In case you have been away or hiding under a log somewhere and haven’t noticed, the world economy is collapsing (again) because of many things left unchecked (again). The trigger this time is a virus. A virus probably transmitted directly from a bat to a human (1) in some place near Yuhan, China.
To me, luckily enough, the most immediate consequence is to watch most of our trading robots politely inform us that what is happening bring them outside of a safe prediction zone. We then follow as they slowly and silently shut themselves down. Temporarily, until they find a new normal. The minority of few other robots have recommended us to take larger positions following specific scenarios and assumptions, what we diligently (and very selectively) do. All of this happens while some of the liquidity shrinks. Most of us are not this lucky.
How did we get to this situation? What is so broken in the foundations of our society to allow an anticipated event, caused by a simplistic organism, to throw us, and our complex economic interactions, in such chaos?
The Trigger
In a matter of weeks, this virus known as the COVID-19 (Corona Virus Disease 2019) has now spread from a bat (1) in a distant place in China, to every single corner of the globe.
That’s what viruses do, and they excel at it. They spread. Viruses are small and deadly organisms that come in many different shapes and flavors (a figure of speech of course). Viruses are simple structures. When a virus is not attached to a host, they are just a simple viral genome inside a protein shell called a capsid. In addition to being very simple, all viruses have one other thing in common: they replicate. Really, really fast.
And that’s why they are so deadly: the combination of simplicity and the speed in which they replicate. The replication mechanism is something that seems to come out of some scary Alien movie. First, the virus finds a host organism. After finding his way into the host’s body, a virus attaches to one of the host’s cells and penetrates the cell wall membrane. After the wall membrane is breached, the capsid goes away, and the virus genome hijacks he host’s cell genetic machinery. The hijacking forces the host cell to replicate the viral genome, to produce a new virus outside of the host cell, from the host’s genetic material – a process that is called lysis.
The spawned virus, replicated out the original host cell, goes on to find another healthy cell, spawning a new virus, and so forth. A chain reaction that would go forever, turning the host body into a mutant mass of viral genetic material.
Disgusting, terrifying, but that’s pretty much it. If left unchecked, a single virus would end all complex life on earth.
The only reason it does not happen is because our complex bodies created an even more complex defense mechanism able to detect, mark, and destroy mutant cells like abnormalities. After a contamination chain starts, the detection starts. The body kills the mutant cells, before they can spread, and with that, the virus is neutralized. The time between the beginning of the infestation and detection is critical. If it takes too long, the body would be way too damaged to effectively fight the infestation.
The Prevention
The relationship between mutation, marking, and our immune system is what our superheroes, the scientists, a few centuries ago, relied on to develop a modern wonder called a vaccine. Vaccines give our bodies a “hint” on what to look for using weakened or killed virus that causes the infestation, stimulating our immune system to recognize and mark the threat, to later produce antibodies.
The process by which vaccines work has been pretty much the same for centuries (2), but since they deal with very basic constructs of life, they have to be tested. And re-tested. And tested again (3). From beginning to end a vaccine is approved through a very methodical, boring, scientific method to make sure it will not cause more harm than good (4).
Vaccines are not a “cure” for a disease. They prevent them. After you get yourself infected by a virus, you have to leave your body to fight the invaders and go with the old grandma’s recipe of “hot chicken noodle soup, water, and rest”, well, at least grandmas at the part of the globe I come from used to say that to us.
The Knee-Jerk Reaction: “Flatten the Curve”
Here you go. You have all the history behind the “flatten the curve” hashtags and conventional wisdom you see all over the place. Since our knowledgeable people were busy doing something else, and we took too long to follow the protocols in place to react to the threat, now we are racing to fit the time average human bodies will take to detect and mark the disease (or die), to the astronomical exponential rate of contagion of the virus (because that’s what virus do since the beginning of times), to the limited resources we allocate to healthcare.
It seems like an unattainable problem, but it is not. This is the type of event that we have been warned about, for decades in advance, as a very clear possibility. We had procedures, talent equipment, and technology in place to ring the alarms and deal with it.
For some bizarre reason, we decided to just fool ourselves, ignore what we know, and not do it.
Ad Hoc Science is Not Science
Nevertheless, we are, in essence, again, despite of all research, dealing with a well understood and catastrophic event, in a global scale, in an ad hoc basis.
Pieces and bits of the global havoc were still ricocheting in distant corners. Regardless of where you looked, the apocalyptic chaos, the confusion. The financial and emotional losses served as clear signs that wrong incentives and bad economic policies carry the same destruction potential of war arsenals.
History will record the consequences for posterity in the hopes that we can avoid the same mistakes in the future, but only if we can clearly understand the causes, and the complex process that led to the disaster.
Now we pause and ask a few very basic questions. Do we understand the causes? What is so new about this event that would grant it this kind of impact? Have we never dealt with such risks before? Is that something specific strain of virus that we could not anticipate?
