BTC#32: WHY DO GOAL POST MOVE WHEN INFORMATION IS LOST?

Humans are astonishingly bad at setting goals.  We consistently establish targets that invite manipulation.  THREAD: A mental model on goal setting and unintended consequences:

Goodhart’s Law is a simple mental model:  When a measure becomes a target, it ceases to be a good measure.  If a measure of performance becomes a stated goal, humans tend to optimize for it, regardless of any associated consequences.  The measure loses its value as a measure!

Goodhart’s Law is named after British economist Charles Goodhart, who referenced the concept in a 1975 article on British monetary policy.  Goodhart wrote that, “Any observed statistical regularity will tend to collapse once pressure is placed upon it for control purposes.”

But the concept was popularized by anthropologist Marilyn Strathern.  In a 1997 paper, she generalized the thinking and called it Goodhart’s Law.  “When a measure becomes a target, it ceases to be a good measure.”  It became a mental model with considerable practical relevance...

The phenomenon has been observed throughout history.  Humans consistently establish targets that invite manipulation.  Indian Cobras & Soviet Nails.  Let’s quickly cover each situation:

The Cobra Effect  

The term "cobra effect" is used to describe a situation where the solution to a given problem makes the problem worse.  It is commonly used when talking about the unintended negative consequences of government policies.  Well-intentioned solutions may make matters worse.

There were too many cobras in India, so the British colonists started offering bounties for cobra heads.  Locals began breeding cobras, killing them, and turning in the heads to earn bounties.  Many cobras were released, increasing the population of cobras.

The British measure of cobra elimination (cobra heads) became an explicit target, and thus ceased to be a good measure.  Humans optimized for a goal, in spite of the clear negative consequences.  

Soviet Nails  Soviet factories set goals based on the number of nails produced.  The workers Soviet Soviet Nails  

Soviet factories set goals based on the number of nails produced.  The workers produced thousands of tiny nails.  The factories changed to goals based on the weight of nails produced.  The workers produced a few massive nails.  In both cases, the nails were useless.

The Soviet measure of nail production (quantity or weight) became an explicit target, and thus ceased to be a good measure.  Humans optimized for it, in spite of the clear negative consequences.  So those are from history, but where do we see Goodhart’s Law in action today?

In Education?  

Traditional education has lost its way.  Measures such as standardized test scores and graduation rates became targets, so humans optimized around them.  The result?  An assembly line system that fails to promote creativity and critical thinking in our children.

We can do better, but it will require rethinking our measures of success and leveraging technology to scale new models such that no child is left behind.  Innovation is coming.

In Business?  

You’ve seen this movie before...  Wells Fargo opening fake accounts to hit new account quotas.  Amazon managers hiring to fire to hit internal turnover goals.  CEOs managing to short-term stock goals.  Measures become targets and humans begin manipulating them.

In Politics?  

Approval ratings are a classic measure of the performance of politicians.  But when approval ratings become the goal, they cease to be a good measure.  Bad, short-term decision making to manipulate approval ratings becomes the norm.  Long-term progress stalls.

Goodhart’s Law becomes a mental model that you can’t unsee.  Once you internalize it, you observe it all around you.  It will force you to think carefully about measures, goal setting, and the potential for unintended consequences from the human desire to game the system.

2008 Bailouts?  

When the government bails out a corporation, it presumably does so with good intentions (to save jobs, etc.).  But the bailouts may have unintended consequences if other executives perceive themselves to be "playing with house money" with a government backstop.

Executives are compensated on the basis of shareholder returns. Increased risk amplifies returns. Why not take on additional risk if Uncle Sam has your back?  The seemingly well-intentioned government action may lead to more risk-taking and an increase in business collapses.

Monetary & Fiscal Policy?  

Aggressive, stimulative monetary and fiscal policy is undertaken in an effort to stimulate a struggling economy.  But the typical government actions - lowering interest rates, QE, and direct stimulus - may have painful unintended consequences.

Low risk-free rates and the "Fed put" may lead to rampant speculative bubbles and painful bursts.  The Cantillon Effect may appear, as the flow path of new money through the economy disproportionately benefits the wealthy, furthering inequality.

