Foreword
I wrote the first draft of this essay on March 13th, 2020 when it seemed the world is doomed because it cannot appropriately respond to a rapidly growing global pandemic.
Since writing the first draft governments globally have resorted to more appropriate measures. Still, the damage has been done and the world will start realizing losses in the coming weeks and months. I fear that the worst is yet to come.
After I explain how we have arrived at a point of being unable to deal with known knowns, I am offering two alternative visions for the post-2020 world. One is a world of pain and renaissance, the other is a world where by the end of the year we will party like it's '98.
Introduction
We are facing a crisis of our lifetimes. Learning through pain is useful. In months and years to come we can learn to turn painful lessons into information. In the ruin one can rediscover wisdom.
The world has become fragile. Do not trick yourself thinking this is a chance event. We have become vulnerable and there is a reason for it.
By the late modernity we have accumulated too much knowledge for one individual to understand. Human knowledge has become unmanageably vast, as captured almost hundred years ago by Will Durant in The Story of Philosophy:
Perspective was lost. “Facts” replaced understanding; and knowledge, split into a thousand isolated fragments, no longer generating wisdom.
The gap between life and knowledge grew wider and wider; those who governed could not understand those who thought, and those who wanted to know could not understand those who knew...
For if knowledge became too great for communication, it would degenerate into scholasticism, and the weak acceptance of authority; mankind would slip into a new age of faith...and civilisation, which had hoped to raise itself upon education disseminated far and wide, would be left precariously based upon a technical erudition that had become monopoly of an esoteric class monastically isolated from the world by the high birth rate of terminology.
Think about the Lindy effect; the "new replaced by newer" phenomenon. Human problems age in reverse - old problems will persist, new problems will be replaced by newer problems. Through such lense human progress is a mirage. The old problem of human history is a tendency to fool ourselves into thinking that we know things.
The illusion of stability
Ancient philosophers knew little of the world but the accuracy of some of their hypotheses in mechanics and astronomy is astonishing. They made remarkable deductions with limited data. Today, we have lots of data but make astonishingly wrong inductions. As pointed out by Nassim Taleb:
More data is an optionality on the part of the researcher, which means that the researcher gets the upside and truth gets the downside.
The experts and specialists put on blinders. Thus, we have arrived at “expert modellers” risking the lives of millions. Or in other words: non-risk takers taking risks with the skin of others¹. As Taleb pointed out:
Education makes the wise slightly wiser, but it makes the fool vastly more dangerous.
Our modern civilisation puts theory above practice. Probably by chance, almost a century ago, Durant described Ancient Greece's and modern inclination to theorise:
Greek mind was not disciplined...and ran too readily to theories and conclusions. So Greek philosophy leaped to heights unreached again, while Greek science limped behind. Our modern danger is precisely opposite; inductive data fall upon us from all sides...we suffocate with uncoordinated facts; our minds are overwhelmed with science breeding and multiplying in specialistic chaos for want of synthetic thought and a unifying philosophy. We are all mere fragments of what a man might be.
We have sacrificed wisdom for the illusion of stability, relying on what we named "knowledge", stewarded by the "experts" whose claims can only be inspected by their peers.
There seems to be a trade-off between the illusion of stability and the truth. Humans can be astonishingly wrong for a long period of time, but as we are all collectively wrong, we find illusory stability in such collective illusion. Eventually, a comfortable and convenient illusion gets confronted by reality².
We have converged on untruths as foundations for the contemporary world. “Truth” is that the world is a dynamic and ever-changing chaos ruled by uncertainty (potential loss, pain, death and suffering) that can only be tamed by continual practicing and tinkering. That requires being often wrong (when it is cheap).
The institutions stewarding the knowledge incentivize the opposite: one must be often right. Thus, we were led to the greatest contemporary error - painting an image of a static world. Because being often right requires the world to be seen as still.
This could explain a hypothesis of the great stagnation since the 1970s (e.g. Peter Thiel is a proponent). Being unable to let go of the illusion, our society has become radically unfree. As a result; the academia, governance innovations and technology (in the world of atoms) have stagnated or even deteriorated in recent decades.
Taleb explains that “freedom is never free” and that “you're only as free as your last trade”. In a sense, our last big trade included an effort to build the illusion and we have to keep investing to prop it up. What matters most is that the illusion keeps standing³. But this comes at a cost.
What matters isn't what a person has or doesn't have; it is what he or she is afraid of losing.
We are unfree in letting go of the stability bubble. We have confused stability with lack of variance and volatility. Slaves to theories, we have been sacrificing our ability to invent things and generate wisdom. These require optionality and tinkering - things that create and benefit from volatility.