Over the next several years the financial community took to the board, looking for causes and answers, trying to explain why and how we had fallen into such a trap. Especially at a time when we had access to latest and greatest technologies, and we were going over the peak of our intellectual enlightenment, amassed over centuries of the application of the scientific method. The same scientific method we now chose to ignore.
The majority of the answers, in essence, pointed to a justification along the lines of “we didn’t know better”.
Actually, the reality is that “we thought, and pretended, we knew better”
Yes, we keep pretending we know better. By the way, these quotes are the introduction chapter of my Ph.D. thesis, pages 15-16, written on or about 2014. I promise you I have no crystal ball. Only simple inference and old battle-tested science. History unfolding and repeating itself before our eyes.
Some basic numbers will make we question how well the underlying, obsolete gears of institutionalized science are churning right now. Google scholar returns about 14,500 publications in “covid-19” just in the first 2.5 months of 2020, yielding about 182 papers published (and peer reviewed!) per day. Who is reviewing all this material and data? Are these results fully reproducible? Why aren’t crowd-based scientific methods more prevalent by now? What does it take for science organizations to crush the bad incentives in place for closed, institutionalized science, and move on to a model of open, crowd-based, scientific investigation?
The same cause, the same catastrophic consequence: we have to reach a level of human development in which we agree to stop doing something that is not science, and calling it science.
We just cannot do science without methods and data. Ad hoc science is not science.
Human Lives? Or Human Livelihoods?
We are now watching an endless “scientific” media-driven debate of doctors against economists, asking the same question: What should come first? What should take priority? Human lives or human’s livelihood?
And what if, just if, they are not one of the same? What if livelihoods equals lives, by some quantifiable proportion? By how much? Why do we actually need to pick one? And why are we only asking these questions now, on national cable TV?
These are definitely not scientific debates – not in structure, not in nature, not in purpose.
The shallow nature of this pseudo-scientific debate are not coming out of nowhere. They are indeed consequential. In September of 2018, in an event to mark the 10 years of the great recession of 2008, my notes from a discussion in midtown Manhattan with Professor Robert Shiller, the Nobel Prize winner of 2013, on what is the highest risk of a repeat of a new crisis of the same caliber of the 2008 recession:
Would it be operational shorting of ETFs, as of last year worth more than $5T alone?
Or maybe a stock price bubble, at ~33 CAPE when average sits around ~16.5? Or the lack of proper tools and scientific methods to efficiently detect crises?
None of the above. The highest perceived risk is the systemic risk due to political instability and noise. One of the presenters pointed out that one of the high points of the 2008 great recession was on how quickly different countries coordinated efforts to control the crisis on a global level. For obvious reasons, we should not expect anything similar now. A second presenter highlighted the risks of what he calls “ultra-capitalism”: “not compassionate”, and the spread of “totalitarian leaders” as a factor that exacerbates systemic risk in a way we have never seen before.
Does it sound like the events unfolding in real-time? Again, I promise there are no crystal balls at play here. Just scientific observations, assumptions, and inference. Systemic risk, caused by political instability, influenced by a recession that ended 10 years ago, might be the highest risk of an upcoming recession. We go in full cycle, and chances are we might be looking at what was predicted.
The last great recession of 2008 cost by 2016 numbers about 15% of our GDP, cost every single American $70,000, and overall twice the total cost of the then 17-year-long war in Afghanistan, the longest war in American history. Those are staggering numbers by all accounts. That not to mention the lingering economic and political shock-waves we are still dealing with, globally.
And if history is any indication, let’s not forget that the ascent of Hitler to power in Germany is linked to the deterioration of the country’s economy. The same can be said about the association of the rise of the communism to the economics of industrial revolution. Would you like to account for the combined number of lives lost in second world war, plus the cold war, plus the political mass killings under communism regimes to the cost of lives due to preceding economic situations?
If left untouched, how would 2020 compare to 2008? And how would 2020 compare to the 1930’s?
How would you translate the ongoing recession of 2020 into lives?
Stop Bad Science. It is Hurting People.
It behaves like yet another vicious feedback loop. Bad science enables bad policies. Bad policies provide the justification for dishing out evidence-based planning. No planning, no science. More bad science.
Science done wrong does more harm than good. We can only come to experience how bad during crisis in large scale, like this one we are going through right now.
If it feels like an apocalypse it is because we enabled it. It is all ours.
- It could be either directly to a human, or through an intermediate host. It is not clear at this point.
- I didn’t want to complicate that too much, but it’s important to mention that Moderna (who is ahead in the vaccine development) is using an mRNA vaccine against the virus, and this is novel. A few other vaccines are testing novel mechanisms too.
- The severe immune system reaction that some individuals get does way more damage than the virus itself, and that is what puts them in critical care
- In the US, the usual approval process takes about 18 months. For the COVID-19 the process is being streamlined and shrunk into about 8-10 months.
Technofinancial Singularity 
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