Archive for June, 2012

Opaque fragile systems dominate.

June 11, 2012 1 comment

“Out of the crooked timber of humanity no straight thing was ever made.”

All systems compete against each other for users.  I believe opaque fragile systems dominate transparent robust systems.  First I believe individuals choose shrouded systems which more tightly bounding their rationality.  Second I believe even when individuals know a system is fragile they believe they will not be victim to its fragility; the greater fools will be.

Firstly sophisticated consumers like price discrimination while myopic consumers are ignorant they are being discriminated against or unwilling to commit the time needed to exploit the system.  Information asymmetry is a feature of the system not a bug.

See “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets” for more detail.

Second sophisticated individuals, even when they perceive the system to be fragile, often subscribe to the the greater fool theory.  They feel they will win out over the greater fools, but they do not understand how tightly bound their rationality has become due to the layers upon layers of shrouding.  The myopics of course are largely ignorant of the risks.

This is a very pessimistic view that offers no solution to the problem of system fragility.  I think though most solutions to fragility only create larger equally fragile systems.