Today, we are willing to take the wrong risks. This demonstrates that we have built an increasing capacity to fool ourselves into thinking we can predict things and "make models". These models work until they stop⁴ (see chart below).
Triumph of knowledge over radical evil
Lately I think about Nietzsche, the philosopher that is yet to be understood:
The mankind surely does not represent an evolution toward a better or stronger or higher level, as progress is now understood. This "progress" is merely a modern idea, which is to say, a false idea.
Perhaps the most useful reading of Nietzsche has been revealed to me in Antifragile:
Culture has been increasingly building blindness to the mysterious, the impenetrable, what Nietzsche called the Dionysian, in life.
This is a reference to “truth” in contrast to “stability”. The Dionysian is the truth about uncertainty - the inevitability of movement and chaos. Stability is represented by the Apollonian. Nassim Taleb explains that Nietzsche
…sees two forces, the Apollonian and the Dionysian. One is measured, balanced, rational, imbued with reason and self-restraint; the other is dark, visceral, wild, untamed, hard to understand, emerging from the inner layers of our selves.
In our times, the Dionysian has been tamed. We have amassed excessive knowledge but we did not practice the “dark, visceral, wild, untamed..” (volatility), no longer able to synthesise knowledge, as Taleb remarked:
…it hit me that Nietzsche understood something that I did not find explicitly stated in his work: that growth in knowledge—or in anything—cannot proceed without the Dionysian.
Apollonian becomes exposed in times of crisis, which are in a sense our moments of clarity. But people are struggling to make sense of this and, perhaps, they will overreact with "more Apollonian". My hope is that eventually, tamed by the “stability” narrative for too long, the Dionysian will be allowed to thrive alongside the Apollonian⁵.
Not everyone has yet seen the Dionysian within themselves. Necessity is a mother of invention and I wish that we will be offered an opportunity to reinvent ourselves while witnessing the Apollonian fail.
The long 20th century seems to be at an end. The Dyonisian embraces amor fati. The fighting spirit will prevail as the courage can only be found in battle.
I do not dare to write words of guidance on how to face the crisis. But I'd like to share different perspectives from three different thinkers. These, I take to heart.
Peter Thiel calls for renaissance so that we can go "back to the future":
Not only do our actions matter, I believe they matter eternally. If we do not find a way to take the narrow and moderate path, then we may find out that stagnation and decadence were all that kept immoderate men from stumbling into the apocalypse.
Friedrich Nietzsche describes the ruthlessness of life, a condition of improvement, and one's ability to find resolve:
The poison by which the weaker nature is destroyed is strengthening to the strong individual - and he does not call it poison.
Finally, I cannot find greater refuge than the work of Incerto by Nassim Taleb. Somehow, it brings this unexplainable calm as I am making sense of what has been unfolding in front of us. The meta-advice I have chosen to follow is to become someone:
...who transforms fear into prudence, pain into information, mistakes into initiation, and desire into undertaking.
How seeming becomes being
There might be a less dramatic ending to this crisis. I suppose that the illusion is too powerful. A crisis, such as the financial one in 2008, represents a moment of clarity. But if the collective prefers the insanity and converges on the illusion, the reality check can be (temporarily) overcome. People addicted to the Apollonian seem to be happy renouncing freedom in exchange for comfort.
Central banks may be playing catch me if you can, but the fact is that no one really wants to catch them (except for the defiant minority). Some expect the system to collapse onto itself. Perhaps we only underestimate our capacity for mass illusion.
Maybe the protagonists have trained themselves to become master illusionists and the rest is happy with being an obedient audience. It is possible that we end up, once again, cheering the emperor's new clothes.
Ironically, Western Civilization pride themselves in being different to China but underneath the individualistic facade we depend on the narrative dictated by our institutions. At least China is free in their unfreedom. We're unfree in our "freedom".
I would not discount the possibility of "the bull market of the century" by the end of 2020. The same way losses will disappear in the alchemy of balance sheets, bodies (literally) will be buried, and the events of the spring of 2020 will be forgotten. By winter time, the football game will be on TV and the turkey in the oven.
This would not be the first time that the West arrived at an impasse, a structural deadlock, and found a way around it. In Straussian Moment, Peter Thiel describes how enlightenment had become a new platform for stability after years of religious warfare in Europe as
"the enlightenment undertook a major strategic retreat...The question of human nature was abandoned because it is too perilous a question to debate...Science of economics and the practice of capitalism filled the vacuum."
Enlightenment strategically rules out the big questions of human nature, reducing human to homo economicus, and his desires to desire to power. Science bases its dogma on the predictability of our world and attempted to fill the void by reengineering God⁶.
One could think of Enlightenment as a cheat code. Cheat codes can take out the thrill and fun out of the game, probably will not make you great at it, but they help you win comfortably. In a world where the "thrill and fun" is actual suffering and death, resorting to a cheat code is understandable.
