Debt in Complex Systems

My wonderful neighbor introduced me to Dave Ramsey a few years ago. They gave me his famous book The Total Money Makeover. The book’s message is that of getting out of debt, building wealth, and achieving financial independence. The target audience are people who have accumulated too much financial debt and are tired of dealing with its negative side affects. He often says that debt is like a “plague” or a version of “slavery” that keeps people from building wealth and living a fulfilling life.

The ideas that Dave Ramsey teaches on debt primarily come from his Christian faith. For example, Proverbs 22:7 states, “The rich rules over the poor, and the borrower is the slave of the lender.” Debt is considered a sin in the three Abrahamic religions, in fact the Hebrew word for debt (חוֹב chov) is related to the word for sin (חֵטְא chet). But modernity has changed our cultural values and views on Debt in the last century, and probably for the worse.

Why is debt seen as a sin by the three Abrahamic major religions? Why is it described as a path to slavery in the Bible? What I would like to show is that debt is a specific negative process on complex systems and should be avoided and removed as quickly as possible.

Definition of Debt

For the majority of people, the term “debt” refers to financial debt: an obligation to repay borrowed money, typically with interest, to a creditor like a bank or credit card company. This can be incurred by individuals, businesses, or governments. Failure to meet these obligations can result in penalties, additional interest, or legal action. Too much debt can result in bankruptcy: a position in which individuals or businesses cannot repay their debt obligations.

From a more abstract position, debt is processes that consume resources that do not help achieve a system’s responsibility.

Debt is a process of consuming resources (sacrifices) from a system that hinders the system from fulfilling its responsibilities.

Think about what happens when you have too much finanical debt. Individually, it causes a large amount of your income to go to creditors, which in turn leaves less money for essentials, like food and shelter. It also means less money to invest in yourself, like books and experiences. From a business perspective, the money going to interest cannot be used in creating market value, in form of goods and services. There’d be less money for employee salaries and other resources needed to not only keep the business running, but to improve its market share.

Paying creditors gets you nothing! For some simple context: money represents value. In complex systems, value represents sacrifices of time and energy to create new qualities. You can read more about Sacrifices in complex systems by reading my article Sacrifices in Complex Systems. Giving your money to creditors doesn’t allow you to create any new qualities in any part of your life (business or personal). It’s simply handing over your time and energy to a creditor for nothing in return. Debt strips a complex system’s ability to create new qualities, which over time only leads to the death of the system.

Taken to the extreme, if you own more money to debtor than what you take in as revenue, you are officially bankrupt. You can no longer pay for essentials, let alone any investments. Debt, if not eliminated, will eventually destroy the system in the long term as a positive feedback loop. How will it destroy the system? One way to answer that is to focus how to keep debt.

Nothing is Static

It takes resources to keep debt static, or the same over a long period of time. However, the amount of resources to keep the debt the same will only grow over time due to the strain on the rest of the system. This strain will grow over time due to the concept of entropy: the natural tendency of systems to move towards disorder and randomness over time.

All systems need to be maintained. For example, your body, a biological complex system, is constantly replacing its all tissue, like your muscles and skin. This is a mechanism to counteract the effects of entropy. By replacing old or damaged cells with new ones, the body maintains its structure and function, resisting the natural tendency towards decay.

Maintaining a system requires resources, or sacrifices. If there is a process that diverts resources away from maintaining or improving a system, then the system will only decay. Nothing is static! To quote Albert Einstein:

Life is like riding a bicycle. To keep your balance, you must keep moving.

Nothing is static in this reality. Either something is improving in qualities or it is dying and debt will only help in destroying a system by taking away resources that can be used to improve or maintain a system. There is another aspect of debt that also negatively affects a system: it makes it more vulnerable.

Vulnerability

The nature of our reality is that of perpetual flux! The ancient Greek philosopher Heraclitus rightly proclaimed:

Change is the only constant in life.

One of the biggest complications of complex systems is their inherent unpredictability. And this unpredictability is inherently due to how Complex systems distribute complexity.

