Book Review: “Chaos Monkeys” and “The Nature of Value”
By Hazel Henderson © 2016
THE NATURE OF VALUE by Nick Gogerty, Columbia University Press, NY, 2014
CHAOS MONKEYS by Antonio Garcia Martinez, Harper-Collins, NY, 2016
Today’s global terrain of change and transformation needs a wider lens to encompass its deeper conceptual paradigm shifts. This underlying paradigm shift is from finance’s reliance on traditional economics based on assumptions of material scarcity, competition and conflict over resources extracted from the Earth and other species – to the new multi-disciplinary systems view of abundance, non-rival goods and services, knowledge-sharing, open-source cooperation and the underlying co-evolution seen in natural ecosystems.
Invasions into incumbent finance by the FINTECH 100, the some 5,000 blockchain-based Silicon Valley startups and cryptocurrencies continue accelerating due to global interconnectivity. Good reasons why conventional traders and asset-allocators need the two books The Nature Of Value by Nick Gogerty and Chaos Monkeys by Antonio Garcia Martinez, as well as Blockchain Revolution by Don and Alex Tapscott and information theorist Cesar Hidalgo in Why Information Grows: The Evolution of Order from Atoms to Economies.
Every Wall Streeter knows that information drives markets and is more valuable than fluctuating fiat currencies. Nick Gogerty, author of The Nature of Value, knows all this. He is a former Wall Street quant, employee at hedge fund Bridgewater Associates and London-based proprietary forex trader and his advice for current investors in this book is invaluable, Gogerty explains why price no longer captures value in today’s markets. We see mounting evidence of this fatal divergence, due to the flaws in economic models still driving too many financial decisions in business, government and investments focused on past price data. All are still backing into the future looking through this rearview mirror , since pricing models are usually based on history and assumptions based on past performance.
Many other critics have analyzed the failures of conventional finance and risk models which led to the crises of 2008 and beyond, yet few have the breadth of experience and inter-disciplinary knowledge of Nick Gogerty. He traverses the paradigm shift he personally experienced as he left Wall Street and finance and entered the territory of the Information Age and planetary knowledge. Now in earth systems science developed with NASA and other space agencies’ uses earth-orbiting satellites beaming real-time data to human decision-makers. This knowledge includes shifting to ecology and biological models with the understanding that that our planet’s income is the daily free photons for our Sun — the source of all life on Earth.
Gogerty sees today’s global transformation beyond price and financial models, as similar to my Mapping the Global Transition to the Solar Age (London,2014), with a Foreword by NASA Chief Scientist Dennis Bushnell. This kind of new worldview led Gogerty to his latest enterprise, Solar Coin. This new info-currency is a rewards program for enterprises, cities, communities and individuals who are capturing the Sun’s daily energy income. He says “Society now has the accumulated knowledge and capability to deliver cheap solar electricity that gets cheaper by the day. In many parts of the world, solar electricity is a cheaper and better alternative for energy (pages 93). I expounded this similar view in my The Politics of the Solar Age (1981,1988) after my six years in Washington as a government science-policy wonk – witnessing first-hand the struggle between incumbent fossil and nuclear energy interests and the budding renewable energy and efficiency sector. Today oil prices are risky on the upswings and downturns, amplifying litter gluts or shortages, driving the global shift to electric vehicles. Economics is usually politics in disguise and prices are distorted by subsidies, tax policies and the “externalizing” of costs still permitted on company and government balance sheets.
As Gogerty reminds us, knowledge advances through “inos” (units of innovative information) and according to the step functions in nature described by biologist Stephen Jay Gould, as “punctuated equilibrium“. Thus, changes in human societies and technologies follow this same process, as we see in today’s accelerating rates of step-function changes. Similarly, human perception is expanding in evolutionary leaps, due to today’s unprecedented connectivity and global interaction. Accountants are keeping up with these changes as they serve real world corporations now shifting to broader valuation models (www.cimaglobal.com). Meanwhile bloated ranks of the economics profession continue to bloviate at conferences and in academic ivory towers — still exhibiting theory-induced blindness and cognitive biases. Their cognitive capture of regulators, politicians and many legacy business leaders encouraged the complacency now shattered by the disruptive 2016 election campaign in the USA, the backlashes of Brexit and populist uprisings in the European Union (EU).
