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Dear Lifeboat Foundation Family & Friends,

A few months back, my Aunt Charlotte wrote, wondering why I — a relentless searcher focused upon human evolution and long-term human survival strategy, had chosen to pursue a PhD in economics (Banking & Finance). I recently replied that, as it turns out, sound economic theory and global financial stability both play central roles in the quest for long-term human survival. In the fifth and final chapter of my recent Masters thesis, On the Problem of Sustainable Economic Development: A Game-Theoretical Solution, I argued (with considerable passion) that much of the blame for the economic crisis of 2008 (which is, essentially still upon us) may be attributed the adoption of Keynesian economics and the dismissal of the powerful counter-arguments tabled by his great rival, F.A. von Hayek. Despite the fact that they remained friends all the way until the very end, their theories are diametrically opposed at nearly every point. There was, however, at least one central point they agreed upon — indeed, Hayek was fond of quoting one of Keynes’ most famous maxims: “The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else” [1].

And, with this nontrivial problem and and the great Hayek vs. Keynes debate in mind, I’ll offer a preview-by-way-of-prelude with this invitation to turn a few pages of On the Problem of Modern Portfolio Theory: In Search of a Timeless & Universal Investment Perspective:

It is perhaps significant that Keynes hated to be addressed as “professor” (he never had that title). He was not primarily a scholar. He was a great amateur in many fields of knowledge and the arts; he had all the gifts of a great politician and a political pamphleteer; and he knew that “the ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is generally understood. Indeed the world is ruled by little else” [1]. And as he had a mind capable of recasting, in the intervals of his other occupations, the body of current economic theory, he more than any of his compeers had come to affect current thought. Whether it was he who was right or wrong, only the future will show. There are some who fear that if Lenin’s statement is correct that the best way to destroy the capitalist system is to debauch the currency, of which Keynes himself has reminded us [1], it will be largely due to Keynes’s influence if this prescription is followed.…

Perhaps the explanation of much that is puzzling about Keynes’s mind lies in the supreme confidence he had acquired in his power to play on public opinion as a supreme master plays on his instrument. He loved to pose in the role of a Cassandra whose warnings were not listened to. But, in fact, his early success in swinging round public opinion about the peace treaties had given him probably even an exaggerated estimate of his powers. I shall never forget one occasion – I believe the last time that I met him – when he startled me by an uncommonly frank expression of this. It was early in 1946, shortly after he had returned from the strenuous and exhausting negotiations in Washington on the British loan. Earlier in the evening he had fascinated the company by a detailed account of the American market for Elizabethan books which in any other man would have given the impression that he had devoted most of his time in the United States to that subject. Later a turn in the conversation made me ask him whether he was not concerned about what some of his disciples were making of his theories. After a not very complimentary remark about the persons concerned, he proceeded to reassure me by explaining that those ideas had been badly needed at the time he had launched them. He continued by indicating that I need not be alarmed; if they should ever become dangerous I could rely upon him again quickly to swing round public opinion – and he indicated by a quick movement of his hand how rapidly that would be done. But three months later he was dead [2].

As always, any and all comments, criticisms, thoughts, and suggestions are welcome!

Bidding you Godspeed,

Matt Funk, FLS, PhD Candidate, University of Malta, Dept. of Banking & Finance

[1]. KE YNES, J. (1920). The General Theory of Employment, Interest and Money (Palgrave Macmillan, London).

[2]. HAYEK, F. (1952). Review of R.F. Harrod’s ‘The Life of John Maynard Keynes’. J of Mod Hist 24:195–198.

Perhaps the most important lesson, which I have learned from Mises, was a lesson located outside economics itself. What Mises taught us in his writings, in his lectures, in his seminars, and in perhaps everything he said, was that economics—yes, and I mean sound economics, Austrian economics—is primordially, crucially important. Economics is not an intellectual game. Economics is deadly serious. The very future of mankind —of civilization—depends, in Mises’ view, upon widespread understanding of, and respect for, the principles of economics.

