Monday, January 26, 2026

A Grand Unifying Theory: Takeaways

This post is one of six posts in a series on this topic. The full list of posts are linked here for convenience.

The models described in this analysis are ridiculously simplified compared to the real world. Their purpose was not to attempt a 100% accurate explanation of the current state of the world or its state in the future. Instead, the goal was to provide at least some plausible explanation of how key forces interact with one another over time to produce results that may differ greatly from what was desired, promised or intended. Applying these explanations to current events provided a way to cement the understanding and minimize concerns over hand-waving or cherry picking examples to justify conclusions.

Ultimately, theories serve no purpose if they cannot be used to predict future events and influence those events in ways that improve society. The key takeaways from these theories that must be applied going forward are set out here.


Creativity, Monopolies and Wealth Inequality

Throughout history, it has always been the case that at any point in time, there are always certain economic endeavors which become HIGHLY rewarded in the larger economy producing great wealth for those involved in those endeavors. It has also been the case that, at each of those points in time, those capturing out-sized wealth from those endeavors attempted to convince everyone else that they EARNED that wealth and should be allowed to continue capturing that wealth or "progess" would be impaired. The analysis involving creativity, productivity and specialization showed how those forces contribute to wealth but also showed that human progress cannot be accurately predicted and shifts from sector to sector as part of an iterative cycle.

Because of that feedback cycle, there will ALWAYS be some new technology emerging that provides the next leap in productivity and profitability that will supersede the incumbent monopolies. That isn't an argument for allowing existing monopolies, it's an argument that no business or sector merits reaching monopoly status in the first place. Allowing monopolies not only fails to ensure the continued economic success of such monopolies in their sector but existence of monopolies WILL harm society in the short term by over-charging and under-supplying existing needs and WILL harm society in the long term by starving other sectors of needed resources to allow development of the next big thing. A benevolent monopoly has never existed in the recorded history of mankind.

Monopolies in the modern data-driven industrial world are particularly dangerous because they place enormous economic power into the hands of private corporations whose behavior exhibits all of the groupthink flaws described previously and distort risk-taking decisions made by those corporations. Concentrating great economic power into a tiny fraction of society simplifies the process of corrupting government which already operates under its own groupthink patterns and distorted incentives made possible by gerrymandering and revolving doors between public service and private sector rewards for the right votes favoring the powerful.

Breaking up economic monopolies is essential to restoring democracy and correcting wealth inequality.


The Only Viable Path is Forward

The introduction to this analysis described two solution paths likely to be suggested as fixes to all of the current ills of the world. Those paths were labeled as:

  • Rollback -- Rolling the clock backwards decades to some magical, mythical time where everything was simpler and everything will return to "normal".
  • Course Corrections -- Making a few minor corrections and "investing in the future" will correct the most crucial problems allowing everything to move towards some better state.

Neither of these paths is viable. Both would somehow revert to a prior state of existence from which all the current rules in play originated. We now know those old rules and norms didn't prevent the de-evolution into the current state we face so attempting a major rewind or minor tweak to revert to any prior state solves nothing. In the case of the United States, these current experiences may not have been foreseen or intended as outcomes from our current Constitution of 1789 or the original Declaration of Independence in 1776 but they stem DIRECTLY from DECADES of effort by special interests who learned to manipulate and paralyze the government we have to yield these results. In sarcastic software terms, at this point these consequences aren't bugs, they're features of the system and the ultra-wealthy and corrupt politicians who serve them like these features. They will resist any attempts to eliminate these features for anything helping those not already holding the power and wealth.

A prior post reviewing the book We the People by historian Jill LePore summarized the problem facing the United States this way:

LePore's core point in writing the book is to convey that amending a constitution is the only way to keep it alive. Many conservatives would like Americans to believe that all of the existing amendments and any new proposals are corruptions of the original, "pure" and perfected Constitution and that all of our troubles stem from straying away from that original perfect text. Of course, reverting to 1787 would eliminate nearly two hundred and fifty years of racial / social progress and economic / environmental protections. The truth is that amending the Constitution is required for the country to move forward and attempts to amend the Constitution should be viewed with hope, not fear.