If we are truly coming at a new impasse we will attempt to use these cheat codes. Perhaps, the Modern Monetary Theory becomes the new Enlightenment, strategically ruling out some questions out of order.
Fundamentally, the world can make much less sense, but we will unite in this illusion. "Virtual Reality" gets a truly new meaning and indeed⁷.
Eric Weinstein proposed that our world operates like pro wrestling, internally referred to as Kayfabe, hinting at our preference of deception over true information.
Because professional wrestling is a simulated sport, all competitors who face each other in the ring are actually close collaborators who must form a closed system (called "a promotion") sealed against outsiders...
What makes Kayfabe remarkable is that it gives us potentially the most complete example of the general process by which a wide class of important endeavors transition from failed reality to successful fakery.
Betting on this scenario is betting against common sense. However, looking at the decades of illusions, I would not underestimate our ability to paint black swans white (the actual pandemic cannot be considered a black swan). The society can unite in scapegoating those who have dared to rain on our parade.
Conclusion: The caution of free spirits
Since the financial crisis of 2008 the market view seems to be bifurcated into permabears and permabulls. From the perspective of 2020, the events of this year are a culmination of this tension. Permabubble is an option. But there is an opportunity to break free.
There are two alternate futures ahead. One that revisits the skin-in-the-game, artisanal, decentralized, localist way of life and the other is a crony-capitalist, globalist, over-optimized, centralized and winner-takes-all modus operandi.
The longer the illusion of stability lives on, the greater the polarization and more dire the consequences⁸. I am undecided whether by the end of 2020 the over-optimization and centralization trend will accelerate with Facebook consolidating travel industry and Amazon local Mom-and-Pops stores, or we will grow wiser - decentralizing and antifragilizing our world.
I would like to contribute to the former - a world of free spirits. However, I do not wish the pain of ruin onto anyone. In my moments of naiveté I imagined the end of the illusion bubble as a "beautiful deleveraging".
I do not think that the possibilities are binary, rather a spectrum between the two opposites I have described. It is likely that the situation will not be resolved. The outer world will turn more Apollonian, misunderstanding the fundamental causes of our failure united against the free spirits.
But (I hope) the dark side, the Dyonisian, will grow stronger in numbers. A silent resistance will be preparing and patiently waiting for the system to collapse onto itself, ready to save people from the ruins.
I'd like to thank @fiskantes as without his comments, edits and pointers, this essay would not be what it is.
Footnotes
[1] I find it alarming that even after governments have resorted, some academics have argued that there is not enough data to justify such precautions. This is an example of academics arguing "to start taking the temperature when the house is on fire or putting the seat belt after the accident". More elaborate rebuttal here.
[2] To give you an idea, without going into details about each of these examples; 1789, 1914, 1939, 2001, 2008.
[3] Eric Weinstein proposes that there exists semi-organized guardians of this illusion naming them "The DISC".
[4] We are fooled by fat tails; living through longer period of illusory stability (center) with the contribution of rare events away from the center becoming more significant to the total property of the system. The fatter the fat tail the more normal times and the more pronounced the consequences of the tail. This allows one to believe a wrong theory for a long time thinking that one is right until the consequences of the tail catch up with one.
[5] As @fiskantes pointed out, the Dionysian was forced to live underground, projecting itself in the dark internet memes, sexual kinks, subculture of fantasy, violent video games and movies. Thiel argues that in the last fifty years there has been a shift from exteriority (doing things the world) to the interior world. As a result we had ended up with a super inward-facing culture manifested in drug counterculture, video games, meditation etc. Perhaps our inability to do the Dionysian in the outer world led to this shift to interiority.
[6] In Straussian Moment Thiel writes that "Enlightenment….abandoned a set of questions that an earlier age deemed central" and “For Girard there remains a denial of a founding role of violence caused by human mimesis and therefore a systematic underestimation of the scope of apocalyptic violence." Thiel citing Schmitt: Men who allow themselves to be deceived by him see only the fabulous effect, nature seems to be overcome, the age of security dawns; everything has been taken care of, a clever foresight and planning replace Providence."
[7] Thiel in Straussian Moment: "A representation of reality might appear to replace reality: instead of violent wars, there could be thrilling amusement park rides; instead of serious thought, there could “intrigues of all sorts”, as in a soap opera. It is a world where people spend their lives amusing themselves to death."
[8] From This Is Not Capitalism by Allen Farrington: “The factors we falsely deem to cause economic wellbeing are in fact fine-tuned to accelerate our inevitable descent into ever greater fragility, inequality, extraction, and financialization, and, ultimately, to the total depletion of capital.”