‘We spend billions of dollars trying to understand the origins of the universe when we still don’t understand the conditions for a stable society, a functioning economy, or peace.’
In this talk, James Glattfelder examines the solution to this problem using the science of complexity.
Complex systems are those which are made up of many interconnected parts; swarms of birds, financial markets, brains. Complex systems are hard to map into mathematical equations, so the usual physics approach doesn’t really work. But, it turns out that complex behaviour is actually the result of a few simple rules of interaction. Combined with the fact that the whole system is more than the sum of its parts, one just needs to focus on the rules of interaction. As a result, networks are the ideal representation of complex systems.
This approach has been used to study many complex systems, with the exception of economics. In Glattfelder’s study, ‘The Network of Global Corporate Control,’ they looked at ownership networks in detail. As ownership is related to control, examining these networks can give answers to questions such as, ‘Who are the key players?’ and, ‘What is the overall distribution of control?’
They started with a database containing 13 million ownership relations and focused on transnational corporations. There were 43000 of these companies operating in more than one country. Then, they built the network around these companies, taking all the shareholders and the shareholders’ shareholders, etc, upstream, as well as the same downstream. This left them with a network of 600000 nodes and one million links for analysis.
Their results were that the centre contained about 75% of the players, with a tiny dominant core in the middle of this. This core was made up of 36% of the companies but with 95% of the total operating revenue of all transnationals. Next, they looked at control. They found that 737 top shareholders have the potential to collectively control 80% of the transnationals’ value. In the core, 146 top players had the potential together to control 40% of the transnational companies’ value.
Glattfelder feels the high level of control is extreme by any standards. This level of inter-connectivity at the core could pose a significant risk to global economy. While he cautions that their study is more of an impression than a ‘street map,’ Glattfelder hopes that the complexity perspective eventually has the power to end the problems of conflicting ideologies. Ideas related to finance, economics, politics and society are often tainted by people’s own ideologies. The reality is far more complex.