticulum
6. Golgi apparatus (or “Golgi body”)
7. Cytoskeleton
8. Smooth endoplasmic reticulum
9. Mitochondrion
10. Vacuole
11. Cytosol
12. Lysosome
13. Centriole

 

 

 

Lynn Margulis’s theory has now become scientific orthodoxy and her book “Symbiosis in Cell Evolution” is seen as a classic of 20th century biology. Her concept of symbiogenesis is at the core of the fifth catataxic maxim “Today’s groups are tomorrow’s individuals”. Time acts to drive individuals up the catataxic ladder. In a social history of the world, families become tribes, tribes become nations, nations become empires and all long before the founding of America. So too in biology. Bacteria merge to become eukaryotic cells, single cell creatures merge to become multicellular plants and animals, and the resulting flora and fauna knit together to form complex ecosystems.

Catataxic funds outperform

Recent research from Collins Stewart, a UK stockbroker, shows that investment trusts have comprehensively outperformed open ended funds over the last 10 years. These funds are rarely recommended by financial advisers since they don’t pay commissions (i.e. kickbacks) to the IFA’s who promote them. In major markets, Investment Trusts gave investors a 106% return while unit trusts only returned 36%. In emerging markets, the difference was even greater: 357% vs 230%.

OK. So maybe the last time someone tried to explain the difference between an Investment Trust and a Unit Trust to you, you edged away and went to find the fun guys at  the party. Maybe you would even prefer to be stuck on a long distance flight in the seat next to an overenthusiastic proctologist, than listen to an explanation like that. But here goes anyway, because there is a catataxic twist to the story.

An Investment Trust is a form of collective investment that has been around a long time (since 1868). It is a closed end fund constituted as a public limited company. So unlike a normal unit trust, once the money has been raised no new money comes into the fund ( that’s why it is called “closed end”). Investors buy and sell shares in the company which can trade at a premium or discount (more likely) to the underlying asset value.

For an open ended fund, like a unit trust, OEIC or mutual fund, investors money can flow in and out. When it is performing well, new money floods in. When it is performing badly, investors pull their money out forcing the fund to sell its holdings which further reduces prices and potentially creates a downward spiral. It is this ‘forced selling‘ effect which may explain the difference in performance. The manager of an investment trust can afford to be more long term in outlook. The money he manages is locked up in the trust and can’t be withdrawn. He only has to worry about stock market performance, not about investors pulling their money out. He is therefore less likely to panic, and more likely to outperform in turbulent markets.

In catataxic terms, an investment trust is a level two entity, hermetically sealed off from level 1. In contrast, a unit trust has a permeable membrane between the two levels so is not truly a level 2 entity. An investment trust is a catataxic fund, a unit trust is not. The research proves that the key to outperformance is catataxis.

Stimulation or austerity: the catataxic debate

Gold CoinMost Western countries are having the same economic debate at the moment: austerity or stimulus? Britain’s coalition government, Germany and the Tea Party in the USA want more austerity. The logic is simple. If you have too much debt then you should stop spending. But the counter argument goes like this: government cutbacks depress the economy, recessions mean less tax revenues which mean more cutbacks. The result is an ever decreasing spiral like the one in Greece where the economy is shrinking 5% a year. So governments should be spending to stimulate the economy and worry about balancing the books later when the private sector is booming again. Rubbish, say the fans of austerity, you can’t spend your way out of a debt crisis…

This “stimulus versus austerity” debate can be recast as an example of catataxis. It hinges around the fundamental concept of money which has three main functions: a medium of exchange, a unit of account and a store of value. These three functions form three different “levels” and the stimulus vs. austerity debate is a conflict between these levels. Let’s look at each of the three in turn.

The first function of money is as a medium of exchange. It acts as a physical token that is exchanged when a transaction takes place. In this sense, money can be cowrie shells, gold bullion, coins or notes. In a prison, cigarettes are often a medium of exchange. It also does not need to be that ‘physical’. If you transfer money between two bank accounts through a BACS transfer, then some digital tokens are being exchanged between two computer systems. Likewise, air miles are a form of money which can be exchanged for seats on an airplane.

