Excerpt

During a half-hour interval on May 6, 2010, stock prices for some of the largest companies in the world dropped precipitously, some to just pennies a share. Then, just as suddenly and inexplicably, shares recovered to their pre-crash prices.

This unprecedented event, burned into the memories of investors and regulators alike, is now known as the flash crash. Since that day, financial markets have seen flash crashes in US Treasury securities, foreign currencies, and exchange-traded funds (ETFs). Other puzzling, system-wide glitches are becoming more frequent as well.

Without a doubt, our financial systems are complex and often unpredictable, and when they swing out of control they remind us how much we still have to learn about how they work and how inadequate our traditional methods of controlling them are.

In all their complexity, though, financial markets don’t hold a candle to the natural world, with its eight million-plus species—those we know of, not including the millions that have come and gone—interacting and evolving in the world’s forests and oceans and in the microbiomes of our guts.

In the century and a half since Charles Darwin published On the Origin of Species, we still are stymied by the complexity of the biosphere, and, just as with our financial systems, our efforts to intervene have often led to confounding results.

Smokey Bear offers an example. For seven-plus decades, this popular icon has reminded us of the importance of preventing wildfires. But modern ecological practice recognizes that suppression of all forest fires today simply sets up forests for larger and more destructive catastrophes tomorrow. In all likelihood, financial systems are no different; small catastrophes are probably essential in maintaining their ongoing health.

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