A Gloomy Concept of Models In Today’s World

Engineers routinely use mathematical models or discrete simulations to decide the details when designing and building something. They observe how a system works and interacts, how it can break and the signs that presage a breakdown, and most important, where the behavior goes non-linear and what parameters drove it into unpredictability and/or a breakdown.

When a system behaves unpredictably it can often be modeled reliably under those new parameters by using a different set of equations for when that system is running under those different parameters. Although sometimes the system just breaks. That’s useful information because you know that in those cases the system is not the right design to do the job.

So that’s pretty cut and dried. When nobody has a vested interest in a particular model, the people maintaining it can freely change things to bring the situation under control, like use a new design and revised models for how it works. Everybody wins in this case. The new system “works” under those new parameters. A good engineering example of this is the incredibly complex systems that we use for airplanes. There are there are thousands if not millions of models that engineers use to describe the behaviors of all the things needed to keep those things in the air, usefully and safely.

The problem is when certain individuals among us monkeys get so vested in a system and its models that they don’t want to discontinue using them. Usually this is because they are getting a lot of good stuff under that old system, and their models work well enough to use them to predict behaviors of the system. It is hard for them to accept that when parameters change to the point that a model is no longer useful, or when they need a radically different model to predict these new behaviors. These believers will insist on applying their previously useful models to an entirely inappropriate situation. Their models are wrong and the system that used to be so good to them is now a total stranger.

That’s what we have now around the weird and distorted version that we call “capitalism” here in the United States. This system calls itself market based, but in truth it’s only market based in areas where big players can make extra dough by jacking around with their pricing and demand; where big players can change the rules to suit themselves and push small players out whenever the little guys stand in the way of the money vacuums. The best and most extreme example of this is the hydrocarbon industry. Suddenly the combination of big players swinging their meat around plus the completely unexpected parameter of a dramatic downturn in consumption has strained the system so hard that it’s broken the models.

On the surface the oil & gas industry has looked like an open market since its inception in Pennsylvania and the Crimea in the mid-19th century. Little guys could run in and with backing, could make a killing until, oops, too many players entered the game, oversupplied the market, and drove prices down as the result. This was easy to model, so bigger players with bright ideas figured out how to add new parameters to their advantage. The rising of companies like Standard Oil, and the various cartels operating out of Russia, The Netherlands, and others found that they could gain some control over supply by buying up as many of the little guys as they could. They found that they had access to controlling certain parameters that hadn’t been visible before, like transportation between field, refinery, storage, and delivery. Then governments stepped in and in some cases tried to even the playing field, take some of the profits, or even nationalize the companies under their sway to become players themselves. By the early 1970s just pure politics was enough to add what had been entirely undetected parameters to their models. We called them embargoes and the models had to change again. But nobody thought these changes would wreck the entire industry. There would be losers and winners, but the pig trough was huge and still full, so it would go on.

Now with CV-19 combined with the Russian-Saudi attempts to use the old model to get their way, they’ve knocked their whole system into a whirl, to the point of endangering other markets and the entire world economy. Worst yet for them, is the fact that this radical downturn is a fast preview of what will be happening sometime in the near or further future; the discontinuation of hydrocarbons as the primary energy source for the world. Some people think that this will never happen, even in the face of global climate catastrophe due to its waste product of fossil CO2, but this threat is far deeper than anything that humanity has ever faced since the ice ages of 100,000 years ago or the black plague that killed off 40-60 percent of humanity.

This system certainly needs new models and those models had better accommodate the rapid handoff between conditions hosting the system. We’re starting to see periods of relative predictability interspersed with periods of extreme disruption, making the old O&G boom/bust patterns look like little fun things. The only way to navigate this would be to create models that acknowledge and use elements of other models, so that one state of existence can build up reserves to weather those other states of existence that aren’t friendly to the system at all.

More important is that those models need to anticipate a discontinuation or radical downscaling of the system itself, just like the buggy whip industry faced after automobiles became universally available. The hydrocarbon believers have been fat and happy with this old system but they’re about to be torn out by circumstances that their models can’t handle. Models rarely accommodate the destruction of the systems they are modeling.

I think the same thing is going to happen to the entire econimic system that the US instituted after WWII. Certainly the whole “just-in-time” supply system has been revealed as pitifully fragile when faced with parameters that weren’t accounted for in their working models. I fear that systems like these and others that we depend on, are failing simultaneously, and in such ways that there are no models to fall back on, to give insight on a path through the mess.

If only we could somehow convince the big players who are at the trough to step back and reexamine their investments, to give back to their peons like us a little bit more, at least enough to be able to weather the losses that are inevitably happening. To convince these big players that they have siphoned away so much currency over the past 40 years that they’ve also eliminated their own system’s protections. That maybe for a few decades they’d be better off taking a much, much smaller drink out of the pipes, and constructively engage in the planning and efforts while our economy readjusts itself to the new realities of unstable conditions of survival.

I fear they won’t. I think they’re going to keep doing what has served them so well over the years, ignoring the fact that every time this has been done in the past, the guillotines started coming out, as well as most of the systems that kept them wealthy also failed. Catharsis is actually a terrifying word. My worst fear is that their greed will drive humanity into the catharsis from losing half of its 7 billion souls, rapidly. Wealth will be a nostalgic concept.