The second function of money is as a unit of account. It acts as a common yardstick for measuring the value of different things. In a barter economy, you can exchange two sheep for three goats. In a monetized economy, you might say that both were worth six shillings. Money as a unit of account tells you what things are worth. In our example, a sheep is worth three shillings and a goat worth two.

The third function of money is as a store of value. This arises because you don’t spend money the instant you get it (unless you are my daughter, Flora). There is a timing difference between transactions. Having sold your sheep for six shillings, you may not spend the money for a couple of weeks. While it is in your pocket (or under your mattress) it is a store of value. The money is worth something while you hang on to it.

These three different functions give us the three different levels. The first is physical, the second is conceptual at a mathematical or accounting level. The third is at conceptual level one higher than that. The store of value is not about numerical equations but about the crystallization of confidence; the distillation of belief. Catataxis is level confusion: the conflict between these different interpretations of money.

If you view money at level one as a physical medium of exchange, then you want your economy to have as much of it as possible. That means that more physical exchanges can take place. In other words, more trade and more growth in the economy.

If you view money at level three as a store of value, then you want your economy to have as little of it as possible. The less there is, the more valuable it is. By restricting the supply of money you keep its value.

A good illustration of the difference between these two views is the “shopping in Vietnam” example. You can pay for your goods in a shop in Vietnam in US dollars, but you will get your change in Vietnamese dong. The shopkeepers would prefer to hoard the dollars as they see them as a better store of value but the medium of exchange is dong – that’s how you get the change.

Some would argue that the US dollar is not a very good store of value. When Nixon broke the link between the dollar and gold in 1971, gold was worth $35 an ounce. Once the link was broken, the US government was free to create as much money as it liked. This “freeing up” of the physical medium of exchange led to a period of spectacular global economic growth. More money, more exchanges (more trade). But now, 40 years later, gold is worth $1,900 per ounce. In other words, the dollar has declined in value by 98% (many currencies have fared worse) so its role as a store of value has been damaged.

The stimulus vs. austerity argument, in effect a debate about whether the money supply should be expanded or contracted, is a catataxic debate. A conflict between the level one and level three views of money. It is also a debate between creditors and debtors. Creditors (people who are owed money) favour level three. They are concerned with the store of value and want their money to be worth something when they are paid back. Debtors (people who have borrowed money) favour level one. They want a lot of economic activity so they can earn the money to pay back their debts. If the value of money falls in the process so much the better – that means less to pay back in real terms.

Normally, the debtors are many and the creditors few. So the populist position is to be on the side of the debtors and let the money lenders take the punishment. This was true when the economy first began to be monetized in 1190 with the terrible massacre of the Jews at York (see the novel Holy Warrior for a graphic description of this appalling event). It is still true today. Maybe the current trend for “banker bashing” is a reflection of this.

Phillip Coggan in his excellent book Paper Promises points out an interesting irony in US politics this time around. The Tea Party is a populist, grass roots movement that is pro-austerity. They favour level three and are concerned about the store of value. Wall street bankers, who would normally be level three advocates, are the ones calling for stimulus at level one. So the traditional positions of the banker and the populace have recently become inverted in the USA.

Europe: the Federated States of Catataxia

Catataxis means level confusion and the Eurozone crisis is a catataxic one. I will explain the problem with the state(s) of Europe in a moment, but first a little bit more background about the state of catataxia.

