Information economies and risk in markets

From The Count of Monte Cristo (published in 1846), two passages which particularly struck me. First, the Count describes his fascination with the telegraph:

“…I had often seen one placed at the end of a road on a hillock, and in the light of the sun its black arms, bending in every direction, always reminded me of the claws of an immense beetle, and I assure you it was never without emotion that I gazed on it, for I could not help thinking how wonderful it was that these various signs should be made to cleave the air with such precision as to convey to the distance of three hundred leagues the ideas and wishes of a man sitting at a table at one end of the line to another man similarly placed at the opposite extremity, and all this effected by a simple act of volition on the part of the sender of the message. I began to think of genii, sylphs, gnomes, in short, of all the ministers of the occult sciences, until I laughed aloud at the freaks of my own imagination. Now, it never occurred to me to wish for a nearer inspection of these large insects, with their long black claws, for I always feared to find under their stone wings some little human genius fagged to death with cabals, factions, and government intrigues. But one fine day I learned that the mover of this telegraph was only a poor wretch, hired for twelve hundred francs a year, and employed all day, not in studying the heavens like an astronomer, or in gazing on the water like an angler, or even in enjoying the privilege of observing the country around him, but all his monotonous life was passed in watching his white-bellied, black-clawed fellow insect, four or five leagues distant from him. At length I felt a desire to study this living chrysalis more closely, and to endeavor to understand the secret part played by these insect-actors when they occupy themselves simply with pulling different pieces of string.”

“And are you going there?”

“I am.”

“What telegraph do you intend visiting? that of the home department, or of the observatory?”

“Oh, no; I should find there people who would force me to understand things of which I would prefer to remain ignorant, and who would try to explain to me, in spite of myself, a mystery which even they do not understand. Ma foi, I should wish to keep my illusions concerning insects unimpaired; it is quite enough to have those dissipated which I had formed of my fellow-creatures. I shall, therefore, not visit either of these telegraphs, but one in the open country where I shall find a good-natured simpleton, who knows no more than the machine he is employed to work.”

“You are a singular man,” said Villefort.

Later, in a moment of pre-postmodern clarity, the Count strikes at something fundamental in the relationship between technology and meaning: “The moment I understand it there will no longer exist a telegraph for me; it will be nothing more than a sign from M. Duchatel, or from M. Montalivet, transmitted to the prefect of Bayonne, mystified by two Greek words, tele, graphein.”

It turns out he has a sufficient grasp of the mechanisms in operation to exploit a security weakness in the network through social engineering, using money and charisma to misdirect a vital packet of information upon which a financial empire rests – a “third-rate fortune”, unusually susceptible to such accidents:

“I make three assortments in fortune—first-rate, second-rate, and third-rate fortunes. I call those first-rate which are composed of treasures one possesses under one’s hand, such as mines, lands, and funded property, in such states as France, Austria, and England, provided these treasures and property form a total of about a hundred millions; I call those second-rate fortunes, that are gained by manufacturing enterprises, joint-stock companies, viceroyalties, and principalities, not drawing more than 1,500,000 francs, the whole forming a capital of about fifty millions; finally, I call those third-rate fortunes, which are composed of a fluctuating capital, dependent upon the will of others, or upon chances which a bankruptcy involves or a false telegram shakes, such as banks, speculations of the day—in fact, all operations under the influence of greater or less mischances, the whole bringing in a real or fictitious capital of about fifteen millions. I think this is about your position, is it not?”

“Confound it, yes!” replied Danglars.

I had the impression that these fortunes earned the scorn of the Count not for their vulnerability to the sort of events that get called “black swans” today, but for their fictitious nature, for being “like the locomotive on a railway, the size of which is magnified by the smoke and steam surrounding it”. There are lots of concerns I’m used to imagining as being particularly of our time by virtue of their technological or complex nature, but the little thrill I get when I see them reflected in a book written 150 years ago reminds me that “of our time” covers a longer period than I expect.

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