Tuesday, February 11, 2014

How Would A Biologist View White Collar Crime And "Control Fraud" ... And Suggest How To Handle Them?

Why ask this question, and many more like it?

Control Fraud and White Collar Crime, as coined by sociologists and criminologists, are useful yet neglected concepts.

What if there are diverse concepts from many other systemic disciplines that are of equal or greater value, yet even more neglected?

If all citizens periodically hear a bit more of what all other citizens know, we'd never have to worry about our democracy?

To get that benefit which history has promised, we first have to condition ourselves to want to know what more of our co-citizens know.

So in case YOU want to know, let's compare some views across disciplines, and see what pops out.

For non-criminologists, what is White Collar Crime ... especially "Control Fraud?"

It's useful to google both terms, and see the variety of illuminating examples illustrating both terms.

"The persons who control a seemingly legitimate entity (private, non-profit, or governmental) can cause unique damage [to the aggregate] if they engage in fraud because the CEO can direct the corporation and cause it to make the firm’s internal and external environment vastly more criminogenic." 
"... the CEO’s interests are frequently contrary to the interests of the corporation" 
"The elegant solution for the fraudulent CEO is not to defeat controls but rather to suborn them and pervert them into the most valuable fraud allies. This explains why sophisticated frauds almost invariably retain top tier auditors to “bless” the financial statements."

These quotes are taken from Bill Black's essay,

75th Anniversary of Edwin Sutherland Naming 'White-Collar Crime'

So, what might all this mean, systemically, to all 315million members of our democracy? Is this cross-discipline sharing of terms and concepts useful for all?

These concept of White Collar and Control Fraud crimes are not only a rehash of ancient tyrant/civil conflict, and not just a review of Marxist/aristocracy conflicts.

To biologists, these concepts are also the real-time noise of host/parasite interactions, where some of the emerging elements in a deeply nested system are always harming rather than helping the system that spawns them. Yes, in the course of spawning their own diversity, biological systems spawn internal parasites, and must constantly invent completely novel methods to regulate and/or cull the mal-adaptive processes, as part of selecting the adaptive fraction.

In short, to any system scientist, "parasitic" members of an internal characteristic-spectrum are those system components NOT YET REGULATED or tuned to adaptive system purpose.

When citizens and criminologists discuss fraud & crime in specific industries, they're talking about diverse expression of similar, not-yet-regulated behavioral excesses. Those behavioral excesses are just applied in different segments of our vast, cultural INTERACTOME, precisely because more adaptive tolerance limits are not yet hemmed in by more evolved regulatory interactions.

How are optimal tolerance limits developed sooner rather than later? By practice at sampling all available feedback and getting good at adaptive_signal/system_noise discrimination. We know that no system ever knows best/worst utilization of emerging resources beforehand, since that utilization is always entirely context-specific. So how does a growing human culture figure that out, as it simultaneously spawns new components capable of harnessing new resources?

Not just by totally naive trial and error, but by applying BEST PRACTICES to the timeless methods for parsing adaptive_signal from context_noise.

Best practices are historically shaped by the rule of system extension, i.e., species, culture or national survival. 

That history automatically pre-defines best practice as configuring ourselves to maintain the most degrees of freedom or highest adaptive potential (DOF/HAP) in the existing system or culture, while retaining all that culture's historical momentum and baggage as a foundation stock of diversity to continue using. Short of sterilizing the planet and starting from scratch, we're stuck with extending the biological infrastructure we have, until we prove it as a dead end and get replaced by something else. Basically, we need to do anything to keep triggering a state of mobilization at regular intervals, instead of staying too relaxed for too long.

In species evolution, we call name such self-motivation tricks as "play behavior" among the so-called, more advanced species. Advanced cultures need cultural-play-behavior too, not just personal play behavior.

This train of thought suggests that we can actually confirm Joshua Chamberlain's thesis, and generalize from it. Yes, we cannot predict specific challenges, but we can determine what kind of adaptive rate our culture can spawn when the challenge strikes, by maintaining a high level of play & practice at both spawning diversity and then regulating it upon demand. Chamberlain didn't say how, but we can. By being prepared, through initially playful and then serious practice.

How to be prepared? By being practiced at assessing & optimizing our net adaptive potential (DOF/HAP; degrees of freedom = highest Adaptive Potential).

How to optimize & fine-tune adaptive potential (DOF/HAP)? History mandates optimal quality of distributed decision-making as the key to system extension or survival. That, in turn, mandates optimally distributed degrees of freedom, which mandates optimal distribution of BOTH static and dynamic assets.

Optimal distribution of both static and dynamic assets is rarely discussed, but historically boils down to "force-readiness." Translation: a median living wage AND mandatory requirements for lifelong education, training and industry, including regular practice at system perspective, not just component practice? In the end, culture is a dynamic asset which, like everything else, is something we either use or lose. It cannot be physically hoarded, only maintained through practice.

There are always important portions of system performance which cannot be appreciated through participation alone. Rather, the perspective from the edge or from a distance - as observer, coordinator or coach - is required, to recognize some system patterns which are much more difficult to recognize from within.

