Bubbles and Wisdom’ (published 2009) and ‘The Blindfolded Masochist’ (published 2011) are two books by Michael Baxter, the creator of ‘Investment and Business News’ – ‘Bubbles and Wisdom’ was co-written with Kenn Herskind.

Both take a slightly different – some might say quirky – perspective on the economy. They are written to appeal to non-economists – in fact, anyone interested in ideas on how the real world works. They are designed to entertain as well as inform, and be thought provoking.  

‘Bubbles and Wisdom’ applies ideas of evolution to the economy. Bubbles can be dangerous, but they can also – surprisingly – be rather useful. Homo Sapiens literally means wise man. When we strode the plains during our hunter-gatherer past, we were indeed wise. But are we so wise today, living in a complex world of technology, one that is quite different from the world in which we evolved to occupy? Are we living in the greatest bubble of the lot – one that began when we bit on the fruit called agriculture, stepped out of Eden, or our hunter-gatherer past, and – charged by Malthusian population growth and advancing technology – began a journey that can only ever end in one almighty pop? Or can the bubble be good?

‘The Blindfolded Masochist’ applies the ideas of networks to the economy. Networks are everywhere. They are made from the neurons in the brain, bees in a hive, ants in a nest, amoeboid protists that form slime mould, the servers that form the Internet, or web sites that form the World Wide Web. The economy, too, is a network. Sometimes, networks can display the hallmarks of a conscience but, with the exception of the neurons making up the human brain, this may be an illusion. The truth is, however, that the individuals who make up a network are blind to the collective role they play; it is as if they wear a blindfold. The network itself can sometimes seem as if it is hell bent on self-destruction; it is as if it is a masochist.

Here is an example of ‘The Blindfolded Masochist’ in action. In March of 2011, a massive shoal of sardines was navigating through the Pacific Ocean just south of Los Angeles. They swam in tight formation, moving as one; to the observer, the shoal seemed to possess a collective intelligence. This particular group navigated their way into Redondo Beach’s King Harbour, California. Apparently hell-bent on self-destruction, they failed to reverse course: caught in a trap of their own creation, they sucked the oxygen supply from the shallow waters, suffocating en masse.

Another example is a network of bankers, cunningly trying to reduce risk by the innovation known as mortgage securitisation. Their collective action caused the finance crisis of 2008, and nearly sent the global economy into meltdown.

Networks can also be smart. Maybe every innovation that has ever occurred was down to a network effect. 


Networks can be hard to change – very hard indeed.

Today, the network of humanity is able to communicate like never before because of the Internet. It has the ability to create something wonderful, or could wreak havoc, creating something even more calamitous than the network error made by the sardines of Redondo Beach.

How can we choose the former course, and not the latter course?

To read extracts from ‘Bubbles and Wisdom’, click here: Bubbles and Wisdom. For extracts from ‘The Blindfolded Masochist’ click here: The Blindfolded Masochist

© Investment & Business News 2013