Cantillon Effect 101:  

With the recent money printing activity and an expanding wealth inequality problem, talk of the "Cantillon Effect" has taken center stage.  But what is the Cantillon Effect and how does it work?  Here's Cantillon Effect 101!

While published 265 years ago, the essay has many insights that remain relevant today.  He posited that the early recipients of new money entering an economy will enjoy a much higher standard of living than those it trickles down to.  The "flow path" of new money matters!

Let's use a simple story to illustrate his point.  Imagine you live in a small, simple island society.  One morning, you find a package has been delivered to your doorstep from your long lost Uncle FEDerico (who lives in a far away land). The package has $1 million in it.

No one else knows you have received this package. You now secretly have $1 million.  So naturally, you start spending it and investing it very quickly. Prices are still low, because no one knows these new dollars exist yet!  Your standard of living improves rapidly.

You buy yourself the nicest house, the most beautiful clothes, tons of land, and still have some money left over.  But now, people are aware that new money is flowing through the system.  Prices begin to rise as supply has yet to "catch up" to the new demand.

So while the money allowed you to invest, spend, and dramatically improve your lifestyle, it did not benefit others in the society in the same way.  The sellers of the goods, who received your cash, now face rising prices when they want to consume.  The flow path mattered!

This is an ultra-simplified example, but gets at the essence of what the Cantillon Effect describes.  Those receiving the new money injected in an economy first are generally much better off than those receiving it via the trickle down.  This may lead to inequality.

The Cantillon Effect is often discussed when examining the impact of "money printing" of Central Banks globally.  With an injection point of the "new money" at the top, asset owners benefit while the working class may experiencing rising prices for everyday goods like food.

It appears we are seeing some of this today.  For example, global food prices rose in July for the 6th consecutive month, hurting workers.  Meanwhile, prices of assets like homes and stocks continued to climb, benefiting asset owners.

Congress is pushing through an infrastructure bill now to further fiscal support (designed to be more bottoms-up) and the Fed is weighing further actions as inflation expands.  Developing a view on Cantillon's observations on the distributional consequences of the flow path of money is essential for understanding it all.

COVID variant carnival is very likely affect the Cantillion effect when lockdowns favor those rich in digital assets like technology companies.  

No matter how institutions like the Fed try to create fictitious economic conditions, market realities will ultimately prevail.
Even more insidious is how loose monetary policies generate inequality. In recent decades, the Fed’s actions have largely been directed towards propping up assets such as stocks, bonds, and real estate. As a result, these assets rise in price, while regular consumers who hold money get the short end of the stick. This is due to the reduced purchasing power of money that is brought about by generalized inflation. In essence, asset holders get rich at the expense of everyday money holders.

HYPERINFLATION? 

In May 2021, the US just hit a 13 year high inflation rate. This was unexpected by policymakers and economists. To an individual of average intelligence, it was entirely intuitive given the massive money printing (stimulus) that happened since COVID.

Economists/central banks argue that the inflation we’re seeing could be temporary, that its just an a supply shortage.  This idea is generalized in the WEF idea of the "Great Reset" in their writings.

COVID?

This situation is where the idea of a great economic reset .  COVID can and has been used as a compliance test to offset the risks the central bank has done to taxpayers.  The WEF and their globalists friends at Davos have committed to COVID political policies to get us to the next economic system without a war.  Politics is a messy process and you are living in that world right now in August 2021.   COVID is not based on biological science; it is political science gone awry.  This is why politicians demands and decree make no sense to us today.  The potential for legislation to reform society, let alone, abolish central banking, almost seems like a fleeting prospect at this juncture.

Today's cryptographer's are attempting the same task using Bitcoin.   This is far less chaotic.  It is your choice which world you want to participate in today.  Choices are the hinges of destiny. 

The WEF definitely wants to limit carbon emissions and their many pathway of doing it is not via their ESG iniatives.  They want to limit carbon based life by pushing veganism and blocking of sunlight.  They will use corporate governance to drive their goals.  Today you see it in vaccine mandates.  

