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I feel that a 100% efficient system is not resilient. Even minor disruptions in subsystems lead to major breakdowns. There’s no room to absorb shocks. We saw a

I feel that a 100% efficient system is not resilient. Even minor disruptions in subsystems lead to major breakdowns. There’s no room to absorb shocks. We saw a drastic version of this during COVID-19 induced supply chain collapse. Car manufacturers had built near 100% just in time manufacturing that they couldn’t absorb chip shortages and it took them years to get back up. It also leaves no room for experimentation. Whatever experiment can only happen outside a system not from within it.

tacitusarc 2y ago
There is a fundamental tension between efficiency and resilience, you are completely correct. And yea, it’s a systems problem, not limited to tech. There is an odd corollary, which is that capitalistic systems which reward efficiency gains and put downward pressure to incentivize efficiency, deal with the resilience problem by creating entirely new subsystems rather than having more robust subsystems, which is fundamentally inefficient.
- hyperadvanced 2y ago
  This is exactly the subthread of this conversation I’m interested in. Is what you’re saying that capitalism breaks down resilience problems into efficiency problems? I think that’s an extremely motivating line of thinking, but I’ll have to do some head scratching to figure out exactly what to make of it. On one hand, I think capitalism is really good at resilience problems (efficient markets breed resilience, there’s always an incentive to solve a market inefficiency), on the other (or perhaps in light of that) I’m not so sure those two concepts are so dialectically opposed
  - tacitusarc 2y ago
    To understand the effects, we first have to take a step back and recognize that efficiency and resiliency problems are both subsets of optimization problems. Efficiency is concerned with maximizing the ratio of inputs to outputs, and resiliency is concerned with minimizing risk. The fundamental tension arises because risk mitigation increases input costs. Over a given time horizon, there is an optimal amount of risk mitigation that will result in maximum aggregate profit (output minus input, not necessarily monetary). The longer the time horizon, the more additional risk mitigation is required, to prevent things like ruin risk. But here’s the rub: competition reduces the time horizon to “very very short” because it drives down the output value. So in a highly competitive market, we see companies ignore resiliency (they cannot afford to invest in it) and instead they get lucky until they don’t (another force at work here is lack of skin in the game). The market deals with this by replacing them with another firm that has not yet been subject to the ruinous risks of the previous firm. This cycle repeats again and again. Most resilient firms have some amount of monopolistic stickiness that allows them to invest more in resiliency, but it is also easy to look at those firms and see they are highly inefficient. The point is that the cycle of firms has a cost, and it is not a trivial one: capital gets reallocated, businesses as legal entities are created, sold, and destroyed, contracts have to be figured out again, supply chains are disrupted, etc. Often, the most efficient outcome for the system is if the firms had been more resilient. So there is an inefficient Nash equilibrium present in those sort of competitive markets.
    - hyperadvanced 2y ago
      That’s a good clarification about firms vs. the broader system. I think that’s a pretty good breakdown, overall, and fits well with the general notion that capitalism is resilient, not efficient, by offloading efficiency onto smaller entities which are efficient, not resilient. You could compare to command economies where a firm failure is basically a failure of the state, and can destabilize the future of the entire system.
kelseyfrog 2y ago
This is coincides with my headcannon cause of the business cycle. 1. Firms compete 2. Firms either increase their efficiency or die 3. Efficient firms are more susceptible to shocks 4. Firm shutdown and closures are themselves shocks 5. Eventually the system reaches a critical point where the aggregate susceptibility is higher than the aggregate of shocks that will be generated by shutdowns and closures 6. Any external shock will cause a cascade There's essentially a "commons" where firms trade susceptibility for efficiency. Or in other words, susceptibility is pooled while the rewards for efficiency are separate.
- NeoTar 2y ago
  It sounds similar to how animal/plant species often work. A species will specialise for a niche, and outcompete a generalist. But when conditions change, the generalist can adapt and the specialist suffers.
- yannis 2y ago
  Good analysis, but one also needs to look at the definition of `efficiency`, what is your definition of efficiency in this context.
  - kelseyfrog 2y ago
    The ability to do more with fewer resources. Profit is a great starting point when answering, "What is efficiency to a firm?"
- Eddy_Viscosity2 2y ago
  But in practice we see that: 1. Firms compete 2. Some firms get ahead 3. Accrued advantages to being ahead amplify 4. A small number of firms dominate 5. New competition is bought or crushed 6. Dominate firms become less efficient in competition-free environment
  - kelseyfrog 2y ago
    They aren't mutually exclusive. And, not xor.
maximus-decimus 2y ago
I mean, car companies also just straight out cancelled their chip orders because they initially thought people would stop buying cars during COVID.
deleted 2y ago
[deleted]
taneq 2y ago
There was a sci-fi series I read (I want to say by Alastair Reynolds) which talked about planet-bound civilisations having an innate boom-and-bust cycle where the civilisation would inevitably get more and more efficient at utilising resources, while thereby becoming more fragile and susceptible to system shocks. It would then collapse and eventually the survivors would rebuild.

