Der Untergang der Titanic. Willy Stöwer (1912)

Harbinger of Things to Come?

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Since 2002, I have worked for the IT department of a government agency. In 2006 or 2007, a software upgrade of the disk controllers on the principal systems went wrong. For a week, they were out of operation. It probably was the biggest crisis in the agency’s history. I was a database administrator working on a systems renewal project at another location. Others dealt with the issue. I knew the systems were offline but didn’t know how serious it was. After a week, the telephone rang at home. It was 9 PM.

My wife took up the phone. It was the IT director. He said there was a situation and asked me to come to the office. His voice reflected fear. ‘As if the Titanic had hit the iceberg,’ my wife later noted. I went to the office in a hurry. I looked at the logfiles, found the error messages, typed them into the Google search bar, and found a document on the Internet with the remedy. I repaired the failures and brought the systems online. Board members and senior managers were standing around me, watching me typing. In 2007, few people knew you could use Google for this.

Then, I learned that we had not made a backup for a week and that the mirror copy was also offline. You probably know why backups are needed, but you may not know what a mirror copy is. If you own a computer or a mobile phone, your data is on a device like a disk. If the disk fails, your data may be gone forever. If you lose some photographs of your late cat, you might feel sad about it, but after a few years, you get over it, perhaps after consulting your psychiatrist and taking a lot of pills.

Corporations can’t lose their data. That would finish them. Their business is their data. Without their data, they are out of business. If you have a backup, only the data from after the latest backup may be lost, but that may still finish you, most notably if you have not made a backup for a week. We were a government agency, so it would not have bankrupted us. But it would have caused a national political scandal.

That is why corporate computers come with multiple groups of disks on different sites. If one group catches fire or stops operating because of a failed software upgrade, the data is still available on the other groups. These groups are called mirror copies. We had two groups, one of them being the original and the other being the mirror. You can imagine my bewilderment. We had no backup, and the mirror copy wasn’t available. So much had gone wrong, so it was a miracle that I could recover the data. We were on the brink.

An even greater surprise was yet to come. The managers and the board wanted to return to business as usual and run the backlog of batch jobs. Then I said, ‘This is perhaps the most important advice I will ever give in my entire career. Don’t start the batch jobs yet. We are on the proverbial edge of the precipice. Running the jobs might just push us over. Everything went wrong for a week and there is no guarantee whatsoever that it will be all right now. We should bring the mirror copy back online and make a backup first.’

They planned to ignore my advice. Bringing the mirror copy back online and taking a backup would take eighteen hours of precious time. It was a lot of data to back up, as it was everything we had. I was a low-ranking official while the IT director had claimed there was nothing to worry about. I kept stressing that making a backup was the right thing to do. ‘If something goes wrong we could be finished,’ I told them. It was the worst crisis ever. And so, I pressed for an extensive check-up to see if everything was in order. On that, they could agree.

During the check-up, I found another failure everyone had overlooked. That scared the managers and the board. They backed off and subsequently followed my advice. The operators brought the mirror copy online and made a backup before we resumed normal operations. In this way, rational decision-making prevailed. Nothing went wrong anymore, but no one could have known that beforehand. And I wasn’t a psychic either.

The audit department later evaluated the crisis. The auditors noted that after a week of failures, all problems suddenly vanished. They found that hard to believe already. What they found even more difficult to fathom, and they stressed the inconceivability of it during a meeting, was that after a week of irrational decision-making, sanity suddenly took hold as we had brought the mirror copy back online and made a backup. They couldn’t figure out why that happened. Our management had kept them in the dark about that.

If it had gone wrong, the agency probably would have survived. Most operations would likely have had to stop for several weeks—that had already happened for a week—and it may not have been possible to recover all the data. That would have made the headlines and the news. It never came to that. When a local newspaper smelled a rat, the board could tell the newspaper the situation was under control and that the data was safe.

It didn’t help my career. Somewhat later, the other senior database administrators received a higher salary grade. Years later, I switched to Java programming when there were too many database administrators. My managers told me I did well and rewarded my efforts by proposing a lower salary grade. That was unusual and possibly unprecedented, so I told them to go to hell.

The incident made me worry about my impression. It suggested my managers didn’t believe I was a useful employee, which angered me. I wrote a letter of complaint detailing what happened during the crisis and requested that it be added to my personnel file. I worked for a government agency and didn’t have to fear dismissal. Perhaps promotion was out of the question, but I didn’t hope for a higher rank.

Your career depends on having the right friends in high places. Managers had diverging views about me. Those who focused on results held me in higher regard than those who occupied themselves with people, teamwork and social events. During a crisis, when rational thinking is of the essence, our social nature can be fatal. There is too much gossip and small talk, and we ignore the elephant in the room. Anyone who does that will not win a popularity prize. It is also why politics in democracies can fail in critical situations.

Featured image: Der Untergang der Titanic. Willy Stöwer (1912). Wikimedia Commons. Public Domain.

Confucius. Gouache on paper (ca 1770)

Fairness Matters

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Working in groups and sharing

Humans are social animals who work in groups. We share the workload and the fruits of our efforts. We agree on who does what and who gets what. Otherwise, we can’t work effectively together. Fairness comes into play here. Violations of fairness provoke strong feelings. Infants already have a notion of fairness. What is fair isn’t always straightforward. Some people contribute more to the group effort than others, or their contribution is more valuable. And some people have more needs than others.

We feel strongly about fairness. Fairness is about how social animals value the cooperation of their partners. In a study, monkeys received less valuable rewards for good behaviour than their partner, for instance, less tasty foods. These apes rejected the reward and became angry. If you feel your partner gets too much and you too little, you become frustrated and might look for another partner.1

Children have a sense of fairness early on. Giving one individual more than another without reason can surprise toddlers as young as fifteen months old. They looked longer at the scene. Children also wish to see you help those they like and harm those they dislike, for instance, children who do not share their food preferences. Young children already prefer people similar to them (the in-group) to children who are different (the out-group).1

We think those who contribute more to the success of a group deserve more. If the success of a venture depends on one person’s skills or efforts, we think it is fair that this individual receives a larger share. When we cooperate, we are more willing to share, but in competition, we accept inequality. In sports, the winner gets everything. But if a team wins, the members share the prize, even if some talented group members decide the outcome.

Innate or learned

Fairness is also about how we treat each other. The golden rule says you should treat others the way you want them to treat you. But is it innate or learned? If our sense of fairness is innate, moral rules that apply to everyone. If it is learned, fairness is a matter of taste. If someone is helpful, we react positively. If someone acts harmfully, we react negatively. That conduct is already present in infants. An experiment with toddlers with a friendly, helpful puppet and a mean, harmful puppet showed that toddlers more often gave the friendly puppet its preferred toy.1

Some of our ideas regarding fairness are learned or cultural, and some are innate or natural. Researchers tested children in seven cultures (Canada, India, Mexico, Peru, Senegal, Uganda, and the US). They could get candy by pulling a lever. One child pulled the lever and could give both children the candy or drop the candy in a box, so both got nothing. The rewards were unequal, sometimes to the advantage and sometimes to the disadvantage of the lever-pulling child.1

The children rejected a bad deal. They accepted an unfair advantage by receiving more than the other child. But they didn’t agree to an unfair disadvantage by getting less than the other child. In some cultures, older children also reject unfair advantageous options. It happened in Canada, Uganda and the US. Refusing a bad deal could be human nature, but forgoing a good deal that is unfair could be learned and cultural.1

The mistakes we make

Are poor people responsible for their choices? And what is the influence of choice? During an experiment with pairs of students who did a task together, one received the pay. It was a random pick. Those who received the pay could choose how much they would give the other. Receiving pay was a matter of luck, and most people believed it was unfair, so they were often willing to share.