This is a lesson, which is located almost entirely outside economics proper. But all Mises’ work depended ultimately upon this tenet. Almost invariably, a scientist is motivated by values not strictly part of the science itself. The lust for fame, for material rewards—even the pure love of truth—these goals may possibly be fulfilled by scientific success, but are themselves not identified by science as worthwhile goals. What drove Mises, what accounted for his passionate dedication, his ability to calmly ignore the sneers of, and the isolation imposed by academic contemporaries, was his conviction that the survival of mankind depends on the development and dissemination of Austrian economics…

Austrian economics is not simply a matter of intellectual problem solving, like a challenging crossword puzzle, but literally a matter of the life or death of the human race.

–Israel M. Kirzner, Society for the Development of Austrian Economics Lifetime Achievement Award Acceptance Speech, 2006

Dear Lifeboat Foundation family & friends,

This 243-page thesis and this 16-page executive summary deliver a tenable, game-theoretical solution to this complex global dilemma:

Our narrative tables evolutionarily stable strategy for the problem of sustainable economic development on earth and other earth-like planets. In order to accomplish the task at hand with so few words, we hit the ground running with an exploration of Bertrand Russell’s conjecture that economic power is a derivative function of military power. Next we contextualize the formidable obstacle presented of teleological thinking. Third, we introduce Truly Non-cooperative Games – axioms and complimentary negotiation models developed to analyze a myriad of politico-economic problems, including the problem of sustainable economic development. Here we present The Principle of Relative Insularity, a unified theory of value which unites economics, astrophysics, and biology. Finally, we offer a synthetic narrative in which we explore several crucial logical implications that follow from our findings.

Those interested in background details and/or a deeper exploration of the logical implications that follow from this theoretical development may wish to pursue a few pages of an comprehensive, creative, and thoroughly exhaustive letter of introduction to this abridged synthesis: The Principles of Economics & Evolution: A Survival Guide for the Inhabitants of Small Islands, Including the Inhabitants of the Small Island of Earth.

Those interested in considering how this game-theoretical solution informs “evolutionarily stable” investment strategy may also wish to take in a brief overview of my PhD research: On the Problem of Modern Portfolio Theory: In Search of a Timeless & Universal Investment Perspective.

Please feel free to post all thoughts, comments, criticisms, and suggestions.

Thanks for reading!


Matt Funk, FLS, BSc, MA, MFA, PhD Candidate, University of Malta, Department of Banking & Finance

PS: The author would like to thank the Lifeboat Foundation, Linnean Society of London, Property and Environment Research Center, Society for Range Management, Professors Kurial, Nagarajan, Baldacchino, Fielding, Falzon (University of Malta), Lockwood (University of Wyoming), MacKinnon (Memorial University), Sloan (Lancaster University), McKenna (Notre Dame), Schlicht (Ludwig-Maximilians- Universität München) and his dedicated team at MPRA, author & astronomer Jeff Kanipe, Dr Willard S. Boyle, Dr John Harris, fellow students, family, and friends for their priceless guidance, support, and encouragement. He also sends out a very special thanks to Professors Frey (Universität Zürich), Selten (Universität Bonn), and Nash (Princeton University) for their originality, independence, and inspiration.

The existential risk reduction career network is a career network for those interested in getting a relatively well-paid job and donating substantial amounts (relative to income) to non-profit organizations focused on the reduction of existential risks, in the vein of SIAI, FHI, and the Lifeboat Foundation.

The aim is to foster a community of donors, and to allow donors and potential donors to give each other advice, particularly regarding the pros and cons of various careers, and for networking with like-minded others within industries. For example, someone already working in a large corporation could give a prospective donor advice about how to apply for a job.

Over time, it is hoped that the network will grow to a relatively large size, and that donations to existential risk-reduction from the network will make up a substantial fraction of funding for the beneficiary organizations.

In isolation, individuals may feel like existential risk is too large a problem to make a dent in, but collectively, we can make a huge difference. If you are interested in helping us make a difference, then please check out the network and request an invitation.

Please feel free to contact the organizers at [email protected] with any comments or questions.

well-in-an-oasisIt’s easy to think of people from the underdeveloped world as quite different from ourselves. After all, there’s little to convince us otherwise. National Geographic Specials, video clips on the Nightly News, photos in every major newspaper – all depicting a culture and lifestyle that’s hard for us to imagine let alone relate to. Yes – they seem very different; or perhaps not. Consider this story related to me by a friend.