tacitusarc 2y ago

There is a fundamental tension between efficiency and resilience, you are completely correct. And yea, it’s a systems problem, not limited to tech. There is an odd corollary, which is that capitalistic systems which reward efficiency gains and put downward pressure to incentivize efficiency, deal with the resilience problem by creating entirely new subsystems rather than having more robust subsystems, which is fundamentally inefficient.

hyperadvanced 2y ago
This is exactly the subthread of this conversation I’m interested in. Is what you’re saying that capitalism breaks down resilience problems into efficiency problems? I think that’s an extremely motivating line of thinking, but I’ll have to do some head scratching to figure out exactly what to make of it. On one hand, I think capitalism is really good at resilience problems (efficient markets breed resilience, there’s always an incentive to solve a market inefficiency), on the other (or perhaps in light of that) I’m not so sure those two concepts are so dialectically opposed
- tacitusarc 2y ago
  To understand the effects, we first have to take a step back and recognize that efficiency and resiliency problems are both subsets of optimization problems. Efficiency is concerned with maximizing the ratio of inputs to outputs, and resiliency is concerned with minimizing risk. The fundamental tension arises because risk mitigation increases input costs. Over a given time horizon, there is an optimal amount of risk mitigation that will result in maximum aggregate profit (output minus input, not necessarily monetary). The longer the time horizon, the more additional risk mitigation is required, to prevent things like ruin risk. But here’s the rub: competition reduces the time horizon to “very very short” because it drives down the output value. So in a highly competitive market, we see companies ignore resiliency (they cannot afford to invest in it) and instead they get lucky until they don’t (another force at work here is lack of skin in the game). The market deals with this by replacing them with another firm that has not yet been subject to the ruinous risks of the previous firm. This cycle repeats again and again. Most resilient firms have some amount of monopolistic stickiness that allows them to invest more in resiliency, but it is also easy to look at those firms and see they are highly inefficient. The point is that the cycle of firms has a cost, and it is not a trivial one: capital gets reallocated, businesses as legal entities are created, sold, and destroyed, contracts have to be figured out again, supply chains are disrupted, etc. Often, the most efficient outcome for the system is if the firms had been more resilient. So there is an inefficient Nash equilibrium present in those sort of competitive markets.
  - hyperadvanced 2y ago
    That’s a good clarification about firms vs. the broader system. I think that’s a pretty good breakdown, overall, and fits well with the general notion that capitalism is resilient, not efficient, by offloading efficiency onto smaller entities which are efficient, not resilient. You could compare to command economies where a firm failure is basically a failure of the state, and can destabilize the future of the entire system.

kelseyfrog 2y ago

This is coincides with my headcannon cause of the business cycle. 1. Firms compete 2. Firms either increase their efficiency or die 3. Efficient firms are more susceptible to shocks 4. Firm shutdown and closures are themselves shocks 5. Eventually the system reaches a critical point where the aggregate susceptibility is higher than the aggregate of shocks that will be generated by shutdowns and closures 6. Any external shock will cause a cascade There's essentially a "commons" where firms trade susceptibility for efficiency. Or in other words, susceptibility is pooled while the rewards for efficiency are separate.

NeoTar 2y ago
It sounds similar to how animal/plant species often work. A species will specialise for a niche, and outcompete a generalist. But when conditions change, the generalist can adapt and the specialist suffers.
yannis 2y ago
Good analysis, but one also needs to look at the definition of `efficiency`, what is your definition of efficiency in this context.
- kelseyfrog 2y ago
  The ability to do more with fewer resources. Profit is a great starting point when answering, "What is efficiency to a firm?"
Eddy_Viscosity2 2y ago
But in practice we see that: 1. Firms compete 2. Some firms get ahead 3. Accrued advantages to being ahead amplify 4. A small number of firms dominate 5. New competition is bought or crushed 6. Dominate firms become less efficient in competition-free environment
- kelseyfrog 2y ago
  They aren't mutually exclusive. And, not xor.

maximus-decimus 2y ago

I mean, car companies also just straight out cancelled their chip orders because they initially thought people would stop buying cars during COVID.

deleted 2y ago

[deleted]

taneq 2y ago

There was a sci-fi series I read (I want to say by Alastair Reynolds) which talked about planet-bound civilisations having an innate boom-and-bust cycle where the civilisation would inevitably get more and more efficient at utilising resources, while thereby becoming more fragile and susceptible to system shocks. It would then collapse and eventually the survivors would rebuild.