# * Too Connected To Fail

Post date: Mar 9, 2017 2:19:22 PM

We were taught that UNITY is good. Is it true??

Aesop for Children (1919) THE BUNDLE OF STICKS

### A certain Father had a family of Sons, who were forever quarreling among themselves. No words he could say did the least good, so he cast about in his mind for some very striking example that should make them see that discord would lead them to misfortune. One day when the quarreling had been much more violent than usual and each of the Sons was moping in a surly manner, he asked one of them to bring him a bundle of sticks. Then handing the bundle to each of his Sons in turn he told them to try to break it. But although each one tried his best, none was able to do so. The Father then untied the bundle and gave the sticks to his Sons to break one by one. This they did very easily. "My Sons," said the Father, "do you not see how certain it is that if you agree with each other and help each other, it will be impossible for your enemies to injure you? But if you are divided among yourselves, you will be no stronger than a single stick in that bundle."

### In unity is strength.

But is this true??

The success of battle at sea is attributed to grouping of ships. In modern United States Navy carrier air operations, the moniker of carrier strike group (CSG) has replaced the traditional term of carrier battle group (CVBG or CARBATGRU)

Excellent books on Naval Warfare (recommneded reading)

In Physics we are taught the same that UNITY is good.

Rope or cable fault tolerance calculation

Probability of 1 strand failing = 10%

Probability of 2 strands failing at same time = 10%^2 = 1%

Probability of 3 strands failing at same time = 10%^3 =0.1%

{...}

Probability of 100 strands failing at same time = 10%^100 = 1E-100 (really small number)

1 strand can hold 1kg.

2 strands can load (1kg + 1kg) - (0.1kg *2 ; loss 10% load loss due to twist per strand) = 1.8kg

{...}

100 strands can hold 100kg - 10kg (0.1kg*100) = 90kg so rate this rope as 45kg Maximum Load

Also in computer network...that UNITY is good.

Computer network fault tolerance

Node 2 fails. Other nodes continue.

RAID: Redundant Array of Independent Disks

Efficient shape

Is UNITY always the best? Not always... here is a case where UNITY failed us.

Chronicle of Three Kingdoms (삼국지)

Cao Cao in Battle of Red cliff (조조)

Naval blunder : connected all the ships to eliminate instability. All lost due to fire attack.

Now to the main point

Everyone knows that income is unequally distributed in the world... but do people know that "control" is much more unequally distributed than income?

Why? and why is it importatn?

Income = control

% ownership vs. control

Father math :

Father wants to go to the beach. Rest of family wants to stay home. Where should they go?

Age calculation:

Father 44 years old.

Mother 40 years old

Son 10 years old

Daughter 6 years old

Father 44 years old vs fmaily 56 years old

The family should win right?

or

Majority rules: 1 father vs. 3 family members

BUT...

This family is going to the beach because father "controls" the car.

How about in Statistics?

Statistics Regression Analysis:

R-squared is a statistical measure of how close the data are to the fitted regression line. It is also known as the coefficient of determination, or the coefficient of multiple determination for multiple regression.

The definition of R-squared is fairly straight-forward; it is the percentage of the response variable variation that is explained by a linear model. Or:

R-squared = Explained variation / Total variation

R-squared is always between 0 and 100%:

0% indicates that the model explains none of the variability of the response data around its mean.

100% indicates that the model explains all the variability of the response data around its mean.

국민연금 may be the majority owner of the Chaebul but the Founder's family still 'controls' the Chaebul.

Chaebul ownership

Samsung ownership

https://gigaom.com/wp-content/uploads/sites/1/2014/11/credit-suisse-samsung-structure.png

Google ownership

https://thehobbeehive.com/2016/09/15/6594/

Candle light Revolution.

This is oversimplified Analysis. Must consider

1) Ownership controls the voting right

2) But must look at relative distribution of ownership

3) degree of influence

4) Potential power: probability of imposing own's will despite opposition

Formula of ownership flow of control

A **network topology** is the arrangement of a **network**, including its nodes and connecting lines.

There are two ways of defining **network** geometry: the physical **topology** and the logical (or signal) **topology**.

2008 Financial Crisis

-Where do we spend our money? Origin of universe : CERN

https://press.cern/facts-and-figures/budget-overview

Science > Human interaction

complex system : connected interacting parts

complex behavior = simple rules

emergence = whole is more than sum of its parts.

Don't look at components. Don't look at whole. Look at simple rules that govern them.

Let the data speak: OECD data

13,000,000 corporations

43,000 trans national corporations

600,000 nodes and 1,000,000 links

1,300 highly interconnected corporations make up 95% of value

1,300 controls 95%, but 737 controls 80%

1,300 controls 95%, but 737 controls 80%, but 146 controls 40%

They are mostly US and European financial institutes

With network control, any stress can spread through the system very quickly.

Questions:

Using Battle of Red Cliff analogy, how did too big become too big?

Why did "too big to fail" almost fail?

Why did we bail out "too big to fail"?

How can we prevent this from happening again?

Why do CEOs keep making large sums of salary even when the company is not doing well?

Why do gang leaders drive Mercedes and wear bling bling?