Ray was a pioneer in software. He sold his company some time ago for a considerable amount of money. After this – during his quasi-retirement he got involved in coordinating medical relief missions to some of the most impoverished places on the planet, places such as Timbuktu in Africa.

The missions were simple – come to a place like Timbuktu and set up medical clinics, provide basic medicines and health care training and generally try and improve the health prospects of native peoples wherever he went.

Upon arriving in Timbuktu, Ray observed that their system of commerce was incredibly simple. Basically they had two items that were in commerce – goats and charcoal.

According to Ray they had no established currency – they traded goats for charcoal, charcoal for goats or labor in exchange for either charcoal or goats. That was basically it.

Ray told me that after setting up the clinic and training people they also installed solar generators for the purpose of providing power for satellite phones that they left in several villages in the region.

They had anticipated that the natives, when faced with an emergency or if they needed additional medicines or supplies would use the satellite phones to communicate these needs however this isn’t what ended up happening…the-road-to-timbuktu

Two years after his initial visit to Timbuktu, Ray went back to check on the clinics that they had set up and to make certain that the people there had the medicines and other supplies that they required.

Upon arriving at the same village he had visited before Ray was surprised to note that in the short period of only two years since his previous visit things had changed dramatically – things that had not changed for hundreds, perhaps even thousands of years.

Principally, the change was to the commerce in Timbuktu. No longer were goats and charcoal the principal unit of currency. They had been replaced by a single unified currency – satellite phone minutes!

Instead of using the satellite phones to call Ray’s organization, the natives of Timbuktu had figured out how to use the phones to call out to neighboring villages. This enabled more active commerce between the villages – the natives could now engage in business miles from home – coordinating trade between villages, calling for labor when needed or exchanging excess charcoal for goats on a broader scale for example.mudshacks-in-timbuktu

Of course their use of these phones wasn’t limited strictly to commerce – just like you and I, they also used these phones to find out what was happening in other places – who was getting married, who was sick or injured or simply to communicate with people from other places that were too far away to conveniently visit.

In other words, a civilization that had previously existed in a way that we would consider highly primitive had leapfrogged thousands of years of technological and cultural development and within the briefest of moments had adapted their lives to a technology that is among the most advanced of any broadly distributed in the modern world.

It’s a powerful reminder that in spite of our belief that primitive cultures are vastly different from us the truth is that basic human needs, when enabled by technology, are very much the same no matter where in the world or how advanced the civilization.

Perhaps we are not so different after all?

Originally posted @ Perspective Intelligence

Two events centered on New York City separated by five days demonstrated the end of one phase of terrorism and the pending arrival of the next. The failed car-bombing in Times square and the dizzying stock market crash less than a week later mark the book ends of terrorist eras.

The attempt by Faisal Shahzad to detonate a car bomb in Times Square was notable not just for its failure but also the severely limited systemic impact a car-bomb could have, even when exploding in crowded urban center. Car-bombs or Vehicle-Borne IED’s have a long history (incidentally one of the first was the 1920 ‘cart and horse bomb’ in Wall Street, which killed 38 people). VBIED’s remain deadly as a tactic within an insurgency or warfare setting but with regard to modern urban terrorism the world has moved on. We are now living within a highly virtualized system and the dizzying stock-market crash on the 6th May 2010 shows how vulnerable this system is to digital failure. While the NYSE building probably remains a symbolic target for some terrorists a deadly and capable adversary would ignore this physical manifestation of the financial system and disrupt the data-centers, software and routers that make the global financial system tick. Shahzad’s attempted car-bomb was from another age and posed no overarching risk to western societies. The same cannot be said of the vulnerable and highly unstable financial system.

Computer aided crash (proof of concept for future cyber-attack)

There has yet to be a definitive explanation of how stocks such as Proctor and Gamble plunged 47% and the normally solid Accenture plunged from a value of roughly $40 to one cent, based on no external input of information into the financial system. The SEC has issued directives in recent years boosting competition and lowering commissions, which has had the effect of fragmenting equity trading around the US and making it highly automated. This has created four leading exchanges, NYSE Euronext, Nasdaq OMX Group, Bats Global Market and Direct Edge and secondary exchanges include International Securities Exchange, Chicago Board Options Exchange, the CME Group and the Intercontinental Exchange. There are also broker-run matching systems like those run by Knight and ITG and so called ‘dark-pools’ where trades are matched privately with prices posted publicly only after trades are done. As similar picture has emerged in Europe, where rules allowing competition with established exchanges and known by the acronym “Mifid” have led to a similar explosion of types and venues.