Eventually, the party the Fed has created for Wall Street will come to an end after businesses recognize they made errors in their investments and have to readjust their business models according to prevailing market conditions. Regular consumers will be compelled to tighten their fiat belts in the correction phase. No part of this process is pretty in a fiat denominated world. It will require great sacrifices and readjustments in economic activities of people who live fiat lives. 

WHERE ARE WE NOW? 

The Fed has continued its on autopilot. I don’t think there’s been any discussion within the Fed about solving their debt problem any other way then what the WEF has put forward.  The Fed is just afraid to change because they don’t want it to be seen as a form of taking their foot off the pedal.  Bitcoin is another option that the Fed is ignoring at your peril. 

BIOLOGY AND GOODHART'S LAW 

Now for my favorite part of this blog.....................

Satoshi turned money into information code and did exactly the same thing Shannon did to data to create information theory.  Code is information theory which is made of letters and numbers, and letters and numbers are a form of speech.  Satoshi just showed the world that money is fundamentally speech.  In the USA, speech is protected by the Constitution.  These links will ultimately end the era of the Federal Reserve.  

The entire computer world is based on Shannon information theory.  Bitcoin was created using Shannon's ideas.  Shannon's ideas link directly to Boltzman's thermodynamics.  This means Bitcoin and biology are fundamentally linked. 

Nature’s codes are buried in biological systems and are adjacent to the Shanon limit in information theory.

Bitcoin takes money closer to the Shanon limit  in cryptography than any manufactured code has to date.  

Bitcoin is a measurement tool for value.  Goodhart's law says, when a measure becomes a target, it ceases to be a good measure.  Satoshi seemed to understand this and he created Bitcoin not to be a target that government would aim at.  This is why movement of the goal posts is a feature of Bitcoin in how mathematics are used to solve block equations.  Bitcoin information flow is unidirectional and this makes it immutable in terms of information flow.  This is what decentralization is all about.  Few people understand how information in Bitcoin and biologic systems link information flow to entropy.  Below is Boltzman's equation for entropy.

Below is Shannon's law for what is the minimum amount of information that can be in message without losing the fidelity of the message.  Do you see anything striking between the two pictures?  

Shannon equation and Boltzman's equation for entropy are identical.  

IMPLICATIONS

There is no way for matter to transmit the information or energy to light to reverse the flow of information transfer because of this primordial ratiofound in the universe of a billion to one and the unlimited orbital angular momentum (OAM) in light compared to electrons and protons. Shannon told us that infomation has a speed limit and we know Einstein said the same thing about light.  This means information and light share some symmetry with entropy and the second law of thermodynamics.  Very few people in Bitcoin realize this relationship.  I think this blog is the first time you'll read about it.  This is the fundamental manner in how health and wealth are linked.

This implies that atoms made up of these electrons and protons are the hardware of the computer and light is the software that runs the computer. Don't computers have two types of memory? RAM and disc drive? Bitcoin runs on these computers.  This is where memory is stored on computers.  Bitcoin stores its information on blockchains.

In biology, is memory stored in the OAM of electrons, protons, and light in our condensed matter? YEP

The implications of this situation mean information and energy move from light to matter all of the time in one direction because of the second law of thermodynamics and what it says about entropy. Boltzman is who created the formula for entropy pre- Alan Turing and pre Claude Shannon.  

Why did Mother Nature choose light for our memory source?

Light is the ONLY particle that seems to have an unlimited amount of OAM, and OAM = information quanta.

That is not true about electrons or protons. OAM of both is limited in these particles of matter.
Information can create order from chaos only when we store information about light in our memory (water). What is the physical basis of this? 

With elapsed time, just as RAM or a hard drive becomes full, light information will fill the capacity of water's hydogen bonding network and fill up all the possible memory, and memory will then become a drag on function and life will decline.  The samething is true in stars.  As they die their masses can collide and become a black hole where information seems to be lost and mass has to be recycled.  This seems to be how spacetime re-seeds the universe. 