Adding a choice, for instance, between getting a small reward or participating in a lottery to get the full reward, changes the picture. The participants were less willing to share. If both participants opted to participate in the lottery, we think it is fair that one of them wins. People often think poverty is a choice, as poor people decide not to get an education or divorce and, as a result, cannot work full-time.1

They made these choices, but what were the alternatives? Possibly, the small reward was not enough to live off, so you had to participate in the lottery to have a chance of paying the bills. Or, the alternative to divorce was living with an abusive spouse. Perhaps a good education was too expensive for you, or you were unqualified. But poor people also have options and can influence their lives.1

If we do not reap the consequences of our choices, choices don’t matter. And that is also unfair. That becomes clearer if two individuals have similar opportunities but make different choices. If one decides to spend his money while the other person saves for retirement, we think it is unfair to tax the latter to pay for the retirement of the former. In this case, it might be better not to have options and a mandatory retirement savings scheme.

Liberals in the United States focus on equality so different groups get equal outcomes, but ethnic differences in health, education and wealth remain. Some ethnic groups work harder, divorce less and invest more in their children’s education. Conservatives think working hard and making the right choices should make you better off. Some societies invest in equal opportunities, for instance, by investing in the education of underprivileged children, but conservatives do not like to pay taxes for that.

Luck is everywhere

Your place of birth, the upbringing you received, your education, and the opportunities you had in life determine for a large part your success in society. Successful people usually think their brilliance and hard work brought them there. That is half the story. Your efforts matter, but your talents are a matter of luck. Luck conflicts with fairness. There are many other instances of luck. Some live long, some die early, some have love, some are alone, some are healthy, and some are sick. Luck is part of life. Luck is a privilege. And you may only realise that when you are an unlucky person.

If we can eliminate luck, that would be fairer. But not rewarding talent, even when it is the result of luck, can result in bad outcomes. If a group’s success depends on the brave, the hard-working or the talented, we think they deserve an extra reward. It can inspire them to do their utmost. It is why low-skilled labourers receive low wages. Wages above the market price can bankrupt the business if there is intense competition. That is why minimum wages exist to mitigate the unfair consequences of luck.

Fairness connects to cooperation and inclusiveness. Inequality relates to competition, winners and losers. And we need cooperation as well as competition. In a village economy with little outside trade, villagers can distribute the fruits of their endeavours in ways they see fit. They can weigh issues that the market cannot, such as effort. There are exchanges where members can trade goods and services outside the market economy. But people with sought-after skills often get a better deal in the market.

The market as a party pooper

Economics is about competition, collaboration and contributions. We accept unequal pay for different tasks. Scarce talent can determine the success of an enterprise. Talented people have a better bargaining position than the expendable. We also accept that unsuccessful businesses fail if we do not buy their products. And we think workers deserve a minimum wage, regardless of the market value of their contributions.

Fairness connects to cooperation and inclusiveness. Inequality relates to competition, winners and losers. In a village economy with little outside trade, villagers can distribute the fruits of their endeavours in ways they see fit. The community movement has started exchanges where members trade goods and services outside the market economy. But people with sought-after skills usually get a better deal in the market.

Fairness is about rights and how rewards relate to contributions. It is about how we value contributions and support those who contribute little. The market principle is not always fair but can promote efficiency. For instance, if farmers grow too many carrots and too few bananas, the price of carrots drops and of bananas rises, making people eat more carrots and farmers grow more bananas.

Consumers and producers solve the carrot surplus and the banana deficit by rewarding carrot-eating and banana-growing efforts. It ensures that there is enough food, reduces waste and promotes an alignment of production to our needs and preferences. If farmers grow more carrots, poverty is their reward. Choices do have consequences, so we have food on the table. Markets are not the only way to make people reap the consequences of their choices.

Justice and fairness

The past casts a shadow over the present. We live with the consequences of colonialism, slavery and feudalism. Colonialism and exploitation, including the slave and opium trade, helped to make Western countries rich. This wealth accrued with interest as capitalists invested that surplus in new capital. People in Western countries still enjoy some advantages of colonialism and exploitation. Exploitation alone cannot explain wealth differences between countries. And so, the issue of fairness is not straightforward.

The alternative of colonialism could have been an absence of that surplus as it required trade relations with other continents or modern organisation methods. For instance, the surplus of spice trade came from the price Europeans were willing to pay for these spices. Europeans also controlled the trade routes and collected the surplus. Capital and wealth require saving and investing. The colonies had not yet developed capitalism, so they would not have invested in new means of production as European capitalists did.

Organisation and trade contribute to surplus value, but those in control take that surplus. And some trade practices came down to theft. For instance, the British East India Company collected taxes in India and used a portion to purchase Indian goods for British use. Thus, instead of paying for them, British traders acquired these goods for free by buying them from peasants and weavers using money they had taken from them. Through this scheme and other scams, the British stole trillions of dollars from India.2

Had that theft not occurred, the Indian peasants and weavers would have been better off. But if they didn’t have a capitalist mindset like the English merchants, they would not have invested their money into means of production and research and wouldn’t have increased India’s capital base. The wealthy British traders likely invested parts of the proceeds of their thievery on the London Stock Exchange into new ventures like factories running on steam engines.

History advantages some people and disadvantages other people. In India, the caste system determines what jobs you can do. Some women in India have to clean toilets for $ 1,50 per month because of the caste in which they were born.1 The Indian caste system is a relic from the past. Some inherit large estates and think they deserve them because their grandparents wisely invested the money stolen from poor Indian farmers, while others inherit nothing. In all societies, some groups have fewer opportunities than others.

The powerful make the rules

The powerful make the rules. The tax codes are an example. From the 1920s onwards, multinational corporations emerged, and the question became how to distribute the wealth they created. The League of Nations addressed that issue. Powerful nations like Great Britain, France and Germany dominated the discussion and agreed on rules that suited their interests. They did not grant taxing rights to their colonies.1

The United States also played a crucial role. The tax codes allow corporations to pretend that the profits came from a tax haven like Bermuda instead of the countries where the production and the sales occurred. This corrupting situation undermines democracy and the rule of law everywhere. To the rich, different rules apply than to the rest of us. In 2010, wealthy people hid 21 to 32 trillion US dollars in tax havens.