Complex systems distribute complexity between a hierarchy of internal components. This allows complexity to be encapsulated which allows higher levels of the system to use the complexity without fully understanding it. For example, the complex system of your body doesn’t require you to understand how your liver or pancreas works. If you had to fully understand and control your body completely, you’d go insane! But one downside of this is that no complex system is fully understandable. And if its not fully understandable, then we can’t ever predict what it will do in the future.

Since complex systems are unpredictable, then there needs to be mechanisms and resources available within systems to protect it from unforeseen future events that could negatively affect the system. Debt only negatively affects a complex system and makes it vulnerable to future disorder by diverting resources away from maintaining and improving the system.

In his book “Antifragile: Things That Gain from Disorder,” Taleb discusses how debt can make individuals or systems fragile rather than antifragile. He contends that debt creates dependencies and vulnerabilities, making borrowers susceptible to unforeseen events and disruptions. In particular, Taleb highlights how excessive debt can amplify risks and magnify the impact of negative events, leading to financial crises and systemic instability.

Choice Between Right And Easy

Now that we have talked about what debt does to a complex system, we can focus on how debt is created. I’ve found that the creation of debt is mostly a human aspect of complex systems since in researching this topic I haven’t been able to discover any form of debt in biological or inorganic systems that are NOT caused by humans. One example is environmental debt: humanity consuming natural resources and polluting the environment at a rate that exceeds the Earth’s capacity to regenerate and absorb waste. I assume that if a biological system evolved to create debt, since evolution is the only way to change biological systems, it would die before it would be able to reproduce and pass the “debt” trait on to future generations. Businesses and humans don’t have this same restriction. Humans have free will and the ability to create complex systems and debt without biological death and reproduction.

Since debt isn’t natural, it comes from our original sin of using oppression to solve problems. It is inherit in us to create new qualities. This means improving and creating systems all around us is part of our nature. In my article Original Sin – Oppression And Subversion with Good Intentions, one aspect of our Original Sin is that we instinctively use oppression and subversion to improve systems, and we do this with good intentions.

Oppressive or subversive solutions are easy solutions to difficult problems. Take communism for example, to solve the problem of unequal wealth distribution, simply take out the wealthy, redistribute their wealth to the poor, and allow the government to take over all economic production to eliminate any future wealth inequality. Its a simple, easy solution that requires massive oppression and creates much social and intellectual debt through the suppression of intellectual freedom and artistic expression, and loss of social trust through heavy surveillance, informants, and state propaganda to maintain control. The easy/oppressive solution not only did NOT solve the problem of inequality, communist states created significant economic inefficiencies due to the constant collection of social debt listed above, leading to poor living standards for the majority of the population.

The choices we make will always be between what is easy and what is right. Jesus proclaimed:

Enter through the narrow gate. For wide is the gate and broad is the road that leads to destruction, and many enter through it. But small is the gate and narrow the road that leads to life, and only a few find it.

To create or improve qualities in any system, one must sacrifice. This is the small gate and narrow road that we must all take. The easy solutions create debt, and debt will eventually destroy a system if it is not cut out.

Discipline and Integrity

There are 2 virtues that help humanity in preventing the accumulation of debt: discipline and integrity. Discipline refers to the practice of training oneself to follow rules, guidelines, or a code of behavior in a consistent and controlled manner. It involves self-control, perseverance, and the ability to delay gratification in order to achieve long-term goals. Integrity refers to the quality of being honest and encompasses a commitment to truthfulness, ethical behavior, and consistency in actions and values.

These two virtues are deeply rooted in Christianity, reflecting principles that are emphasized throughout the Bible, and are crucially important in helping to prevent debt in any complex system. Discipline helps prevent impulse decisions that can create oppressive or subversive solutions which will eventually undermine the system. It will also help slow down the solution process which can help emphasize the use of empathy to try to fully understand the complexity of the system before making changes. Integrity can help prevent the temptation of creating debt and reduce the likelihood of fraudulent activities and mismanagement.that would result in the creation of debt for short term gains.