How did life change this phenomenon? It innovated sleep. Sleep is fundamental to creating order from chaos and that means those who sleep well will be more creative. Think about Micheal Jackson now. As a kid when he could sleep he was massively creative. What did he really do after 1984 when his sleep went awry from his blue-lit nnEMF lifestyle? He lost his creativity. 

Sleep is when we prune our memory in light and in water. Information can only be useful on an ongoing basis if it is useful and used over and over and deemed critical, or until it is deemed useless and the memory mechanism in cells deletes information contained in light or water from our stores. When this happens it balances the second law of thermodynamics. It appears life breaks the law but she never does because she return useless information back to the environment she no longer needs to build order and the living state.  

This means there really is no free lunch in living things. How did life do this? Evolution built sleep to be mandatory. This is where memory in water is being deleted diurnally so that we can continue to use the information to order our cells while we live.  

The routine erasure of information during sleep is what drives entropy increases over time in the living system. This is a consequence of having 1 billion light photons to one atom ratio in the universe.  

If so how wise is it to place life inside a microwave and surrounded by antenna's because this is what the banking world is doing to us now.  The WEF is executing this plan for the bankers.

BITCOIN

Bitcoin was conceived of as a replacement of the monetary system, but it could also be used as a store of value if it was taxed as property and not handled as a currency.  This feature was built into the design.  Whether it was on purpose or not, I doubt will will every know, but I do know this feature destroys Goodhart's law with respect to Bitcoin.    

Moving the goalposts is an informal fallacy in which evidence presented in response to a specific claim is dismissed and some other (often greater) evidence is demanded. That is what governments are doing to Bitcoin right now with regulation.  That is, after an attempt has been made to score a goal, the goalposts are moved to exclude the attempt.

Consensus is a villian to truth and real science.  

Consensus in monetary theory is also pseudoscientific. Bitcoin is the best example I can think of as an example.  Bitcoin does not require governmental or regulatory compliance because of how it was conceived by Satoshi.  

The good news for you today is that markets find ways to solve many of the problems people face on a daily basis. The question of monetary policy is now being addressed through the private taxpayer due to the rise of Bitcoin and other digital currencies on the free market.   These innovations are anathema to central banking policies.  Indeed, digital currencies are still in their infancy but they are providing valuable lessons to millions across the globe on how money works. 

Namely, money can emerge in private markets, and when left to operate freely, it can serve as an alternative to state-controlled currencies. A depoliticized money enables the restoration of economic liberties and can correct many of the deleterious effects of government intervention. 

SUMMARY 

Central banking in developed economies like the U.S. has a signature– market intervention through credit expansion and manipulation of interest rates.  The enactment of low-interest rates encourages the accumulation of unproductive debt, excessive consumer spending, and discourages productive savings.

Considering how fiscally reckless the U.S. has become, the country could be staring at a sovereign debt crisis in the not too distant future. At that point, there will be a strong incentive for the government to debase its currency in a desperate attempt to pay off the debt with depreciated dollars. This favors the probability of hyperinflation before a deflationary spiral develops.  Under such circumstances, Americans will inevitably be subject to a wholesale reduction of their standard of living.   Bitcoin on your balance sheet will fix this.  Like a black hole in space-time does to energy, bitcoin will recycle monetary energy fairly among its users.

Bitcoin is omnivorous as the picture above shows: it is eating every other store of value the Fed has ever created.  The fact that the US government tried to harpoon Bitcoin in the infrastructure bill last week with a poison pill amendment, it says way more about the government than it does about Bitcoin.  Bitcoin restores taxpayer value and modern monetary theory is usurping it.  We are being ruled and abused by tyrants.  The US Congress is worse than any King was in in the 1770s.  

CITES

https://www.bloomberg.com/news/articles/2021-03-26/goodhart-s-law-rules-the-modern-world-here-are-nine-examples?sref=UGGkDWbK

https://towardsdatascience.com/unintended-consequences-and-goodharts-law-68d60a94705c

Documentary Movie:  The Bit Player on the life of Claude Shannon  https://thebitplayer.com

Documentary movie Cryptopia:  https://www.amazon.com/Cryptopia-Bitcoin-Blockchains-Future-Internet/dp/B08HSLGR29