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From California comes word that the summer programme of Singularity University (SU) ended this week. The idea of SU is simple enough. Put smart people together with the latest technology; let them figure out solutions to the world's problems. 'The Singularity' is an idea from Ray Kurzweil.
The gist of it is that computers will soon be smarter than humans; by the middle of this century they'll be smart enough to figure out how to get smarter and faster. No doubt many will go into finance. And no doubt many will make a fast buck. But will more smartness really make the world a better place? According to the singularists, increased brainpower will be able to solve all sorts of problems – from global climate change to market crises.
One of the biggest disappointments of the human race is that its finest tool has proved useless for its most important undertakings. The brain itself is just a dumb tool. It does what it's told to do; it doesn't ask questions. Put to the task of building a bridge, it does well. But no mechanical engineer has ever improved the old-fashioned kiss. The brain sets to work on every project as though it were building a bridge... as though it were an engineering job.
The more the brain takes command of a project, the dumber the man becomes. He limits himself to his logic, cutting himself off from the wisdom of intuition and the accumulated wisdom of 1,000 generations' worth of trial and error. He ends up coming down on his subject like a blacksmith's hammer on a fine Swiss watch. Set him to work on social, political or financial matters and the genius always smashes it to pieces.
For every problem brains have solved, they've caused two more. During the bubble period the big banks were the biggest employers of graduates from the world's top schools. Oxford, Cambridge, Harvard, Yale – the financial sector drew them in like flies to an open latrine. The financial industry made so much money it had a hard time explaining it. The smart dudes did not toil in the fields, neither did they spin. What did they do? They earned millions, bought BMWs and got dates with actresses. They claimed they were doing a fine job of allocating the world's wealth and making everyone better off.
But when the bubble blew up, it was apparent that the financial world they created was fragile and perverse. Not a single one of the largest Wall Street banks survived without government handouts. A news report this week tells us Americans were so damaged by the bubble époque that their discretionary spending has now been cut to levels not seen in 50 years. The geniuses wiped out a half century of economic progress in the richest, most successful economy the world has ever seen.
This comes decades after the economic engineers had already destroyed two of the most promising economies of the 20th century. What was the biggest single error of the last century? Central planning – a simpleminded attempt to fix the supposed evils of the natural economy. The smart central planners thought they could do a better job than individuals did for themselves. The idea was so alluring half the world fell for it. If the Nobel Committee had been on the ball they'd have given Karl Marx a prize.
If the bug had come from stupid people, smart people could have avoided it. They would have come through the period without permanent scarring. But the wheezy intellectuals behind it were too clever for their own good. They soon infected the top universities – and the government. They convinced almost everyone that central planning was the wave of the future and that anyone who stood against it was a bumpkin, parasite or a fool. Then, in the name of human progress, they took control in two of the world's largest countries and turned them into prison camps.
By the last decades of the 20th century it was obvious that central economic planning wouldn't work; it was obvious even to the planners. In both Russia and China, they gave up. But the brains didn't give up. We reported last week on the Nobel laureates' role in the blow up of 2007-2008. It was they who had developed the formulae and theories that set hearts fluttering in the financial sector. They believed they could tame risk – by calculation! They figured out the odds and worked out prices – to as many decimals as needed to put investors to sleep. And then along came a risk they had not foreseen – the risk that their own formulae were nothing but claptrap.
Meanwhile, the brains were at work in the public sector too. There, they were still pushing central planning, albeit on a much less ambitious scale than in the last century. In the West, government economists kept lending rates low to encourage consumption. In the East, they kept rates low to encourage production. And what ho! Now the world has too much debt and too much capacity.
And so the brains are back on the job. In China, the government is boosting production by lending at three times last year's rate. In America, the planners are trying to boost consumption by spending trillions more. In short, the fixers are trying to fix the problems caused by their fixes of the last two decades.
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