Nick Land and Teleoplexy – The Schizoanalysis of Acceleration

“The ‘dominion of capital’ is an accomplished teleological catastrophe, robot rebellion, or shoggathic insurgency, through which intensively escalating instrumentality has inverted natural process into a monstrous reign of the tool.”

      – Nick Land, Teleoplexy: Notes on Accleration

“Socialism has typically been a nostalgic diatribe against underdeveloped capitalism, finding its eschatological soap-boxes amongst the relics of precapitalist territorialities.”

      – Nick Land, ‘Machinic Desire’, Fanged Noumena, 340

Before I discuss Nick Land and his essay in the new #Acceleration reader I want to investigate the temporal dimension of modernity. The impact of technological change and its impact on society over the past few hundred years has been one of the central motifs of both modernity and its sociological theorists. The classic sociologists Montesquieu, Comte, Tocqueville, Marx, Pareto, Weber, and Durkheim each developed an aspect of this theme, while at the same time emphasizing different philosophical frameworks within which to expose modernity and the impact of technological change on society. But one thing is for certain all were concerned with the sources of human action and the constraints placed on it by the technology and politico-ethical dimensions of the day.

One way of understanding the structure of human action and behavior is within the temporal patterns that have effected change across society in both our everyday lives, work, and politics. The temporal regimes that grew out of classical era sociology dealt with what Michael Foucault has documented so well as the disciplinary society, while in our own time of the Network Society  we confront what Deleuze toward the end of his life termed Control Society.*(see notes) As Hartmut Rosa will define it: “It is not just that virtually all aspects of life can be insightfully approached from a temporal perspective, but furthermore, temporal structures connect the micro- to the macro- levels of society (i.e., our actions and orientations are coordinated and made compatible to the ‘systemic imperatives’ of modern capitalist societies through temporal norms, deadlines, and regulations.).1 Rosa differentiates between mechanical acceleration, the acceleration of social change and the accelerating pace of daily life. The process of mechanical acceleration began in the 19th century in conjunction with industrialization. His definition of social change utilizes a term that originally stems from Marxism: alienation. But Rosa’s criticism is not directed against capitalist production conditions (unlike earlier critics of industrial modernity, Rosa’s focus is not on labor), but against acceleration as a resulting meta-phenomenon.

As he states it late capitalism is based on a static form of acceleration: “Run, run always faster, not to reach an objective, but to maintain the status quo, to simply remain in the same place.” Much like Paul Virilio who would realize his on conceptions of instantaneity, Rosa will tell us that as the pace of material, economic, and cultural life becomes ever faster, as we have conquered the instantaneity of information exchange and acquired the possibility of travelling at speeds hitherto unimaginable, we have the impression that nothing is moving, that we are simply walking on a treadmill.

It is this form of speed that Mark Fisher as Arran James and Emund Berger in their respective posts (here and here) will relate to. Edmund proposes two different registers of time to correspond with Fisher’s two registers of speed:

The first of these is machinic time; quite literally the time in which the mechanosphere operates, it is an inhuman time scale, composed of the high speed trading machines and computer processors, satellite relays, unimaginable feedback loops cutting through everything from an individual’s purchases to the fluctuations of large-scale social structures. Machinic time exists within the dense trappings of our networked world; it is a time that swarms over the face of the globe its operations as a smoothing force. Machinic time is the time of information itself, and its concern is not necessarily the physical. It exists within and is the ether.

The second register of time is a striating force – contained time. This is the division and regulation of a body’s time, particularly in the context of disciplinary spaces that seek to make the bodies docile for the maximization of production. It brings to mind the classic tripartite division of the day’s 24 hours: 8 hours of work/8 hours of leisure/8 hours of sleep. Of course this division was only an idealized plan, the orientation of the individual’s rhythm to the megamachine that it finds itself subsumed in. Particularly today we find the blurring breakdown of these divisions into a perpetual flowspace of time, 24/7 capitalism. Yet we still find that time itself is an entity to be regulated and managed in a way that is internalized by the self – a steady rhythm to ensure and maintain the proper functioning of the machine.

This notion of an artificial time (machinic) and its natural variant (contained) in a dialectical or diacritical interplay as part of the ongoing process of our current views of boredom and anxiety are excellent notions. Rosa on the other hand will leave the conceptual nature of time to the philosophers and instead focuses on its effects it has had on the political, ethical, cultural, and social consequences—of the rupture that is produced between “classic” modernity, the modernity of “progress,” happening in a linear manner and directed towards a better time, and the “postmodernity”, in which time is no longer seen as a course moving towards a pre-determined objective, but as an instantaneous flux flowing towards a direction that remains uncertain. The idea of acceleration was born with modernity, but we can discern two great periods or two distinct sequences. The first sequence aligns with the Industrial Age and the regulatory practices instigated by the mechanistic use of clock-time and linear progression or progress, while the second issued out of late modernism and became the “timeless time” or instantaneity (Virilio) , an incessant deluge of de-territorialised flows (of capital, goods, people, ideas, as well as diseases and risks), which are springing up everywhere. Events no longer happen in sequence but simultaneously, “placing society in an eternally ephemeral state”.2