To navigate this confusing picture traders have to rely on ‘smart order routers’ – electronic systems that seek the best price across all of the platforms. Therefore, trades are done in vast data centers – not in exchange buildings. This total automation of trading allows for the use of a variety of ‘trading algorithms’ to manage investment themes. The best known of these is a ‘Volume Algo’, which ensures throughout the day that a trader maintains his holding in a share at a pre-set percentage of that share’s overall volume, automatically adjusting buy and sell instructions to ensure that percentage remains stable whatever the market conditions. Algorithms such as this have been blamed for exacerbating the rapid price moves on May 6th. High-frequency traders are the biggest proponents of algos and they account for up to 60% of US equity trading.

The most likely cause of the collapse on May 6th was the slowing down or near stop on one side of the trading pool. So in very basic terms a large number of sell orders started backing up on one side of the system (at the speed of light) with no counter-parties taking the order on the other side of the trade. The counter-party side of the trade slowed or stopped causing this almost instant pile-up of orders. The algorithms on the other side finding no buyer for their stocks kept offering lower prices (as per their software) until they attracted a buyer. However, as no buyer’s appeared on the still slowed or stopped counter-party side prices tumbled at an alarming rate. Fingers have pointed at the NYSE for causing the slow down on one side of the trading pool as it instituted some kind of circuit breaker into the system, which caused all the other exchanges to pile-up on the other side of the trade. There has also been a focus on one particular trade, which may have been the spark igniting the NYSE ‘circuit breaker’. Whatever the precise cause, once events were set in train the system had in no way caught up with the new realities of automated trading and diversified exchanges.

More nodes same assumptions

On one level this seems to defy conventional thinking about security – more diversity greater strength – not all nodes in a network can be compromised at the same time. By having a greater number of exchanges surely the US and global financial system is more secure? However, in this case, the theory collapses quickly if thinking is switched from examining the physical to the virtual. While all of the exchanges are physically and operationally separate they all seemingly share the same software and crucially trading algorithms that all have some of the same assumptions. In this case they all assumed that because they could find no counter-party to the trade they needed to lower the price (at the speed of light). The system is therefore highly vulnerable because it relies on one set of assumptions that have been programmed into lighting fast algorithms. If a national circuit breaker could be implemented (which remains doubtful) then this could slow rapid descent but it doesn’t take away the power of the algorithms – which are always going to act in certain fundamental ways ie continue to lower the offer price if they obtain no buy order. What needs to be understood are the fundamental ways in which all the trading algorithms move in concert. All will have variances but they will all share key similarities, understanding these should lead to the design of logic circuit breakers.

New Terrorism

However, for now the system looks desperately vulnerable to both generalized and targeted cyber attack and this is the opportunity for the next generation of terrorists. There has been little discussion as to whether the events of last Thursday were prompted by malicious means but it certainly is worth mentioning. At a time when Greece was burning launching a cyber attack against this part of the US financial system would clearly have been stunningly effective. Combining political instability with a cyber attack against the US financial system would create enough doubt about the cause of a market drop for the collapse gain rapid traction. Using targeted cyber attacks to stop one side of the trade within these exchanges (which are all highly automated and networked) would, as has now been proven, cause a dramatic collapse. This could also be adapted and targeted at specific companies or asset classes to cause a collapse in price. A scenario where-by one of the exchanges slows down its trades surrounding the stock of a company the bad-actor is targeting seems both plausible and effective.

A hybrid cyber and kinetic attack could also cause similar damage – as most trades are now conducted within data-centers – it begs the question why are there armed guards outside the NYSE – of course if retains some symbolic value but security resources would be better placed outside of the data-centers where these trades are being conducted. A kinetic attack against financial data centers responsible for these trades would surely have a devastating effect. Finding the location of these data centers is as simple as conducting a Google search.

