[ExI] AIG Bail out

[Lee Corbin]

Max writes

> Damien--the stock exchanges DO have such mechanisms in place, precisely to constrain dangerous feedback loops. (They were put in 
> place, however, not by "elected deputies" but by stock exchange executives.) I think a very interesting, important, and difficult 
> question is how those constraints might be improved in some systematic way.
>
> Eric Bonabeau has some interesting thoughts on this issue in his article, "The Perils
> of the Imitation Age" (from the business  person's perspective). My review is here:
> http://www.manyworlds.com/exploreco.aspx?coid=CO61041235546

All I see there---without signing up further---is
the  following, but I don't see an attribution for
you anywhere. Is this really what you were trying
to draw attention to, or was this review of
Bonabeau written by someone else?

Lee

<If we understand human nature in terms of its biological and genetic basis then it is true, as Eric Bonabeau says, that it has not 
changed for many thousands of years. What does change is the way that social and technological progress amplifies the effects of the 
enduring qualities of human behavior. In this insightful, stimulating, and productive paper, Bonabeau zeroes in on a powerful 
element of human nature: imitation. Technological progress has given imitation enormous and rapidly growing influence, resulting in 
destabilization, quicker fads and fashions, bubbles and crashes, new and dying markets. This paper provides insight by looking into 
the motivations, mechanisms, multipliers, markets, measures, and concludes with six tools and strategies for understanding possible 
outcomes of imitative behavior and exploiting the opportunities that arise.

<Early in the information age, writers were apt to praise the potential of the rapid expansion of available information to help us 
make better decisions. Unfortunately, in too many cases, we use it instead to imitate others. A "self-referential society" has 
developed from our tendency to follow the lead of others, especially when it comes to consumer purchases, financial markets, and 
corporate strategy. We can easily see the appeal of imitation in an age when choices are multiplying and life is highly complex. 
Bonabeau grants the virtues of imitation but emphasizes its tendency to promote instability and unpredictability. When we routinely 
imitate leaders who get it wrong, a mistake quickly multiplies into disasters.

<Bonabeau does not promise anyone that simply mastering the dynamics of self-reference will make them invulnerable to its effects. 
What he does suggest is that businesses with this knowledge can take some protective measures, such as by accounting for it in their 
forecasts and risk management plans, by becoming more attuned to unexpectedly changing circumstances, and by hardening themselves 
against mindless imitation of moves made by other companies. On the positive side, executives may be able to craft strategies around 
self-reference and bend the forces of imitation to their will in order to influence opinion or capture new business. A sidebar 
summarizes some forms of imitation successfully exploited by businesses: Best-seller lists, collaborative filters, opinion 
aggregators, mock markets, and clusters.

<Bonabeau concludes his startling piece by offering six strategies for exploiting the dynamics of imitative markets: Target the 
hubs, keep it simple, embrace the new channels, give it away, model what you can, and be a rock. Readers familiar with Bonabeau's 
work will not be surprise to see "model what you can". However, here he does not discuss agent-based modeling, instead he suggests 
behavioral finance and tools that make it possible to infer individual behaviors from aggregated data. An excellent addition to 
leading thinking about strategy in the Innovation Economy. >

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