1 decade ago in Quotes
So what Iâm proposing is that finance, and indeed consumer Internet companies and all kinds of other people using giant computers, are trying to become Maxwellâs demons in an information network. The easiest way to understand it is to think about an insurance company. So an American health insurance company, before big computing came along, would hire actuaries to set rates. But the idea of, on a person-by-person basis, attempting to decide who should be in the plan so that you could only insure the people who need it the least on an individual basis, that wasnât really viable. But with big computing and the ability to compute huge correlations with big data, it becomes irresistible. And so what you do is you start to say, "Iâm going to..." â youâre like Maxwellâs demon with the little door â "Iâm going to let the people who are cheap to insure through the door, and the people who are expensive to insure have to go the other way until Iâve created this perfect system thatâs statistically guaranteed to be highly profitable.â
And so whatâs wrong with that is that you canât ever really get ahead. What youâre really doing then is youâre radiating waste heat. I mean, for yourself youâve created this perfect little business, but youâve radiated all the risk, basically, to the society at large. And if the society was infinitely large and could absorb it, it would work. Thereâs nothing intrinsically faulty about your scheme except for the assumption that the society can absorb the risk. And so what weâve seen with big computing in finance is a repeated occurrence of people using a big computer to radiate risk away from themselves until the society canât absorb it. And then thereâs some giant bailout and some huge breakage. And so it happened with Long-Term Capital [Management] in the â90s. It happened with Enron, and we saw a repeat of it in the events leading to the Great Recession in the late aughts. And weâll just see it happening again and again until itâs recognized that this pattern is just not sustainable.
1 decade ago in Quotes
The Morlocks could have descended from today's social network or hedge fund owners, while the ancestors of the Eloi undoubtedly felt lucky initially, as free tools helped them crash on each other's couches more efficiently. What is intriguing about Wells's vision is that members of both species become undignified, lesser creatures. (Morlocks eat Eloi, which is about as far as one can go in rejecting empathy and dignity.)"Who Owns The Future?"