When things start to get bigger, sooner or later a certain point arises when there is a discontinuity. Getting past that requires a transformation in structure or organization. To get to the next level, something more than just size must change. Think of the biggest insect in the world. It will not be more than a foot long. Those giant ants towering over houses in 50’s sci fi movies are a physical impossibility. A creature with an exoskeleton reaches a physical limit to growth. There comes a time when the muscles required to move the external carapace get so big they can not be contained inside that carapace. Think of an enormously fat knight; his armour is so heavy he can no longer lift it. So in order for an ant to grow to be the size of an elephant, he has to cease to be an ant. His body form must be reorganized. His exoskeleton needs to be replaced by an exoskeleton. Mammals have endoskeletons: internal bones not external shells. Mammals range in size from a tiny shrew to a gigantic blue whale. That “exo to endoskeleton ” transformation marks a catataxic boundary: a discontinuity in a smooth linear expansion. A necessary reorganisation before further growth can continue.

Hence, the catataxic maxim “more of the same is different”. Let’s look at a corporate example instead of a biological one. A common cause of failure amongst small companies is not that that they fail to adapt when things are going badly but when things are going well. Sudden rapid growth can be just as dangerous as a declining market. As they expand quickly to become a big company they face a number of complicated hurdles, mostly to do with internal organisation. They must develop more robust systems in HR, admin, compliance and legal. They must navigate through a deadly miasma of corporate structure and org charts. This is the equivalent of the “exo to endo” transformation: the ant becoming the elephant. To most employees, this pointless bureaucracy and red tape is a big dead weight; sapping energy, crippling natural agility and dragging down performance. It is true that an ant can perform prodigious feats. Insects can carry many times their own weight or jump many times their own height. An elephant can’t jump at all, but it is BIG and that brings many different benefits.

Let’s look at a social example. When two or three people go out to dinner in a restaurant it is quite easy to settle the bill: just split it down the middle. But with 12 people there, suddenly the argument is all about who had the lobster to start with and how much wine did Jimmy drink. More of the same is different. It’s hard for a big group of people to pay the bill. Often its best to appeal to a higher authority: someone picks up the tab and takes a chance by sticking it on his corporate credit card. That way some higher level corporate entity can sort it out.

And so back to Europe. Everyone agrees that there should be a bailout for the Eurozone but no one wants to pay the bill. There is no leadership and no one to take charge because they can’t. There is no institution big or powerful enough to deal with it… yet. In Europe, we are privileged enough to be watching the ant turn into an elephant before our very eyes. Yes, this will require upheavals, reorganisations and much red tape. In the end, the Federated States of Europe will emerge. This lumbering, dull witted mastodon, much mocked and stung by the agile insects around it but big enough to crush them without even noticing.

The press has delighted in pointing out that the Groupe de Francfort, the eight public figures including Merkel and Sarkozy that are attempting to lead the response to the Eurozone crisis, are largely unelected and therefore have no democratic legitimacy. But then again, no one lauds a catataxic transformation. Have you ever heard a front office employee praise a corporate decision to double the number admin staff and increase red tape. This transformation is happening because it is an inevitable consequence of scale. Globalisation has made the existing structures redundant or unfit for purpose, and new institutions must replace them. It is a naturally emergent phenomenon driven by the environment, like a high tide or a wildebeest migration.

The ant must turn into an elephant. The Groupe de Francfort is its emergent head. A catataxic boundary must be crossed. It is a necessary transformation before growth can continue.

BYOT and the jobs revolution

Do you know the latest trend in the office IT world? It’s called BYOT, short for Bring Your Own Technology. New young recruits into large multinationals are shocked by how awful the corporate IT systems are. This is a generation brought up on facebook, twitter, tablets  and smart phones; personal devices on which you can do a lot of cool stuff. Their first encounter with a corporate IT system makes them recoil in horror. It’s so slow, so clunky and so user unfriendly.

In most other industries, there is professional grade equipment for serious business use and then a cut down, ‘less good’ version for the home hobbyist. But in the IT world this has been inverted. All the cool stuff is at the consumer end of the market. This is catataxis. The level 1 ‘home’ gear runs faster and is more powerful than the level 2 ‘corporate’ gear.  Hence BYOT. You bring in your own laptop or iPad to use at work. You are responsible for maintaining it. You are happy because you get to use the cool gadgets that you like. The company is happy because the cost of equipment and maintenance goes down. Productivity is up and costs are down (by 22% in some pilot schemes). Everybody wins.

