Traveling to Traverse City by Lake Michigan in the U.S. in cold, rainy October, serendipity struck in funny ways. In a bookshop next door to the renovated Art Deco State Theatre movie-house run by the film director Mike Moore, I picked up a 2010 book by the Serbian physicist Vlatko Vedral, “Decoding Reality,” which sees the world through the lens of quantum information. I read the book in Boston, right in the midst of Hurricane Sandy as it tore through the East Coast of the U.S., demonstrating the frightening power of nature. 

Stopping in the MIT Coop bookshop, I picked up more books on information theory. It blew my mind on how modern quantum physics has begun to integrate the world in a new theory of information, almost as a theory of everything.

Around 300 B.C., the ancient library of Alexandria had perhaps 500,000 scrolls. Its existence spread the knowledge of mathematics from the Arabs to the Greeks and the Romans. Information and knowledge was used by a small elite to control empires. The Industrial Revolution was a revolution created by science and technology. The New Industrial Revolution is a revolution of information.

The arrival of the Internet changed the game by making knowledge accessible to all. By 2010, Google estimated that the world published 2.2 million books annually out of 130 million books in existence. Smartphones in the hands of millions created network power, which was revealed by the impact of social media on the Arab Spring revolutions.

Physicists like Vedral are now pushing the envelope by explaining reality or our perception of reality in terms of quantum information theory, since we imagine reality and today process images of reality in terms of digitized information. Holograms are virtual images of reality.

All theories are really compressions of large amounts of uncertain and complex information into simple laws or principles, with which we try to predict the future. We reduce complexity into simplicity by explaining natural phenomenom in relatively simple equations or mathematical language. The most famous equation is Einstein’s theory of relativity, E = mc2, which explained that matter contains energy equal to its mass times the square of the speed of light.

Reality is today translated into digitized information of bits and bytes (0 and 1), which computers today process into knowledge, using complex mathematics. A simple picture taken can be reduced to 30 kilobytes of information, but a top rated camera is now capable of taking the same picture with 20 megapixels. That has information content of 30 or more megabytes or1,000 times more information for the same picture.

What this means is that if you have one of the top-range cameras, you do not need to have optical (telescope) zoom to see a distant object, you simply blow up your picture with digital zoom. Using that data, you can reformat the picture into new forms of art.

In 1997, one of the pioneers of the Internet, the late MIT Professor Michael Dertouzos conceived the Web as an information marketplace, where people and computers trade information and information services. The information marketplace actually describes all markets, because today, almost all information is stored and processed by computers, human and machine.

As all bureaucrats know, information is power. Businesses also understand that having good information is not only very powerful, but very valuable. We are all concerned about personal privacy, but the use of social media means that we can check up on almost anyone by simply googling for that information.

Simply being secretive is no longer possible. Did you know that you can measure how a supermarket is doing by using Google Maps to measure how many cars are parked outside that supermarket? Since smartphones like iPhone can be tracked, it is possible to map out your movements on a daily basis.

Someone is therefore able to map out traffic movements and make predictions about traffic jams by simply tracking the movement of these phones and tablets. In fact, a group of researchers using Google Trends data was able to predict GDP trends by the amount of searches for information using Google.

Big data, the ability to process and extract value from masses of data that is collected everyday, is the flavor of the month. This year, the U.S. government has launched a Big Data Research and Development Initiative to extract knowledge and insights from the data that the U.S. government collects. Companies are already beginning to look carefully into their own databases to map out consumer behaviour patterns in order to predict the next product or buying trends.

Information rules are therefore theories of how reality can be understood. Mathematics and theory is all about how to make unknowns known. So here’s the trick question if we think that the world should have rule of law: how do we write a rule for unknown unknowns?

The world is going through political turmoil because we are all debating about what caused the current crisis and how we should write new laws to make new reforms to prevent the new crisis. The new laws are getting more and more complicated, because everyone understands that new laws change the status quo and may hurt vested interests. All crises reveal the need for loss allocation, which is why vested interests reject such reforms that make them pay for the losses.

The trouble is that every new law or rule divides up gains and losses in unpredictable ways. This is the law of unintended consequences ― any law or rule may have outcomes that were never intended. Any new law is therefore writing rules on unknown unknowns. Furthermore, the more complex the law, the more the unknown unknown, because the market simply games the new rules, changing behaviour in unknown ways. No wonder the world is getting more complex.

In any situation of order, disorder wins, but in a situation of disorder, order wins. The world is no longer simple, but we need simplicity to manage complexity. 

By Andrew Sheng

Andrew Sheng is President of the Fung Global Institute. ― Ed.

(Asia News Network)