We think it is fair that you can start a business, and if it is successful and contributes to our well-being, you should be able to get rich. But we believe it is unfair that some people inherit large estates or that individuals become billionaires in a winner-takes-all industry. And we think that the wealthy and multinational corporations should pay taxes. And we believe that receiving an income without working for it usually is not good.

The corruption debate is often about petty corruption that contributes to poverty and inequality but ignores the tax havens and the massive white-collar corruption industry surrounding it. Tax haven countries like Great Britain, the Netherlands, Luxembourg and Switzerland help the elites avoid paying taxes. Many people know the system is unjust but believe we can’t change it. But perhaps we can.

From moral philosophy to revolution

Fairness is the primary concern of moral philosophy. The Golden Rule is a fundamental moral rule. It appears in most ancient religions and traditions. Confucius formulated it as what you do not wish for yourself, do not do to others. Starting with Plato, philosophers tried to find a rational foundation for morality. Today, we know that humans are social animals, and moral systems help us to survive. Our nature allows for different cultural values, but our ethical systems share the same ingredients.

Western moral philosophy has two main traditions. A pragmatic school prevalent in Great Britain and the United States claims that ethical rules are an agreement between group members. Moral rules are thus a cultural phenomenon. David Hume was one of its most prominent philosophers. And outcomes might be more important than intent. If you kill two people by accident, that might be worse than murdering one person. In this tradition, freedom means doing as you please.

On the other hand, you have the idealist, notably German, continental European school. It claims that moral rules can be absolute and apply to everyone, thus universal. A prominent philosopher in this tradition was Immanuel Kant, who was a deeply religious person. He tried to find a rational foundation for morality. In this view, intent might be more important than outcomes. Accidentally killing two people might not be as bad as murdering one. Freedom means liberating yourself from depraved impulses and becoming a rational and morally upright person.

It is thus not entirely a coincidence that Adam Smith lived in Great Britain and that Karl Marx and the Marxist Frankfurt School came from Germany. Heteronomy is acting on desires rather than reason. To Kant, that is reprehensible as you do not behave like you should. Karl Marx believed there was heteronomy in legitimising exploitative social relations. Marx claimed history is the outcome of our unenlightened self-interest, such as greed, and our willingness to trust the fantasies of the elites ruling society. Our unwillingness to be rational by ruthlessly reasoning from the evidence and acting upon it blocks a better future. Religion was opium from the masses, Marx claimed, as it prevented people from seeing the truth and taking action.

The French had already tried such ruthless reasoning from the evidence under the banner of liberty, equality, and brotherhood. Taxes in France were low overall compared to Great Britain, but the elites didn’t pay them, so the burden fell on the peasants and the middle class. And so, revolutions are not only about ideals like liberty, equality, and brotherhood. The fairness of taxes often plays a significant role in revolutions. It happened in England during the Glorious Revolution and in the American colonies during the American Revolution. The French Revolution rid the country of the corrupt old regime and improved the quality of the state but at the cost of bloodshed and war.

While the French Revolution and its aftermath occupied Europe, pragmatism prevailed in Great Britain. One of the leading British conservative politicians, Edmund Burke, tried to find out what works in practice. No matter how good your idea might seem, you can be wrong. Burke saw the need for reform but only pushed for it when necessary, as changing the status quo was dangerous. The French Revolution underpinned his point. But, the conditions in Great Britain and France were very different. After the Glorious Revolution, the British state was responsive to the wishes of taxpaying citizens. Gradual reforms were not an option in France as its entrenched elites didn’t allow them. The current state of the world resembles France before the French Revolution.

Featured image: Confucius (possibly the inventor of the Golden Rule)

1. The Price of Fairness (film). Alex Gabbay (2017).
2. Independence Day: How the British pulled off a $45 trillion heist in India. The India Times (2023).

Model Thinking

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The limitations of one-dimensional thinking

The Hegelian dialectic is about argument, counterargument and resolution. It locks us up in thinking along a one-dimensional line with two opposites. Perhaps the best solution is outside that line. The debate about capitalism versus socialism dragged on for over a century and has dominated world politics. But markets and states can’t create agreeable societies on their own. Much of politics is theatre rather than reasoning and solving questions. We often think of good versus evil rather than the advantages and disadvantages of alternatives. We might find better solutions if we can meaningfully model humans and their interactions.

The limitations of thinking along a line like capitalism versus socialism become clear once you represent a line in a field. Suppose the grey area reflects the possible solutions, and the red dot is the optimal solution. If you reason along the black line, you only consider solutions on that line. If you design solutions by only thinking about how free markets should be and how much government interference we need, you might never consider the prevailing values in society. Your reasoning ignores human values. Thinking that markets and governments can solve society’s ailments is simplistic.

A line has one dimension. A plane has two dimensions, like the freedom of markets and shared values in society. You can represent three variables in a cube. For instance, you may add the state of technology as an additional variable. You won’t find the best solution if you think along a plane inside a cube. The number of variables can be higher. Freedom of markets and values in society are vague notions you can break down into dozens of more concrete variables. And if you have variables, you need ample data to estimate their impact. That data can be inconclusive. How do you know some other variable you didn’t think of didn’t interfere with the outcome? Despite all the models they used, central banks didn’t foresee the 2008 financial crisis. So yes, models can be wrong.

Still, models can be helpful. Our minds have constraints. We often take a perspective and reason from there. A socialist economist might tell us why capitalism fails but not what is wrong with socialism. There are economic theories that explain specific phenomena under certain conditions. And you might find additional answers in psychology, sociology, or even history. You might want to know what is wrong with your ideas before trying. You can run the idea through those theories. And that might give new insights. You can’t be sure you are right, but you can eliminate errors using models.

Natural Money is a research into an interest-free financial system. It draws from economic theories, monetary economics, banking, psychology and even history. I reviewed that idea with the help of existing theories and historical evidence to investigate how it might work in practice. During the process, issues came to light that I hadn’t thought of. Once interest rates in Europe went below zero, a resistance against negative interest rates manifested. Savers are irrational and prefer 2% interest and 10% inflation over -2% and 0% inflation.

It suggests we measure our gains and losses in our currency rather than purchasing power. And behavioural economics says we give more weight to losses than gains. The 4% loss in interest income impresses us more than the 10% reduction in inflation. These irrational emotions are human nature. It seemed pointless to try to convince savers that they were better off. Once I realised that, I could look for a fix for this awkward human feature by making negative interest rates appear as inflation.

The insights models give

Economic theories are models. Models are simplifications or abstractions. They can be loose and without numbers, like raising interest rates leads to lower economic activity. They can go into detail and include mathematics and predict that raising interest rates by 1% will slow economic growth by 0.5%. Models have limitations. Reality is much more complex than we can comprehend, so a model’s predictions are often off the mark. Still, models require us to use logic to establish which ideas might work under what circumstances by analysing an issue from different perspectives.

Proverbs can disagree with each other. Two heads are better than one, but too many cooks spoil the broth. And he who hesitates is lost while a stitch in time saves nine. Contradictory statements can’t be simultaneously correct, but both can be correct in different situations or times. Hence, we want to know which advice is best in which situation or what combination works best.

