It has been seen that with the progress of mankind there is a belief that we can make conjectures of the future based on the past. That is what modelling is all about. But what if it can be shown that almost everything that happens is random or a fluke?
That is what Brian Klass would make us believe in his book, Fluke. The now famous term ‘black swan’ was used by Taleb to describe the financial crisis. But almost everything that happens could be moving in a random way. The story of Mr and Mrs Stimson who visited Kyoto in 1920 is now well known. When the atom bomb had to be dropped by the United States, Kyoto was on the list, but Stimson’s intervention (who was the secretary of war) on account of a pleasant memory of a holiday led to Hiroshima being pounded instead. Also, Nagasaki was not on the radar, but there was a cloud cover on the other target cities. Hence, Nagasaki became an unintended victim. This may sound fantastical but is true. Lives of thousands got affected on this score, but Kyoto escaped.
Klass starts with this example and takes us through various such instances where randomness steers our lives. Hence while traditional Indians do still believe in the law of karma where things are pre-ordained, Klass would brush it aside by saying that things are random and driven by chance. This probably also explains why some businesses work while others don’t. Or a single startup which does well in a particular field cannot be replicated by others.
The importance of chance played out with Charles Darwin being offered a role of companion on the ship HMS Bagle too, when the captain wanted someone to talk to on the voyage. If that had not happened, then Darwin may not have probably picked up insights that have now become legendary.
The author talks a lot of the ‘garden of forking paths’, which is demonstrated by the disproportionate impact of small events that make chaos theory.
In the same vein he also highlights the difficulty or impossibility of prediction, from weather forecasting to economic forecasting. This is something that we are aware of as these forecasts change regularly with changing conditions. Interestingly, the basic assumption made in any prediction is ceteris paribus—which is saying that everything else is being held constant.
But nothing is constant and random instead, which makes forecasting a useful academic, though impractical, exercise. That’s why most forecasts are a series of possibilities rather than certainties. Here the author distinguishes between ‘risk’ and ‘uncertainty’. A war anywhere in the Middle-East can cause severe disturbance across geographies which are seemingly unrelated. Hence the ‘why of when’ something happens is as important as what happens.
The author finds these answers in in a multi-disciplinary matrix of political science, philosophy, economics, evolutionary biology, geology and more. He does get provocative most of the time. Let us look at history for instance. There are two ways of looking at it. The first is the storybook version which shows that everything is ordered and structured. Individuals come and go but trends dominate. But these trends come from an aggregation of humans to an inevitable outcome. The other version is dramatic. It says that individuals are supreme and the idiosyncratic behaviour of an individual can alter the way things shape up. Hitler is a perfect example that we can relate to. Or for that matter even Putin, who suddenly changed the life of Ukraine. Hence anyone can change history with one’s actions or thoughts. There are several examples, including the start of the First World War, which can be traced to common individuals.
The book is a rollercoaster because as a reader one can keep arguing with the author as there could be compelling arguments on both sides. He talks of ‘basins of attraction’ which holds in politics. The American presidency is a good example where there are two parties and hence everyone gravitates to one of them. And the victory of this one person can shape the way in which political and economic relations evolve across nations. In the olden days it was religion that created these basins of attraction.
The author further argues that when society appears to be stable (which can apply to an economy too), we could actually be on the edge of chaos, which can explode at some time. In India we could think economic reforms of the 1990s happened mainly due to the random element of the country being close to bankruptcy—something which was not predicted by any model!
Hence while black swan has been used to refer to a specific problem that erupted in the US, there are several developments that take place at random and cast a shadow on the entire world. This could be a trade embargo or an eruption of a volcano in any part of the world. Klass also takes us into the world of superstition, which he says is not the ‘providence of simpletons’. They were invented to deal with causal uncertainty, which, in turn, generated a disorienting feeling.
Fluke is a book which the reader can identify with all the way. One may not agree with the author but his arguments deserve attention. It is quite interesting when he talks of the markets and how specialists react to basic questions. Experts are asked for views on such movements for hours on business channels. There could be no specific reason for the movements because they could be caused by a random event. But the discourse is always suffixed with words like ‘markets are reacting to’ or ‘stocks dipped today because’. This kind of what he calls teleological bias pervades our thinking. And in a lighter vein he says that experts can never say three simple words—‘I don’t know’. But talking aggressively with a flimsy argument carries more weight for sure! This book is a must read and will tickle the reader’s senses in every way.
Book: Fluke: Chance, Chaos, and Why Everything We Do Matters
Author: Brian Klaas
Publisher: Hachette
Pp 336, Rs 699
The author is chief economist, Bank of Baroda.
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