An October 21st interview on PBS Newshour with Nassim Nicholas Taleb, author of the book The Black Swan, and Benoit Mandelbrot, the mathematician who postulated the "the butterfly effect" in addition to his work with fractals.
Turbulence. We are in its midst. No one knows how severe it will eventually become.
This because we have set up global (financial, resource, trading) systems that try to stabilize it or mitigate against its effects, but when these globalized and interconnected systems fail, the resulting volatility and instability is actually worse (and we don't know how much) because of network effects.
Network effects are seen on the web -- where small inputs can be magnified by the power of the network to get greater results. But, as Mandelbrot says, no one knows how to model the behaviors when these systems get out of control. This is equivalent to weather forecasting. We can forecast where storms go but we cannot forecast why or where they form, or how severe they will become.
They discuss the network effects of the global economic situation, how the turbulence is magnified by the structure of the banking and global resource system. Tiny changes in oil supply cause huge price shifts, same with food. This occurred e.g. in the Niger Delta when MEND guerrillas could whipsaw global oil prices by $10 per bbl. by capturing one American oil worker. Fear magnifies network effects.
This is same field of assessment where feedbacks in the climate system e.g. will wreak havoc: effects magnify effects and they multiply on themselves.
This is what we are seeing right now in the global financial system.
Resources:
Taleb in NYT: Learning to Expect the Unexpected
Taleb at EDGE.org Learning to Expect the Unexpected
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