The current United States Constitution is irrevocably crippled by undemocratic stipulations regarding representation and improper powers being abused by the Executive Branch. No improvement in the long term direction of the United States is possible without a new constitution. The founders of this country didn't expect ANY constitution to last more than twenty years. They didn't fear constitutional conventions. They expected them. Americans today should demand them, at both the federal and state levels.


Think Calculus, Not Arithmetic

The larger goal of this analysis was to illustrate a technique of thinking through complex problems and systems by zooming in, then out, then across, then in, then out over a variety of forces people may think about individually but may seldom consider as a set. No issue of any consequence in a modern economy can be explained in a single dimension only involving a single variable or decision. The flip side of this point is that no human is capable of devising an accurate model for the real world nor would they understand one if someone else magically claimed to do it for them. But that doesn't mean that analyzing two, three or even four factors SIMULTANEOUSLY is pointless. Even if a simplified model is incapable of predicting an EXACT outcome of a proposed policy, the model can provide insight into how the change will alter the outputs. If a simple analysis says changing X by twenty percent will improve Y by ten percent but a politician or business is promising Y will change by two hundred percent, questions need to be asked and answered. Either the simplified model is wrong or someone is lying. Are they just ignorant? Or do they have a vested interest in boosting spending on X?

Another way of stating this lesson is to think in terms of calculus (a field of math that analyzes the rates of change between variables) rather than simple arithmetic. Economists can argue for decades over a simple demand curve, arguing over exactly where horizontally or vertically the curve should go on the price and quantity axes. They can argue over the precise shape of the graph (straight line or curve? slope?). But if anyone participating in the debate argues that the demand curve slopes UPWARD (reflecting that the quantity demanded increases to the right as prices increase), then everyone knows that regardless of any NUMBER coming from that economist, that economist doesn't understand the basic THEORY of supply and demand. Any NUMBER suggested by that economist is therefore pointless to consider.

Politicians, executives and special interests presenting simplistic, one-dimensional descriptions of problems and solutions cannot be trusted. Citizens should not tune out discussions involving complexity, they should seek them out. The mere complexity of a proposal isn't a guarantee of validity either but if the person advocating the proposal can speak to the complexity and explain the interactions between the variables their proposal addresses, they are less likely to be intentionally misleading the public.


False Precision

The idea that Jack Welch got away with manipulating quarterly earnings at General Electric for nearly two decades and became "America's CEO" never ceases to amaze. By the end of Welch's tenure in 2000, the firm was worth $600 billion dollars and had operated businesses in every sector imaginable over that term -- nuclear submarines, generators, home appliances, light bulbs, television networks, locomotives, jet engines. But for most of that tenure, GE's actual quarterly numbers for earnings per share matched its prior forecasts to the penny. Ponder that. It is impossible to find two economists who will forecast the same number on any financial statistic in the economy much less have even one of those economists get the estimate right yet a firm operating at nearly the same scale in nearly the entire economy managed to forecast its earnings correctly for nearly twenty years?

Should anyone have believed it at the time? Absolutely not.

In the present time, anyone showing up to argue a position that has numbers calculated to the decimal point and simple straight-line graphs pointing up is lying through their teeth. In a $32 trillion dollar economy, few statistics can be measured to more than two decimal points so anyone showing up with figures such as $3,141,592,653.50 has spent too much time carrying insignificant digits and not enough understanding the problem they have converted into a formula. And no one should listen to anyone providing forecasts down to the penny for any policy being proposed in current debates. A business begging for a $100 million dollar tax abatement because they will produce $4.79 million in additional salaries for a local community yearly? Don't get distracted by the precision. Ask the business under oath to show the math.

Any entity providing forecasts for specific economic or demographic statistics that contain false precision is succumbing to Excel syndrome (it was calculated in a spreadsheet so the number must be correct) or is attempting to mislead the audience with false precision. In some contexts, the presentation of such numbers may very well constitute fraud.


Investing Versus Gambling

The exponential growth in so-called cryptocurrencies is the most obvious current danger stemming from a failure to understand the difference between BANKING and INVESTING. This is because cryptocurrencies themselves are attempting to blur the line between the intended function of a CURRENCY and the intended purpose of INVESTING. An INVESTMENT is a transaction between two parties where both knowingly consummate a transaction which exchanges current and future values over some arbitrary period of time which exchanges a significant RISK between the parties. An investor who buys a new stock issue or a new bond issue of a corporation is surrendering CURRENT value to that corporation in exchange for a promise of future payback, either in interest payments and principal for the bond or in dividends and a higher future share price that can be captured by selling the shares later. Both parties understand that the longer the period of the bond (or the arbitrarily infinite period of stock ownership) generates risk and both assume the prices involved reflect that risk.