Models usually are better than uneducated guesses, and using a combination of models can lead to better outcomes than using a single model. That is why weather forecasters use up to fifty models to make a weather prediction. People who use a single model do poorly at predicting. They may be correct occasionally, just like a clock that has stopped is sometimes accurate, and endlessly tout their few successes while forgetting about their endless list of failures. These people will never learn anything from experience.

Intelligent people use several models and their judgement to determine which models best apply to the situation. Only people using multiple models together make better predictions than mere guessing, but they can be wrong. Models help us think more logically about how the world works and eliminate errors we would make otherwise. They can also give us insights into phenomena we wouldn’t get otherwise. To illustrate that, we can use models to investigate why people of the same ethnicity often live together and why revolutions are difficult to predict.

Sorting and peer effects

Groups of people who hang out together tend to look alike, think alike and act alike. If you look at the map of Detroit, you see people of the same ethnicity living together. Blue dots represent blacks, and red dots represent whites. We can’t change our skin colour, so if we hang around with people who look like us, that is sorting. We also adapt our behaviour to match that of others around us. When you hang around with smokers, you may start smoking too. Alternatively, if you hang out with people that don’t smoke, you might quit smoking. That is the peer effect. Both sorting and peer effects create groups of similar people who hang out with each other. Models can help us understand how these processes work. The phenomena seem straightforward, but we can model them.1

Schelling’s segregation model gives a possible explanation for how segregation works. Schelling made a model with individuals following simple rules. Suppose everyone lives in a block with eight neighbours. Red boxes represent homes where rich people live, and grey boxes are homes where poor people dwell. The blank box is an empty home. Assume now that everyone has a threshold of similar people who will make them stay.

A rich person might stay as long as at least 30% of his neighbours are rich. Assume a rich person lives at X. In this case, three out of seven or 43% of the neighbours are rich, like the person living at X. If one of the wealthy neighbours moves out, and a poor person takes that place, 29% of the neighbours will be rich, and the person living at X will move.

You can use a computer to simulate how that works out over time. Assume there are 2,000 people; 1,000 are poor, represented by yellow dots, and 1,000 are rich, represented by blue dots. Suppose they are distributed randomly at the start, and everyone wants to live amongst at least 30% similar people. In that case, the average is 50% alike, and only 16% are unhappy because less than 30% of their neighbours are alike. As a result, people start to move, and you will end up with a situation where the average is 72% similar and 0% unhappy.

Even when everyone likes to live in a diverse neighbourhood where only 30% of their neighbours are like them, segregation occurs. Segregation may not be the intention of the individuals involved, as they might be tolerant people requiring only a minority of similar people living in their neighbourhood.1 Whether that is the case is a different question. But if it is so, and if we believe segregation is undesirable, managing the ethnic makeup of neighbourhoods makes sense.

Peer effects cause people to act alike. Contagious phenomena are peer effects. They often start suddenly, seemingly out of nowhere. In uprisings and revolutions, extremists frequently determine what happens, for example, with uprisings such as the French, Bolshevik and Maidan revolutions. In hindsight, several pundits saw it coming, but things could have proceeded differently. It is difficult to predict revolutions. Granovettor’s model gives a possible explanation as to why that is so.

Suppose there is a group of individuals. Each individual has a threshold for participating in an event like an uprising and will join if at least a specific number of others join. If your threshold is 0, you do it anyway. If your threshold is 50, you start if you see 50 participants. The outcome varies depending on the thresholds of other people that might get involved.

Suppose there are five individuals, and the behaviour is wearing a suit. One individual has a threshold of 0, one has a threshold of 1, and three have a threshold of 2. The following will happen: one individual starts wearing a suit because her threshold is 0. The second individual joins because his threshold is 1. Then, the three remaining individuals join in because their threshold is 2.

If the thresholds had been 1, 1, 1, 2, 2, nobody would have worn a suit despite the group, on average, being more open to the idea. If the thresholds had been 0, 1, 2, 3, 4, and 5, everyone would have worn a suit after five turns, even though the group, on average, was less keen on doing this. In this case, extremist suit-wearers determine the outcome.

It indicates collective action is more likely to happen with lower thresholds and more variation. The influence of variation is surprising. It might explain why it is challenging to predict whether or not something like an uprising will happen. Not only do you need to know the average level of discontent, but you must also see the spread of discontent among the population and connections between individuals and groups.1

The proof is in the pudding

Do similar people hang out together because of sorting or the peer effect? That is the identification problem. Sometimes, it is clear. Segregation by race occurs due to sorting. Other situations are less clear. Often, you can’t tell whether it is sorting or peer effect because the outcomes are the same. Happy people hang out with each other, as do unhappy people. Both sorting and peer effects may have caused this.1

Models provide new insights, like why similar people hang out together and why revolutions are difficult to predict. Other models help us investigate what might happen under which circumstances. Thus, models explore the dimensions of complex questions and help us identify the spots where the best solutions dwell. In this way, models can assist us. For instance, if we intend to make everyone contribute to a good cause, we might want to model humans to see how we can do that. But not everyone is the same.

If we see humans as rational beings with good intent, we can convince them with arguments to do the right thing. If we see humans as religious creatures, an inspiring story can make them do it. If we think humans are calculating individuals, incentives and punishments can make them do the right thing. If we see humans as status seekers driven by pride seeking recognition, we might achieve the objective by telling them how great they are. You may get the best result if you use a combined approach.

Model or myth?

You can look at a model in several ways. How well does it explain the facts? How well does the model predict future events? Is the model correct? Is the model useful for a purpose? All models come with limits. They can be simplifications that explain a particular selection of events or predict specific future events. We also have worldviews that are our models of reality. We are creative thinkers and connect the dots in different ways. Our worldviews might be fiction mixed with facts. But a model doesn’t need to be correct to be helpful. Worse, irrational beliefs might save you. Believing is about surviving, not about being right. That is why humans are religious creatures. An example can illustrate that.

The replacement theory alleges that the elites aim to replace white populations with non-whites through mass migration and lowering the birth rate of whites. That can ‘explain’ mass migration and lowering birth rates of whites, and also pro-life activists trying to ban abortion because the abortion rates of whites are lower than those of non-whites. You might even believe there is a sinister anti-white force operating behind the pro-life movement, probably Jews. It explains the facts neatly as long as you ignore evidence to the contrary. The theory is so flimsy that it is hard to believe that rational, intelligent people would think it is correct. Only the rationality of a belief is not in its correctness.

Had the Native Americans believed from the onset that whites were an evil race with nefarious inclinations, not humans, but trolls from a dark place where the Sun never shines who were planning to murder them, so that they had to eliminate these pale abominations at all costs, they might have fared better in the centuries that followed. But there was no reason to believe that when the first starving whites washed ashore. You had to be crazy to think that. And if the natives had eliminated the whites and prospered, critics might later have argued it had been unnecessarily cruel to genocide these pale faces. But in this case, an irrational belief might have saved them from disaster.