Well, not quite everybody. No-one in the IT department likes this trend at all, because having so many different devices gives them a big headache. BYOT is cynically known by IT staff as “the CEO bought an iPad” syndrome. Nirvana for IT staff is an organisation that uses exactly the same equipment everywhere, all under the centralised control of the IT Dept. Under their watchful eye, individualism is stamped out “for security and efficiency purposes”.

This drama is not new. Take a look at the Apple Mac advert from the dawn of the PC era. A female athlete runs through the hall of a political rally and hurls a hammer at a huge screen with the face of Big Brother on it. The final tagline says:

On January 24th, Apple Computer will introduce the Macintosh. And you’ll see why 1984 will not be like “1984”. 

Shot by Ridley Scott, this advert is almost 30 years old but it is still as powerful as ever and encapsulates the whole spirit of BYOT: the catataxic challenge of the individual against the corporate system one level higher. Steve Jobs’ revolution really is a revolution in jobs. And how satisfying that he finally got to see it happen before he died.

Is the EU too democratic?

Burma cancels dam

Burma cancels damYesterday the Slovaks voted “No” to the Greek bailout. Quite reasonably, the poorest country in the Eurozone could not see why it should bailout a country where the average wage and pension provisions are far higher than their own. The result is continuing financial turmoil and uncertainty as the markets get frustrated by the lack of visible action. The meeting between Merkel and Sarkozy over the weekend ended with a statement along these lines: we have a plan to save the Eurozone but we can’t tell you what it is yet. There is a growing sense of impatience amongst the pundits and commentators whose general consensus runs something like this “European leaders are behind the curve. We need fast, decisive action. Why can’t these things be done more swiftly? Why is there not more leadership?” Notice that this line of argument is only a short step from a complaint that the EU is too democratic. After all, Napoleon or Hitler could have sorted this mess out in a trice. Is this laborious process of asking everyone what they think and getting a consensus a waste of time?

Consider this interesting counter example from the other side of the world. The military rulers in Burma have decided that they will cancel the construction of the Irrawaddy Dam. This is a slap in the face for China who was funding this 3.6bn hydroelectric project. Campaigners, including Aung San Suu Kyi, have been protesting against the dam for months, since it would inundate dozens of villages, displace at least 10,000 people and irreversibly damage one of the world’s most biodiverse areas. Why did the Burmese military junta change their mind? It was “against the will of the people”.

A dictatorship responding to the will of the people? This is democracy without voting. We could call it  “non-suffrage democracy”. Yes, I know that sounds as stupid as “bubble free champagne” or a “water free ocean” but it does suggest an interesting catataxic twist. We can call the people Level 1 and the government Level 2.  Clearly the normal way to transmute from one level to the other is through voting. That may be one way but it is not the only way, and in the case of the Eurozone crisis it may not even be the best way.

People power

Power of the peopleA Greek friend was explaining to me the mood amongst the Athenian citizens these days. Their frustration and anger is best expressed like this “The Government borrowed all that money and now they want the people to pay”. Notice that there is no identification between the people and the government. Despite Athens being the birthplace of democracy there is no sense of this being a government “by the people, of the people, for the people”. The government is some other entity, separate from the people, licensed to play their political games somewhere else. This is a catataxic split . The government is on level two, arising from the citizens on level one but separate from them. The slogan of the anarchists puts it best : no matter who you vote for, it’s always The Government who gets into power.

The second strand of frustration is with the Germans, because somehow it’s all their fault. The popular belief amongst the Athenians is that the Germans are trying to destroy them, just like World War 2 all over again. But the Germans have their own problems. In Germany, there is another illustration of the catataxic spilt between the will of the people and the government. Chancellor Merkel won the backing for a Greek bailout by a huge majority in Bundestag this week. But at the same time, a German opinion poll shows 75% of the people oppose it. The elected representatives of the people (in all parties) do not seem to be reflecting the people’s will. That is Catataxis.