In contrast, BANKING is focused on optimizing the storage of existing wealth by providing security and convenience of access WITHOUT exposing that wealth to undue risks. A depositor placing $10,000 in a savings account paying a nominal 1% interest rate in a world of 4% inflation is essentially paying the bank 3% to protect that money. When the bank loans some of that $10,000 to another customer for a car loan at 9%, the bank is essentially taking a risk on the car loan to make some additional income off the $10,000 to further defray the cost of physically operating the bank, hiring tellers, oiling the hinge on the vault, etc. But the risk taken with the car loan by the bank and the risk taken by the depositor are FAR LESS than risks taken with INVESTMENTS.

When "investors" are buying cryptocoins as an "investment", they are speculating on the value of what they are calling a currency which defeats the purpose of trying to use the cryptocoin as a currency. Having the price driven up through speculation isn't allowing the cryptocoin to act as a store of value -- they WANT it to go up in value, even in the short term. The problem is that if a cryptocurrency can go UP significantly in the short term from speculation and hype, it can FALL in value significantly over short periods and thus FAIL at serving as a store of value.

In an environment of limited regulation on business in general and financial businesses in particular, individuals saving for their own futures require far greater literacy about how banking works, how different types of investing address risks and how nearly every transaction will extract money from and transfer risks to the least-informed participant in a transaction. Never confuse investing with gambling.


The Dangers of Decentralized Power

The section on groupthink and power theorized that organizations are likely to drift away from official stated goals or goals of individual members as the organization grows in size and becomes more difficult to control. Well, if allowing too much centralization of power and economic influence leads to monopolies in business or corrupt, unresponsive leadership in government, then surely decentralizing power and economic control would be good, right?

Wrong.

Government, law enforcement and the judiciary is a good example where too much de-centralization of power is creating harm in society. The harm stems from two problems created by de-centralization. First, decentralization duplicates hierarchy which requires more people to fill roles in those hierarchies. But what if the supply of people with those particular skills (mayor, controller, alderman, police chief, public works commissioner, judge) is limited? What if low tax rates restrict the amount of money available for pay and the entity cannot pay market rates for these skills? In this climate of low pay, those jobs are likely to be filled by workers checking at least one of these boxes:

  • they are not qualified for similar positions of authority / responsibility in the private sector, or
  • they can use that position of power and authority for their own financial gain, either directly to their own businesses or those of family and friends, or
  • they simply want to exert power over others or abuse power for sadistic purposes

I live in a county with over NINETY individual municipalities. Each with a mayor and aldermen who exert influence over local policing, zoning and real estate development. Many of those have individual police departments, a city manager, a controller, etc. The pay may be low and the overall economic power of these people may be limited, but ultimately they still influence policing which can impact the freedom of people not just in their community but anyone driving through. Is that level of local autonomy necessary? Is it actually increasing safety?

As a final example of the trade-off between overly centralized and overly decentralized power, consider the murder of Letcher County, Kentucky judge Kevin Mullins by his own sheriff Shawn Stines on September 19, 2024 in the judge's chambers. Local officials quickly found the shooting was triggered after Stines suspected the judge of being involved with allegations that a deputy in that sheriff's department and others were operating an extortion ring between the county court and the jail that traded improved bail / probation terms for females in exchange for sex. The sheriff seems to have concluded this system was abusing his own daughter. Subsequent reporting has confirmed dozens of women in the county have been exploited for years by this group, including this judge. This type of abuse of power is much likelier to occur when everyone is habituated to believing "more government" is bad, "less government" is good and no one needs state or federal officials looking into their operations.

The opposite of a problem is seldom a solution. The opposite of a problem is likely to just create another problem. The world doesn't need MORE government. The world doesn't need LESS government. The world needs the RIGHT level of government with the RIGHT controls in place to be accountable for serving the public.


WTH
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