Most immigrants have no evil intent and seek a better future for themselves and their children. Business elites may need additional labour or aim for low wages. Immigration is a way to achieve that. Political elites may try to keep the peace by promoting diversity. Western countries signed humanitarian treaties to allow asylum seekers. In recent decades, policies in Europe and the United States aimed to limit immigration. However, immigration continues unabated and has led to a border crisis in the United States, and the theory gives a so-called explanation.

Renaud Camus is the intellectual father of the modern replacement theory. According to Camus, replacement comes from industrialisation, de-spiritualisation and de-culturisation. Materialistic society and globalism have created a replaceable human without national, ethnic, or cultural specificity. Camus argued that the great replacement does not need a definition, as it is not a concept but a phenomenon. Indeed, the predominant liberal ideology in the West is globalist and serves the interests of the capitalists. And if money becomes our primary measure of value, other values lose meaning.

Humans cooperate based on shared myths like religions and ideologies. The replacement theory is a shared myth. It helps bond the group members and prepare them for collective action. That might be limiting migration, sending back migrants, or even a race war. The myth needs not to be correct but helpful for its purpose. If you fear the consequences of mass migration or are living together with far-right people, it is rational to accept the myth. It can generate collective action or make you acceptable within the group.

Critics argue that the replacement theory can be an excuse for right-wing violence. In a similar vein, multiculturalism can be an excuse for left-wing violence. In both cases, there are examples, and the perpetrators often have mental health issues. In 2002, a left-wing extremist assassinated a Dutch anti-immigration politician after another had been permanently handicapped in a previous attack sixteen years earlier. In 2011, a Norwegian right-wing terrorist assassinated 77 people in a bid to prevent a ‘European cultural suicide’. Most of them were whites.

Modern multiculturalism is also a myth. Multicultural societies supposedly have people of different races, ethnicities, and nationalities living together in the same community. In multicultural communities, people retain, pass down, celebrate, and share their unique cultural ways of life, languages, art, traditions, and behaviours, or so we are told. In most cases, it is not a reality. Ethnic groups often live in separate quarters, and cultural differences can cause trouble. But the purpose of the myth is to keep the peace.

Once you accept a myth, it becomes a faith, and you start ignoring evidence to the contrary. That may be why progressives and conservatives drift apart on this issue. It is a survival mechanism. We can’t foresee the future. Maybe multicultural societies will disintegrate and descend into gang violence and civil war. Alternatively, multiculturalism may promote world peace. For both outcomes, plausible scenarios exist. Your future and that of your children are on the balance, so it is natural to have strong feelings about the matter and rally around a myth that can generate the collective action you think is needed.

Latest revision: 13 April 2024

Featured image: Line And Dot On A Grey Rectangle. The artist wishes to remain anonymous because who wants to be as famous as Piet Mondriaan?

1. Model Thinking. Scott Page. Coursera (2014). [link]

Barataria: An Economic Fairy Tale

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Money makes the world go round

Money makes the world go round, they say. And that is correct. Money directs our actions. Those who have savings hope to make a return. The financial sector directs our savings to investments. If you have a savings account at a bank, the bank will invest that money in loans and give you interest. If you buy a mutual fund, you invest in corporations. Finance harbours an unprecedented power. We are its hostage, but finance is also our hostage. When we invest, we desire profits, and the financial sector must deliver them. Profits on capital, usually called interest, drive economic growth and wealth inequality.

Before the Industrial Revolution, nearly everyone was as miserable as the poorest people today. Since then, capitalism has lifted billions of people out of poverty. There are benefits to entrepreneurship and enterprise. But there is a dark side to capitalism. It is exploitation, pollution, and the squandering of scarce resources. Trade and finance, not our values and needs, determine what happens to us and the world. We must blame ourselves. As consumers we desire convenience and as investors we desire profits. And often we don’t think of the consequences of our actions for other people and the planet.

We suffer from money delusion. Our measure of success is GDP. And GDP does not equal well-being. If you buy a gun and go on a killing spree, the sale of the semi-automatic rifle, the costs of medics trying to save the victim, the salaries of the police going after you, and the price of your processing in the justice system all count as GDP. And so do the films from Hollywood glorifying violence and the merchandise that come with them. Cigarette sales and the subsequent cancer treatments all add to GDP. The advertisements, the consultancy fees and the litigation add to it, as does the building of lavish mansions for consultants and lawyers. Economists call it creating wealth. But it is not economical to store food, so there is only enough food in storage to feed humanity for a few months.

The problem is not a single trade or trader. Nor is it a single financial transaction or bank. Trade and finance are also useful. We can’t have an economy without them. But if making money becomes our core value, we end up morally depraved. Depending on your political views, whether progressive or conservative, you see examples of how this corruption destroys progressive or conservative values. This is not only corruption in the traditional sense of people taking bribes, but money preventing us from doing the right thing.

In a competitive, economising world, we lack livelihood security and are under pressure to compete. As consumers, we are lured by convenience and social pressure to conform. Despite the dramatic increases in GDP during the last fifty years in advanced Western economies, life has not improved for many people. While the rich become richer, more and more people live from paycheck to paycheck and can’t afford a home.

Trade and finance fuelled competition and thereby drove modernisation, colonisation, the slave trade, and the depopulation of the countryside. Several movements tried to confront the issue, like socialism, fascism, anti-globalism, small-is-beautiful, and environmentalism. So far, meaningful change remained elusive. Few people, such as the Amish, successfully established communities that largely remain outside the system. There are alternatives to the current system, but they also come at a price. That price might be worth paying.

The pillars under the current system are trade and finance. We must prevent money from driving our decisions so we can address our needs and choose our destiny. That will have repercussions for the returns on capital and interest rates. And so, the change probably requires an interest-free financial system with a holding fee on currency like in Wörgl and ancient Egypt. Natural Money is a research into the feasibility and consequences of such a financial system.

To explore the options, imagine a community that has tried other ideas. In the early 1990s, STRO published The Miracle Island Barataria, an economic parable by the Argentinian-German economist Silvio Gesell.1 I rewrote that story to make its message more clear. And I highlight the longer-term consequences we are about to face. And so the chronicle goes.

Long ago, on a faraway island

In 1612, a few hundred Spanish families landed on Barataria after their ships had sunk. The Spanish government believed they had drowned, so no one searched for them, and they became an isolated community. At first, they worked together to build houses, shared their harvests, and had meetings in which they decided about the affairs that concerned everyone. It was democracy and communism. After ten years, the teacher, Diego Martinez, called them together. He noted that working together and sharing had helped them build their community, but the islanders were lazy. They spent their time at meetings discussing what to do, but many jobs remained undone.

‘If someone has a good idea, he must propose it in a meeting to people who don’t understand it. We will discuss it but usually we don’t agree or we don’t do what we agree upon. And so, nothing gets done and we remain poor. We could do better if we have the right to the fruits of our labour and take responsibility for our actions,’ Martinez said, ‘The strawberry beds had suffered damage because no one had covered them against night frost.’ He mentioned several other examples. Martinez said, ‘If the strawberries are yours, you will protect them. And if you have a good idea, you will do it yourself and hire people to help you.’