In practical terms, this advises us to regularly practice listening to diverse viewpoints, observing our own processes from the outside, and practicing dialectic modeling of everything, to trigger emergence of new regulatory checks & balances. Functionally, dialectic modeling reduces to early practice at examining emerging interdependencies.

What is the fastest way for supra-tribal populations to re-constitute the extreme agility & adaptive rate of tribal pass-through, tribal economies? Simply mandate it. Then practice it's features, by keeping ourselves prepared, by challenging ourselves with a steady spectrum of cultural-play behaviors.  Some of those play behaviors will always transition to serious work options. Self-challenge keeps us on our toes, while waiting for unpredictable outside challenges.

Pursuit of adaptation is a selected conditioning bias, not an inescapable certainty. Every new level of system expansion must not only be spawned, it must start from scratch and thereafter develop yet another set of tools and methods which instil a bias to pursue further adaptation (optimizing DOF/HAP). Such a bias can occur ONLY from the statistics of selection bias! There is no other way to discriminate best/worst resource allocation models.

No wonder systems ONLY advance during crisis, and always decline systemically without systemic selection pressure - reverting to component competition rather than coordinated cooperation.

What does that say about how our electorate orients to our present context?

The quick answer is "horribly" or "barely at all." So let's apply a bandage to our fractured, cultural orientation process.

Making a jump, let's put it this way, and start from scratch.

Tribal systems evolved to the point of running out of room to operate independently, and are still adjusting to all the resulting inter-dependencies. The former, tribal functions, however, maintained a highly selected system of distributed decision-making, which preserved & maximized net degrees of freedom. You can say that a "social" species is one that practices "pass-through" economics to optimize system maneuverability.

Where did "capitalism" come from? One view is that it arose from the onset of supra-tribal politics, where permanent inter-tribal frictions gradually transitioned "temporary" tribal war chiefs into "permanent" aristocracy with the habit of acquiring static assets across formerly tribal boundaries, instead of optimizing tribal capabilities. 

Capitalism is inherently the distributed practice of Control Fraud? 

Because of that view, early attempts to regulate White Collar & Control Fraud crime have focused on keeping it's practice distributed within tolerance limits, rather than reconstituting ancient Public Purpose and formally co-optimizing static as well as dynamic assets simultaneously. To optimize cultural Adaptive Potential, we might want to re-explore civic practice and preparation at agile utilization of all civic resources, aka, mobilization skills or force-readiness.

(You could also argue that allowing extreme wealth and income disparity is just another way of returning to a restrictive gold standard, where excessive amounts of access to public fiat is constrained in the hands of a few. That constitutes Central Planning, by any other name. Any method whatsoever of constraining or slowing, rather than more speedily distributing use of public fiat, is a severe, mal-adaptive constraint on both Policy Space and Policy Agility.)

From that perspective, capitalism is simply an off shoot of an arbitrary approach to acquiring static assets ACROSS system boundaries, while newly supra-tribal aggregates try to figure out how to organize dynamic assets on a new scale. For an aggregate, organizing dynamic assets as fast as it acquires static assets is the key to Adaptive Rate. Only by co-organizing static/dynamic assets can aggregates better discriminate best/worst options for aggregate resource allocation.

Capitalists are routinely taught that adaptation is merely static asset allocation, or simply distributed hoarding. Optimal adaptive "use" of resources is considered separately and transiently, if at all. It is typically viewed by most avowed capitalists as too difficult to do, and is therefore considered both presumptuous and something to be neglected. Unless absolutely necessary. The frequency of war indicates how frequently absolute necessity actually occurs.

The worst application of this new practice of "capitalism?" Instilling the habit of NOT practicing optimization of dynamic assets, and instead settling for an obsessive focus on distributed hoarding of static assets. In short, business capitalism is self defeating, by neglecting the return-on-coordination from it's own INTERACTOME, while progressively seeking to uselessly hoard static assets. That constitutes a transient, unstable, net loss of Adaptive Potential (a growing Output Gap), while components reflexively hoard under-utilized static assets. Capitalism is, in short, a group failure to orient to the far higher return-on-coordination.

We're looking at 2 settings for humans, long familiar to ecologists. 

1) Overgrowth of one species, waiting for some new sub-clone to out-compete all the rest ... simply because it can.

2) Climax ecology, where a stable mix of species co-exist, until unpredictable events clear fractions of the environment & allow a cascade of marginally preserved elements to build toward a new climax "cover crop" mix.

Our only challenge is to more quickly determine how prepared we are to respond, to whatever is going to happen next, no matter when it occurs. The only way to assess our national force readiness, is to practice on invented or "cultural-play" processes. Call them Public Works if you will, but whatever you call them, please just practice?

As we ponder this task, it should occur to all that humans may not be suffering from future shock at all. Rather, compared to our ancestors, humans may be suffering only from FutureBoredom, and need to get busy doing something about it, by first playing en mass, and then turning some fraction of competitive play into real evolution. The alternative is to sit around becoming progressively un-practiced, and thereby becoming less rather than more prepared for unpredictable challenges.