Gogerty offers his roadmap to asset-allocators on How To Invest in the Adaptive Economy– the sub-title of his book. I recently connected with Gogerty and other infotech innovators at an expert workshop on FINTECH and its disruptions of incumbent finance and legacy firms, convened by the UN Inquiry on Design of a Sustainable Financial System (www.unepinquiry.org). Many experts present agreed with the view that value and valuations in financial markets were now morphing beyond fiat currencies and over-burdened central banks — toward pure information-based transactions and trading on electronic platforms and barter-based exchanges.
The task now is to stitch together workable interfaces between the old currency-based systems and the newer information-based systems of exchange, so as to assure: trust, verification, custody, property, insurance and contracts. Many see the blockchain startups as providing such secure distributed ledgers as described in Blockchain Revolution and underpinning Solar Coin, Ethereum, Everledger and many other firms of the FINTECH 100 firms offering direct transacting and trading without intermediaries and financial middlemen. In my background paper for this workshop “FINTECH: Good and Bad news for Sustainable Finance“, I credit the firms now lowering barriers and democratizing access to financial services for those billions still left out: for payments, loans, transfers of remittances and funds, crowd-investing for local businesses, all at much lower cost. The bad news includes the cooption of these firms, platforms and blockchain models by incumbent giants including Citi (C), Barclays (BCS) and others, for the purpose of protecting their business models overlaying their byzantine layered IT systems purely to lower costs and increase profits by “paving their obsolete cow paths.”
The more fundamental bad news is in the prevailing currency-based worldview and price system — less a measure of real value under new conditions, and more a measure of human ignorance of how planet Earth actually functions. Therefore, the fintech disrupters’ value system must encompass the new realities and metrics of the Solar Age, or perpetuate the narrow pricing models that helped crash markets in 2008 and still pose threats globally.
Thus, we turn to examining the value-system and culture of Silicon Valley and most of its fintech startups and their many trivial “innovations”. In Chaos Monkeys, author Antonio Garcia Martinez, former Goldman Sachs trader, tells all in a frightening, hilarious look at the often infantile “frat boy,” testosterone-driven, emotional adolescents leading most of Silicon Valley’s startups, as well as giants Amazon (AMZ), Microsoft (MSFT), Facebook (FB), Twitter (TWTR), Instagram, Snapchat — all focused on Wall Street’s price system and currency-dominated values. Thus, most of these companies focus on competing for eyeballs to sell to advertisers and data-brokers and aspire only to cash out in high-multiple IPOs.
Martinez is of Cuban descent, rejecting both Fidel Castro’s communism and Silicon Valley capitalism with equal disdain. He is deeply immersed in in human history, philosophy, literature, art and culture and brilliantly juxtaposes these historical insights to illuminate the mindless sophistries of the Valley. Chaos Monkeys is a great read, with all the blow-by-blow personal encounters, as a startup CEO of AdGrok, and its deals with Y Combinator, venture capitalists on Sand Hill Road and various angel investors. He describes working with the bureaucrats at Facebook as fascism with their slavish allegiance to its totalitarian founder “Zuck”. This “Big Brother “ culture is also behind the algorithms that now run our lives and circumscribe our experience , including the hyping of the Internet of Things (IoT) which now invades our homes, monitors our babies and controls our identities.
After succumbing to all the “big money“ temptations in the Silicon Valley lifestyle, author Martinez rejects them and returns to his sailboat in San Francisco Bay. The deeper knowledge and broader values he expresses in Chaos Monkeys have now made him a literary icon and best-selling author. Such a path was also followed by author Michael Lewis – from a Wall Street insider at Salomon to the success of “Flash Boys” and the movie of his ”The Big Short”. Let us hope that Silicon Valley’s values evolve beyond infatuation with money and technological trivia toward deeper knowledge of humanity’s current condition on this planet, before any further takeovers of incumbent finance.