Potatoes are bulky, thus difficult to carry, and they rot. At the next meeting, Santiago Barabino argued that they could set up a storehouse for the potatoes and issue paper money, notes you could exchange for potatoes if you needed them. So, you had banknotes of 1, 2, 5 and 10 kilogrammes of potatoes. The Baratarians agreed to the proposal. To cover the storage cost and because potatoes rot, banknotes had a date of issue and gradually lost their value. If you returned the banknote to the potato storage after a year, you received 10% less. And because the issue date was on the banknote, buyers and sellers knew the actual value.

For a while, Barataria had banknotes covered by potatoes. Their value declined over time to pay for the storage and the rot. Borrowers didn’t pay interest. People lent the money if the borrower agreed to return notes representing the same weight. That would not have happened if the notes had a constant value. The notes lost value, so everyone spent their money quickly and kept items and food in their storehouses. The general level of opulence rose, but there were no poor or rich people. There were no merchants buying things at a low price to sell them at a high price. Because businesses didn’t pay interest and there were no merchants, things were cheap in Barataria. The chronicle notes that the islanders acted as good Christians and helped each other.

Then Carlos Marquez came up with a new idea. He addressed Baratarians, ‘How many losses do housewives suffer from keeping food in their storehouses? We shouldn’t put our savings in products, but money. We can back our money with something we don’t need and doesn’t deteriorate. The Pinus Moneta is a nut we can’t eat, and doesn’t rot,’ he said, ‘We don’t have to back money with a commodity of value like potatoes. The things we buy and sell give the money its value. If we do that, we can buy things when we need them and don’t have to store them ourselves.’

That seemed too good to be true. And when something appears too good to be true, it usually isn’t. Diego Martinez argued against the proposal. He told his fellow islanders that a medium of exchange passes hands. It remains in circulation. But savings stay where they are unless those short of money borrow it and pay interest. You end up paying interest to use the currency you need to buy the things you need. His argument was to no avail. And that is the price of democracy. People often decide about questions they don’t understand. And if you are doing well, you can’t imagine that seemingly insignificant errors can ruin you.

Most islanders preferred to spend their time getting drunk in the pub instead of studying the issues of government. And Marquez spoke passionately, while Martinez warned cautiously, saying things were fine and he couldn’t foresee the consequences. That may have swayed opinions. The islanders switched to money backed by the Pinus Moneta. That money didn’t lose its value. That made it attractive to save.

Suddenly, everyone wanted to exchange their supplies for the Pinus Moneta, mayhem in the marketplace. Everyone brought in all their supplies, but no one could sell their goods because everyone wanted money. That was until the company Barabino & Co came up with a plan. Barabino & Co. set up a bank with accounts you could use to save and make payments. Everyone could bring their money to the bank and receive an extra 10% after a year. The naive Baratarians agreed. They could have known there weren’t enough nuts of the Pinus Moneta to pay the interest. And they didn’t ask themselves how Barabino & Co. would generate the profits to pay that interest. With this borrowed money, Barabino & Co. bought goods from the islanders and gave them money in their accounts, but Barabino & Co. mainly bought seeds.

The following spring, Barabino & Co. hiked seed prices. Most islanders paid more for the seeds than they received in interest. They went into debt with Barabino & Co. Then Barabino & Co. bought the harvest and cranked up food prices. Soon, Barabino & Co. owned everything. Most islanders were in debt and worked hard, but a few wealthy people lived off interest income. They didn’t work and lived a life of luxury of the interest in their accounts. The Baratarians needed money to pay for the items they bought from Barabino & Co. They paid interest to use that money.

There weren’t enough nuts to pay the interest from, so the islanders went further into debt. And this continued year after year. Consequently, the Baratarians worked harder and grew more creative in earning money. They invented, produced and sold more things, most notably, wooden items made from the trees on the island. Not everyone could keep up, so there were homeless people. But the economy grew, and the islanders grew accustomed to luxuries they hadn’t before.

The chronicle tells us that this change came with other unfavourable consequences. It had undermined society. The Baratarians had become agitated, deceitful, and immoral. Crime was on the rise. Of their Christian faith, nothing remained except an empty shell. They were only interested in making money. Then came the day the Baratarians had cut down all the trees on the island. The islanders suddenly didn’t have the wood to make the tools for harvesting their crops and starved. The Pinus Moneta was worth nothing. After all, you can’t eat money.

Adam Smith and the Wealth of Nations

The tale tells the unpretty side of capitalism or how devious and nefarious acts contributed to a result most of us now see as desirable. Most people have a better life than most people in the Middle Ages. But that wealth came with war, colonialism, the slave trade, pollution, and miserable working conditions. With the help of saving and investing, capitalists build their capital. And that is often beneficial. Capitalism is about making sacrifices in the present by saving to have a better future by investing. In practice, it can come down to generating as much profit as possible. Morally reprehensible acts can have favourable outcomes, but founding our society on evil ultimately makes us evil.

Competition leads to a process economists call creative destruction. Businesses that don’t produce something customers desire at a competitive price go bankrupt. As factories produced at lower cost, artisans lost their business, but fabrics became cheaper, and more people could afford them. And countless new products have come to the market that make our lives more agreeable. As production becomes mechanised, fewer people do the work we need, and more people waste energy and resources on jobs we don’t need. You may think you need an espresso machine and social media, but you can do without them. It is a tale with two sides, like the Agricultural Revolution. Now, our chickens are coming home to roost. Capitalism as it is will probably end civilisation as we know it. That is why we must build our economy on values rather than profits.

Adam Smith, the father of capitalist thought, argued that if everyone pursues their private interests, they can achieve the public good. A baker doesn’t bake bread to serve the community but to make a living. That is why we have something to eat. Smith believed it would work out well as we are moral creatures. Individuals would temper their behaviour by how they thought it would affect others. That is not how markets operate. Individuals may have moral values, but markets never have them.

Factory owners didn’t consider the plight of the artisans they put out of business or the miserable working conditions of their employees. And if they did, they would go out of business. Moral considerations do not drive business decisions. Most people may have a moral conscience, but some do not or have moral values that allow them to trade. They provide harmful products like cigarettes, semi-automatic rifles and cocaine and even try to expand their market by advertising their products. A gun salesperson might argue that he allows people to defend themselves. A merchant will say, ‘If I don’t supply the market, someone else will, so why not take in that profit myself?’ And, gang warfare is often just business and a fight about market share between entrepreneurs.

Poverty was Smith’s primary concern. Increasing production was the way out. Self-interest is an effective way to achieve that. Since then, production increases lifted billions of people out of poverty. Smith wrote:

  • The division of labour drives production increases. If you specialise in a trade, you can do a better job or produce more at a lower cost.
  • The size of the market limits the division of labour. High transport costs limit market sizes. Cheap energy drives long-distance trade.
  • People preferred precious metals as money as they could save them. It facilitated trade and finance as merchants could store their gains and make profits in finance.