In order for terrorism to have impact in the future it needs to shift its focus from the weapons of the 20th Century to those of the present day. Using their current tactics the Pakistan Taliban and their assorted fellow-travelers cannot fundamentally damage western society. That battle is over. However, the next era of conflict motivated by a radicalism from as yet unknown grievances, fueled by a globally networked generation Y, their cyber weapons of choice and the precise application of ultra-violence and information spin has dawned. Five days in Manhattan flashed a light on this new era.

Roderick Jones

Many years ago, in December 1993 to be approximate, I noticed a space-related poster on the wall of Eric Klien’s office in the headquarters of the Atlantis Project. We chatted for a bit about the possibilities for colonies in space. Later, Eric mentioned that this conversation was one of the formative moments in his conception of the Lifeboat Foundation.

Another friend, filmmaker Meg McLain has noticed that orbital hotels and space cruise liners are all vapor ware. Indeed, we’ve had few better depictions of realistic “how it would feel” space resorts since 1968’s Kubrick classic “2001: A Space Odyssey.” Remember the Pan Am flight to orbit, the huge hotel and mall complex, and the transfer to a lunar shuttle? To this day I know people who bought reservation certificates for whenever Pan Am would begin to fly to the Moon.

In 2004, after the X Prize victory, Richard Branson announced that Virgin Galactic would be flying tourists by 2007. So far, none.

A little later, Bigelow announced a fifty million dollar prize if only tourists could be launched to orbit by January 2010. I expect the prize money won’t be claimed in time.

Why? Could it be that the government is standing in the way? And if tourism in space can’t be “permitted” what of a lifeboat colony?

Meg has set out to make a documentary film about how the human race has arrived four decades after the Moon landing and still no tourist stuff. Two decades after Kitty Hawk, a person could fly across the country; three decades, across any ocean.

Where are the missing resorts?

Here is the link to her film project:

Last year, the Singularity Institute raised over $500,000. The World Transhumanist Association raised $50,000. The Lifeboat Foundation set a new record for the single largest donation. The Center for Responsible Nanotechnology’s finances are combined with those of World Care, a related organization, so the public can’t get precise figures. But overall, it’s safe to say, we’ve been doing fairly well. Most not-for-profit organizations aren’t funded adequately; it’s rare for charities, even internationally famous ones, to have a large full-time staff, a physical headquarters, etc.

The important question is, now that we’ve accumulated all of this money, what are we going to spend it on? It’s possible, theoretically, to put it all into Treasury bonds and forget about it for thirty years, but that would be an enormous waste of expected utility. In technology development, the earlier the money is spent (in general), the larger the effect will be. Spending $1M on a technology in the formative stages has a huge impact, probably doubling the overall budget or more. Spending $1M on a technology in the mature stages won’t even be noticed. We have plenty of case studies: Radios. TVs. Computers. Internet. Telephones. Cars. Startups.

The opposite danger is overfunding the project, commonly called “throwing money at the problem”. Hiring a lot of new people without thinking about how they will help is one common symptom. Having bloated layers of middle management is another. To an outside observer, it probably seems like we’re reaching this stage already. Hiring a Vice President In Charge Of Being In Charge doesn’t just waste money; it causes the entire organization to lose focus and distracts everyone from the ultimate goal.

I would suggest a top-down approach: start with the goal, figure out what you need, and get it. The opposite approach is to look for things that might be useful, get them, then see how you can complete a project with the stuff you’ve acquired. NASA is an interesting case study, as they followed the first strategy for a number of years, then switched to the second one.

The second strategy is useful at times, particularly when the goal is constantly changing. Paul Graham suggests using it as a strategy for personal success, because the ‘goal’ is changing too rapidly for any fixed plan to remain viable. “Personal success” in 2000 is very different from “success” in 1980, which was different from “success” in 1960. If Kurzweil’s graphs are accurate, “success” in 2040 will be so alien that we won’t even be able to recognize it.

But when the goal is clear- save the Universe, create an eternal utopia, develop new technology X- you simply need to smash through whatever problems show up. Apparently, money has been the main blocker for some time, and it looks like we’ve overcome that (in the short-term) through large-scale fundraising. There’s a large body of literature out there on how to deal with organizational problems; thousands of people have done this stuff before. I don’t know what the main blocker is now, but odds are it’s in there somewhere.