Complexity theory for regulators

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In the last few weeks I’ve been involved in three workshops/symposia which, in different ways, were all about a single topic: evidence-based policy and decision-making. (The subjects were: evidence-based policy in learning technology; the future of research-intensive universities; and understanding social networking.) One thought that has surfaced in all three events is that they were at least partly about making decisions in very complex social systems — which of course leads to an obvious question: can complexity science (or what one might call “social physics”) be of any use in this context?

I did some initial speculation about this in Chapter 5 of my new book, but worried that I’d lose my target audience if I delved too deeply into graph theory etc., and so left it at the speculative level. But the idea persists: can complexity science help in policy formation?

This morning I came on a fascinating article by two German physists, Tiago Peixoto and Stefan Bornholdt, who have modelled pricing behaviour in certain kinds of distributed markets — e.g. that for petrol at the pump. The most intriguing outcome of their work is the idea that cartel-like behaviour can be an emergent property of these markets.

Why is this interesting? Well, to date, our instinctive regulatory responses to situations where a large number of suppliers magically agree on a price is to assume the existence of a cartel. No smoke without fire, and all that. But if Peixoto and Bornholdt are right, then that may not always be true.

The dynamics undergoes [sic] a transition at a specific value of the strategy update rate, above which an emergent cartel organization is observed, where individuals have similar values of below optimal trustworthiness. This cartel organization is not due to an explicit collusion among agents; instead it arises spontaneously from the maximization of the individual payoffs. This dynamics is marked by large fluctuations and a high degree of unpredictability for most of the parameter space, and serves as a plausible qualitative explanation for observed elevated levels and fluctuations of certain commodity prices.

Fascinating stuff. Interesting also that the authors don’t see “dynamics” as a plural noun. Perhaps they regard it as the same as ‘economics’ or ‘mathematics’?

Apple: the new Microsoft

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Those who are salivating about Apple’s new tools for creating iTextbooks ought to first of all have a read of this.

For nearly two years, Apple has wooed digital book publishers and authors with its unconditional support of an open, industry-leading standard. (The EPUB standard is managed by the International Digital Publishing Forum [IDPF], of which Apple Inc. is a member.)

With last week’s changes, Apple is deliberately sabotaging this format. The new iBooks 2.0 format adds CSS extensions that are not documented as part of the W3C standard. It uses a closed, proprietary Apple XML namespace. The experts I’ve consulted think it deliberately breaks the open standard.

I’m inclined to agree. Like Mr Bott, I see this as a variant of Microsoft’s old strategy of “embrace, extend and extinguish”.

The tyranny of hindsight

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This morning’s Observer column about Kodak’s demise.

A good way of inoculating yourself from the wisdom of hindsight is to read Clayton Christensen’s seminal book, The Innovator’s Dilemma, which is the best explanation we have of why and how successful firms can be undermined by disruptive innovations – even when they appear to be doing everything right: listening to their customers, watching the marketplace, and investing in research and development.The really sobering thought to emerge from Christensen’s book is that good decisions by great managers can still lead to corporate disaster. The reason is that while big companies are often good at fostering “sustaining” innovations – ones that enhance their positions in established markets – they are generally hopeless at dealing with innovations that completely disrupt those markets.So the question that Kodak’s demise raises in my mind is this: would any of us have done any better in 1976 after our R&D guys had come up with an idea that would cannibalise our core business and reduce our margins to near zero?

Blackout

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It’s strange how shocking this is. It’s a reminder of how dependent we have become on our networked environment. As a sardonic colleague put it this morning, some of his students are going to be mightily discombobulated today when they realise that (a) an essay is due and (b) Wikipedia isn’t available. But that’s too cynical. He and I use Wikipedia every day, and it often saves us a lot of footnoting and explanation.

The blackout served a useful purpose — that of drawing attention to the SOPA and PIPA Bills now before the US Congress. I wrote about these on January 8. Joi Ito, Director of the MIT Media Lab, has posted a really good essay explaining why he — and the Lab — oppose the Bills.