Precious metals aren’t money anymore. The tale of Barataria highlights why. As a means of exchange, it needs to lose value. But as a means of savings, it should retain its value. Central banks try to generate some inflation but not too much, so money can be a means of exchange and a store of value. There is also another reason. In this way, governments finance deficits by borrowing and promising to pay interest. Producers produce things at different times, locations, and quantities than consumers need. Traders bridge those gaps by storing, transporting, and dividing goods. It promotes large-scale production and labour efficiency, so we need fewer people to provide for our necessities. And so, more people do things we don’t need.

In advanced economies, many people’s jobs are pointless, bullshit jobs that waste energy and resources, but do not produce something we need. Imagine these jobs replaced by meaningful work, like police officers solving crimes, social workers helping disadvantaged children, and family and care workers caring for the elderly. On the market, labour has a price driven by competition, but in communities, we are free to reward contributions as we please. Labour efficiency only appears rational when there are abundant energy and natural resources. But that changes once resources and energy are in short supply. As our material wealth declines, we can lead more meaningful lives and address our needs.

The ‘evil empire’ of trade and usury

Economic power and financial power translate into military power. The Europeans didn’t finance their colonial wars with taxes like previous empires but with the profits from their colonies. No one likes to pay taxes, but everyone wants a profit. The Europeans reinvested these profits, so their financial and military strength increased. After the bourgeoisie took control of the British government in the Glorious Revolution, the British state became a venture of the propertied class like the Netherlands and Venice. The bourgeoisie believed it could benefit from a functioning state and was willing to pay for it. Taxation thus became seen as legitimate as it came with the consent of the taxed. With its secured and enlarged tax base and a newly established central bank, Great Britain could borrow more in financial markets at lower interest rates.

The bourgeoisie didn’t like to pay for corruption or ineptitude, so the quality of the state improved. It allowed Great Britain to defeat France, a country with more wealth and a larger population. In France, wealthy people didn’t pay taxes, and the government lacked funds. France defaulted on its debts several times, and its government was inept and corrupt, so lenders were unwilling to lend to the French government. With its control over the seas, Great Britain controlled the largest market, which enabled the Industrial Revolution because large-scale mechanised production required sizeable markets.

Today, the United States is a venture of the propertied classes like Great Britain once was. Wealthy people pay little in taxes. The reserve status of the US dollar rather than an effective government is the primary asset of the empire of trade and usury. A corrupt and inept government is a boon to the elites. They bribe politicians to pass legislation they desire. They finance the think tanks that advise on policy matters. If things go wrong because the government is corrupt, they blame the government, saying there are too many regulations. The interests they represent might profit from fewer regulations. Or they blame the lack of government oversight and demand more rules. Their lobbyists may then make the regulations benefit the interest groups they represent.

Americans can have a higher-quality government, but it is not in the interest of the elites. They only need a top-quality military and secret services to prop up their world order. And they need it to be corrupt to make it do what they want. The US finances its wars not by taxes but by the global usury financial system, of which the US dollar is the central pillar. These expenses add to the debt pile. The US promises to pay interest on its debt with money that doesn’t exist to finance its military and the extravagant lifestyle of its elites. As a result, the US is the world’s greatest debtor, and its debt is the world’s savings. Soon, resources will be in short supply, like trees on Barataria, and the world’s savings will be worth nothing.

Losing our human values

In the past, people regarded trade and finance with suspicion. In popular culture, these were domains where people with questionable ethics thrived. Hermes, the Greek god for the traders, was the god of the thieves. And bankers are the worst. Did Jesus not chase the money changers from the temple? They turned the sacred temple into a den of thieves. And the Bible says, ‘For the love of money is a root of all kinds of evil.’ The Jewish sage Jesus Sirach noted, ‘A merchant can hardly avoid doing wrong; every salesman is guilty of sin.’ It is in the Catholic Bible. Jews and the Protestants didn’t include it in their scriptures. That might be why the Catholic view on trade and finance differs from the Jewish and Protestant stances.

Capitalism has been a wonderful fairy tale as long as it lasted. One day, we will all be rich. And indeed, even the poorest are mostly better off. The life expectancy in the poorest countries today exceeds that of the Netherlands in 1750, the wealthiest nation on the eve of the Industrial Revolution. But today, we take more than Earth can give us. We can’t ignore that for much longer. And if we let the ethics of trade and usury guide us, we lose our values, whether they are Christian, Buddhist, Confucianist, Islamic, Hindu or traditionalist. We will value money more than people or the planet. We will not care enough to do what we need to do to prevent a disaster we can prevent without too much pain. In doing so, we lose our humanity, as behind those traditions are human values.

Modernisation is about the rise of markets and governments at the expense of communities. Capitalism requires enlarged markets to enjoy the benefits of scale. Via capital income and usury, capital builds and concentrates in the hands of a few. Abundant natural resources and energy from fossil fuels made it possible. And the capitalists need the state to protect their interests or to appease people with handouts. The concentration of economic activities and opportunities promotes the depopulation of the countryside and mass migration from poorer to wealthier areas.

We likely have less energy and fewer resources at our disposal in the future, so we must live simpler lives and depend more on families, communities and nature and less on markets, governments and technology. Many of us think life must be perfect, but it never is. New technologies and products will not change that. Depending more on family and communities may not make us happier, but it could bring us closer to our human nature. The foundations of a future civilisation must both be sustainable and humane. We could build our future society on values rather than money. But that is easier said than done.

Latest revision: 16 March 2024

Featured image: cover of The Miracle Island Barataria

1. Het wondereiland Barataria. Silvio Gesell (1922).

Grapevine snail. Jürgen Schoner.

Learning Opportunities

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In 2005, the government agency I worked for embarked upon an ambitious systems renewal project. The IT director hoped to make a mark by replacing our existing IT systems with something new. As the story goes, meaning I was not a first-hand witness, but several colleagues said more or less the same, so that it could be the truth, the IT director visited Oracle headquarters near San Francisco. He could get a steep discount on the Oracle ERP solution. ERP can administrate an entire business as a total-for-everything solution, but only if you model your business the way ERP prescribes. In other words, every department had to change how it conducts its affairs. That would upset our entire organisation. That makes ERP awkward.

Instead of admitting he had bought the ERP on a whim and writing off the license fee, which would have been a minor loss, the purchase had to be justified. Possibly, the IT director wanted to save face. He then hired business consultants to assess the quality of our IT systems and propose a solution. Not surprisingly, their report stated that our systems were obsolete and beyond repair, even though they were doing fine even fifteen years later, and that we should switch to the Oracle ERP as that would save a lot of money. There is no such thing as coincidence here.

There was a strategic information planning phase before the project started. Cap Gemini business consultants organised brown paper sessions where employees could help identify the business requirements. We had to list our components. And the consultants would call them services. I wrote the word database on brown paper. I stuck it to the wall, and the Cap Gemini business consultant called it a database service. That did not seem like a proper strategic business analysis to me. Anyone could paste the word service behind the name of a component. It was the moment when it dawned upon me that it might not end well. There were political troubles early on. A Cap Gemini project leader left because she didn’t share the vision of the IT director. It appeared he surrounded himself with yes-men.

