Whoops! Why Everyone Owes Everyone and No One Can Pay

In an interview on Lying

So your brain was making a pattern from random input?

Yes, and drawing on past experiences because there is nothing else it can draw on. When our brains are creating these patterns they form a whole sequence of hypotheses. And the brain goes on with these guesses until it finds one that seems to be the closest: we see this in optical illusion puzzles such as the one where a vase turns into a face and then back again.

For example, just before you arrived I thought I saw someone on the settee but it was cushions, because these new lenses, made out of plastic, are not the same as my original ones. Since the operations my brain is having to adapt to a different sort of stimuli and I keep catching it making these hypotheses.

What is appalling to me, and this is why I keep writing about it, is that so many people don’t know about this constant hypothesising – and they don’t know how to bring this knowledge to bear in their personal lives or in their professional lives.

Now if Alan Greenspan, as chairman of the Federal Reserve, had had this knowledge, had understood that everything is a hypothesis, he wouldn’t have carried out the kind of operations that he did, operations which were a very large part of what led to the economic crisis. And the same is true of the economists and mathematicians, the ‘quants’ as they call them – they wouldn’t have been so stupid as to create things like the CDOs [collateralised debt obligations] and to use them uncritically.

So there is a certain necessary humility that comes with understanding that everything is guesswork?

Yes, it is all guesswork. These people simply underestimated how little they knew. Everyone should read this book and grasp this idea. The other element everyone needs to understand is what Chris Frith writes about the self. Another of the illusions that my brain creates is my sense of myself as an island of stability in an otherwise ever-changing world. But that is not what you are: you are just a stream of impressions flowing along, with your brain trying to make some kind of sense of them. And that picture is always changing, while all the interpretations are impressions. They are all guesses and theories, and they can easily be invalidated. When you come up against a major invalidation, such as happened to Alan Greenspan when the financial system was threatened with collapse, well, you simply feel yourself falling apart. Greenspan aged terribly during that period. He looked hale and hearty when he retired but then at the hearings in Washington and when interviewed about the crisis he looked terrible – he had that beaten look people get when everything just starts to fall apart. If Greenspan had understood his limitations, he would have been able to deal with finding out that he was wrong.

What about Mark Twain’s warning?: ‘Don’t part with your illusions. When they are gone, you may still exist, but you have ceased to live.’

The problem comes when people are not able to distinguish a fantasy from a truth. We can’t live without fantasies. For example, when you were coming here today you had a detailed fantasy, which you were constantly having to revise, about how you were going to get here and in what order you were going to do what this morning – if you hadn’t drawn up that plan as a fantasy you wouldn’t have been able to carry it out.

Then there are also the comforting fantasies that we all enjoy and use. But you must remember to distinguish between fantasy and reality – I had a lot of unpleasantness from the Christians with my last book, which was on belief systems, because they were so offended when I said that religious belief was a fantasy. When I said, ‘Well, where is your evidence?’ they became offensive.

So you can’t live without fantasy because you have to plan and you have got to be able to comfort yourself: consider that very popular fantasy about ‘what I would have said had I thought of it at the time’. It’s an extraordinarily comforting fantasy. You are lying in bed and you have finally worked out what you could have said and what you would say next time – that is actually how we learn, because we practise in fantasy what we can then do. That’s how children learn through play – it’s a vital part of learning.

Perhaps all capitalism has been bubbles of illusion, but hasn’t that kept civilisation moving?

Yes, but capitalism is a relatively recent event in that way. None of this was true in the middle ages. In John Lanchester’s book Whoops!, which is my next choice, he points out that during the Cold War communism and capitalism were balanced – so capitalist America did nice things to show that they were nicer than these horrible communists. And at the time a lot of people had put their hopes in communism. I know that my dad had. Out in Australia he was told and believed that all the wrongs that he and his family had suffered would be put right and it would be a fairer world – he couldn’t believe it when the news of the Stalin trials came out. That really was terrible for him. And Lanchester says that then, after the Cold War, the Americans didn’t have that balancing effect of competition with communism. And then with a whoosh capitalism took off and along came Milton Friedman [economist and champion of free markets with minimal intervention].

The reason I’m putting Whoops! in this list, is because it’s a beautiful read and it’s so funny. But also because he says at the end of his introduction: ‘The aftermath of the crisis is going to dominate the economics and politics of our societies for at least a decade to come. It’s important that we try to understand it and begin to think about what’s next.’