Discipline and integrity will help prevent debt. To help understand how, lets look at some other forms of debt that are not finical.

Gambling

Gambling is a form of societal debt. The time and energy sacrificed to gambling leads to nothing productive in any sense (economically, intellectually, socially, etc). I’ve personally only been to a casino a handful of times, but even the first time I had a depressed feeling when looking at all the people mindlessly putting money into a slot machine for hours on end. How much blood, sweat and tears that have been used to create that wealth is being mindlessly given to the casino for no value in exchange. This is why I believe our American ancestors made it illegal back in the 19th century.

Investing in the stock market is a far FAR better solution to gambling. It’s a risky process, but the money is at least going to be used to create new qualities in the market place that will solve current and future problems. Investing in the stock market plays a significant role in driving economic growth, fostering innovation, creating jobs, and improving living standards.

Addiction is a very negative affect of gambling, which increases its potency on the people and institutions it affects. One must be disciplined in the choice of gambling, making sure that they budget a small amount of money if they choose to gamble, and no more. Due to the addiction affect, it would be wise to avoid gambling all together.

Junk Food

Eating junk food is a form of nutritional debt. Junk food typically lacks essential nutrients such as vitamins, minerals, fiber, and healthy fats. Without these, your body isn’t getting the necessary nutrients to function optimally. It will try to compensate, but over time this compensation will deteriorate your body’s function. This will eventually lead to death in the form of cancer, diabetes or other cardiovascular diseases.

Addressing nutritional debt involves making conscious efforts to consume a balanced diet rich in whole foods, such as fruits, vegetables, lean proteins, whole grains, and healthy fats. This discipline helps ensure that the body receives the necessary nutrients to maintain optimal health and prevent the adverse effects associated with poor dietary habits.

Planned Obsolescence

If you are not familiar with Planned Obsolescence, it is a business strategy in which products are intentionally designed and manufactured to have a limited lifespan or fail after a short period of use. It is a strategy of greed to artificially increase revenue over time by degrading the quality of the product manufactured, to encourage a more frequent replacement of the goods sold.

The debt of this strategy is multi-faceted: it incurs economic debt by imposing an economic burden on people by necessitating frequent purchases. It also incurs ecological debt by increasing waste due to the artificially low product lifespan. And due to the frequent replacement of products, economic demand for raw materials increases which leads to over extraction of raw materials and the quicker depletion of natural resources.

Addressing these issues caused by planned obsolescence requires concerted efforts from consumers to promote integrity in ethical business practices. The current “its legal” ethical behavior from some corporations is a form a deceitfulness that must be pushed back on. Legal rules can only go so far in promoting ethical behaviors, humanity must push for a higher level of integrity from our corporate leaders.

What if I Have Debt?

From a complex systems perspective, debt is something to be avoided at all cost. However, sometimes one just can’t avoid it. Home ownership has become increasingly expensive to the point that nobody can pay cash for a home. America has setup their traffic infrastructure monolithically so that one can only get around by vehicle, which is also becoming increasingly expensive.

As described above, the Bible is pretty anti-debt. But, it also has some wise things to say about what to do when you have debt. Romans 13:8:

Let no debt remain outstanding, except the continuing debt to love one another, for whoever loves others has fulfilled the law.

And if you have thoughts of not ever paying back debt, remember this psalm:

The wicked borrows but does not pay back, but the righteous is generous and gives

If you have to take on debt, only take the smallest amount possible and pay it off as quickly as you can. This will help reduce your future vulnerability. Remember, if debt is taken and not removed, the system will collapse. This is why discipline and integrity is so important to our culture: discipline is needed to not take the easy path to oppression and integrity to prevent us from not creating debt at the expense of others. If we can follow these, our systems would be robust and our future would be forever bright.

Overview

Debt is a process of consuming resources (sacrifices) from a system that hinders the system from fulfilling its responsibilities. If not removed, the debt will lead to the destruction of the system.