As a student, I learned in the Information Planning course that you must first define the business requirements and then select a solution based on these requirements. It can save you a lot of trouble. The business consultants did the opposite as they tried to justify a choice already made. Over time, it grew into an all-encompassing megalomanic plan. Most departments didn’t want the IT department to determine how they operate. And so, they planned to supplement the Oracle ERP with several special-purpose modules. Making special-purpose software would make ERP pointless, as not having to make special-purpose software was the whole point of using ERP.

Once the project had started, Oracle began to determine its direction. Oracle consultants soon found that we needed more solutions from Oracle and, of course, the latest technology, sometimes not yet proven to work. Our decision-makers agreed. So when the special-purpose software failed, they tried new ideas like using a business process model language on top of ERP. In this way, the business model could be tailor-made while using ERP. No one had done that before for good reasons. However, the consultants were there to make money for their employers by making the customers happy, so they tried the idea. The pointlessness demoralised me. Goals were constantly changing as ideas were failing. Employees became stretched to their limits for years in a row. I was an Oracle database administrator and was especially hard hit as our job role expanded to everything related to Oracle. The stress began to take its toll, and I began to experience repetitive strain injury.

One of the database administrators, Kees, was a tech genius who enthusiastically jumped on every crazy plan and did a lot of overtime. In this way, he became the manager’s darling. I lagged behind him, but the other database administrators couldn’t keep up. The situation soon went out of control. It was like having a trojan horse inside our department. Kees didn’t look after the department’s interests but the project’s. The things he invented and built had to be kept up and running by us. He didn’t make a lot of notes but was always willing to help us if we didn’t understand It.

Our managers had no clue what they were doing and believed that more advanced technology like Oracle RAC clusters would fix things, but that only contributed to our troubles. RAC was pointless, required additional knowledge, and was prone to failure. I would then sarcastically note, ‘The most stable RAC cluster has one machine.’ That was the same as not having RAC at all. Pesky problems piled up on my desk, and I constantly had to learn new skills while project leaders pressured me to work on plans that were bound to fail. That couldn’t go on. I want to help people, but I shouldn’t fix other people’s problems or work on ideas that will never succeed. There was always too much work, while most of it was pointless, and there was only so much I could do.

I made a few radical changes and worked only on the issues that mattered most while trying to avoid working on things that were bound to fail. Whenever multiple project leaders pressured me, I referred them to my manager, saying, ‘He should set priorities.’ Whenever a colleague tried to bequeath his pesky problem to me, I explained how he could fix it himself. ‘It begins with using Google,’ I said time after time. In 2006, not many colleagues used search engines. Google helped me to solve more issues at a faster pace. Often, someone else has had the same problem and posted the solution on the Internet. It was also a learning opportunity. If you solve problems, others will relay their problems to you, and you end up drowning in problems. When people can find someone else to fix their problems, they won’t do it themselves. And perhaps it is better to let them fail if they can’t.

As things were spiralling out of control, our management decided we needed more qualified database administrators. Our salaries were too low to attract the right people, so they gave the new hires and Kees a higher salary grade. They also increased the number of temporary positions. The headcount went from four to fourteen database administrators. And still, we couldn’t handle the workload.

The year 2008 neared its end, and then it appeared that A* was God and that She had a plan with me. Long-lasting stress can cause psychosis. My perspective on what mattered changed profoundly. The job at the office became a sideshow. I had to step up on rational thought to deal with the craziness of it all. I cut my working hours and began to work on a plan for the future of humanity. I nevertheless succeeded in giving a good impression. My manager at the time, who had been a database administrator previously, held me in high regard because I tried to manage the workload by focusing on what mattered. After all, even fourteen database administrators couldn’t handle the work, so something was seriously wrong. It was like being the only rational person in an insane environment. I didn’t know how to end the madness. I only tried to deal with it within the limits of my possibilities.

As we needed so many database administrators, temporary hires came and went. One of them had roots in the former Dutch colony, Suriname. He once made a surprisingly frank statement. He worked for his uncle, he told me, who also came from Suriname. But apart from him, his uncle only hired Dutch people. ‘That is because the Dutch are more reliable,’ he added, and, ‘They do the job as agreed. You don’t have to check on them.’ I supposed it was true. Otherwise, he wouldn’t say that. People from Suriname don’t take things as seriously as the Dutch.

After several years and spending over 100 million euros, our corporate delusion finally went into operation. It did nothing but accept incoming messages and acknowledge their reception. An experienced programmer could build that in a day. It was a bloated set of software and machines with the latest technology but capable of nothing. The IT director organised a party in which he proudly announced that we finally had a system under architecture. That made me think our architects were incompetent, and it would take years to erase that impression.

Again, as the story goes, our board then made a politically brilliant move by selling the project as a success to the government in The Hague, arguing that after spending more than 100 million euros, they needed a few million more to fix the remaining bugs. The board used that money to hire a software company to rebuild everything in Java. The ERP only did the financial administration. In this way, it appeared that the new software was just an add-on. The budget was tight. There was no money for testing and fixing bugs. As you can see, image is everything. That is why corporations invest in brands and marketing.

The new Java systems crashed nearly every day. They consumed a lot of resources and produced a lot of data, for instance, millions of messages no one dared to throw away. You could use them to find out what went wrong. And so much went wrong. Working with these systems was dreadful, not only for IT workers but also for the end users. I had grown cynical about everything management was doing. Only one project succeeded, building an old-fashioned Designer/2000 system. Had we made the other systems using Designer/2000 or its successor tool APEX, from the start, it might have cost less than 5% of what we had spent, and it would have worked. Architecture came with a price tag and had nothing to show for it. If you see an ugly building, an architect likely designed it and made it far more expensive than it needed to be. The core problem, however, was complexity, or trying to implement one solution for everything in one go.

I estimated that the new Java systems used 100 times as much memory and disk space as the Designer/2000 systems for doing the same job. That was an understatement because making a fair comparison was difficult. The outcome of the calculation was 3,000 to 16,000 times as much. The new systems started with low numbers of transactions and would scale up, and there is a margin of error. Excessive resource consumption didn’t seem like a problem at first. The price of memory and disks went down over time. Cheap resources make people wasteful, and you can see that everywhere around you. But we were too far ahead of our time in terms of wasting resources, that is.

The data storage became overburdened. The IT director fired the manager responsible for the data storage, citing that corporations like Google and Facebook could scale up fast. But we weren’t Google, but a government agency with a few hundred IT employees. I was on leave when it happened. The following Monday, I learned about it. And I thought, ‘The IT director is responsible for the mess. He is the one who should be fired.’ A few hours later, a soccer club, VVV from Venlo, fired its trainer, who had the same first and last name as our IT director,1 a remarkable coincidence. After five years of maintenance, costing millions more, the Java systems gradually began to work properly.

Featured image: Grapevine snail. Jürgen Schoner (2005). Wikimedia Commons. Public Domain.

1. VVV-Venlo ontslaat trainer Van Dijk. Nu.nl (20-12-2010). [link]