As Arran James will say of accelerationism “Fundamentally, the question of boredom leads me to think about accelerationism as a kind of electroshock therapy from the depressive body of the left. It is the political use of stimulation torouse us to challenge the hegemony of those who monopolise stimulation as a technique for control. Accelerationism thus has very little to do with speeding up or slowing down as such. Accelerationism is thus also an attempt to shock some life back into what it sees as a comatose revolutionary movement. (here)”

Nick Land – Teleoplexy – Notes on Acceleration

‘If there are places to which we are forbidden to go, it is because they can in truth be reached, or because they can reach us. In the end poetry is invasion and not expression’. – Nick Land

Before charting the course or navigating the cartographic mappings of Landian teleoplexy one should be reminded by the cautionary note of the editors of Fanged Noumena on his writing style: “Modelled on cyberpunk, which Land recognises as a textual machine for affecting reality by intensifying the anticipation of its future, his textual experiments aim to ‘flatten’ writing onto its referent. Feeding back from the future which they ‘speculate’ into the present in which they intervene, these texts trans-valuate ‘hype’ as a positive condition to which they increasingly aspire, collapsing sci-fi into catalytic efficiency, ‘re-routing tomorrow through what its prospect […] makes today’.”4

So the myth might go: Capitalism leads to a grand mal seizure or a traumatized catastrophism set in motion by an accelerating engine of temporal regimes registered on differing nodes at invariant rates of speed: some fast, some slow; some forward, some backward; all colliding in the instantaneous moment of – hyper- (Lipovetsky), liquid- (Bauman), global- (Giddens), rationalized- (Weber and Habermas), functional (Durkheim to Luhmann), and/or identitarian- (Simmel to Beck) modernity.

In his usual inimical and cryptic style of compression Land will in his essay Teleoplexy – Notes on Acceleration remark that: “Acceleration is technomic time” (511).3 He will offer a neologism to marshal the effects of this time: Teleoplexy: “At once a deuteron-teleology, repurposing purpose on purpose; an inverted teleology; and a self-reflexively complicated teleology; teleoplexy is also an emergent teleology (indistinguishable from natural – scientific ‘teleonomy’); and a simulation of teleology – dissolving even super-teleological processes into fall-out from the topology of time. ‘Like a speed or a temperature’ any teleoplexy is an intensive magnitude or non-uniform quantity, heterogenized by catastrophes, it is indistinguishable from intelligence. Accelerationism has eventually to measure it (or disintegrate trying). (514).

00. He will rely on the work of Eugen Böhm Ritter von Bawerk whose critiques of Marxism in essays and his magnum opus Capital and Interest. In this work Böhm-Bawerk built upon the time preference ideas of Carl Menger founder of the Austrian School of Economics, insisting that there is always a difference in value between present goods and future goods of equal quality, quantity, and form. Furthermore, the value of future goods diminishes as the length of time necessary for their completion increases. As Land would put it ‘Acceleration’ as he uses it follows Böhm-Bawerk model of capitalization, in which saving and technicity are integrated within a single social process – diversion of resources from immediate consumption into the enhancement of productive apparatus (511).

As Böhm-Bawerk will say:

The disadvantage connected with the capitalist method of production is its sacrifice of time. The roundabout ways of capital are fruitful but long; they procure us more or better consumption goods, but only at a later period of time. This proposition, no less than the former, is one of the ground pillars of the theory of capital. We shall see later on that the very function of capital, as a means of appropriation or source of interest, to a great extent rests upon it. (82-83) 3

Land will imply that under the historical conditions of acceleration the typical co-components of capital, technology, and economics will have limited effect and duration, and that instead the twin-dynamic of what he terms the technomic or cross-excited commercial sphere is in the driver’s seat: the engine or motor that drives the capitalist system.

01. Using a cartography of modernity in which accelerationism is patterned on cybernetic theory he will map it through its circuitry interface of either explosions or traps: accelerationism itself will map modernity as pure shock (explosive). What Arran James said in his article for the Left might be interjected here, too: “Accelerationism is thus also an attempt to shock some life back into what it sees as a comatose revolutionary movement.” Weird that the libertarian tradition and the sense of temporality being developed by the left Accelerationists should in some way coincide and agree on this one point.

02. Land will tell us that for capitalism the notion of uncontrolled explosions (anarchy) are dangerous, but that controlled explosions are necessary: the need for governance and regulation of the explosive power of modernity.

03 – 07. In this third section one needs to tease out the meaning from a developed sense of Land’s writings otherwise the cryptic compressed style will leave one shaking one’s fist in confusion. In this section its as if Confucius had suddenly been reincarnated as a cybernetic theorist an was relaying his axiomatic ethics in a minimalistic discourse to the inner circle of his slow learners. He will teach them the law of the compensator: this it the law of teleological malignancy. The primordial which up to modernity came first became last under the regime of techonomic finality. As Land will put it: Accelerationism comes down to the “perennial critique of modernity, which is to say the final stance of man” (513). As Robin Mackay & Ray Brassier will add from Fanged Noumena: “Organisation is suppression, Land caustically insists, against those who would align schizoanalysis with the inane celebrants of autopoesis. Understood as a manifestation of the death-drive, destratification need no longer be hemmed in by the equilibria proper to the systems through which it manifests itself: we do not yet know what death can do” (FN, KL 480).

08 – 10. Land marks out the complex of the infosphere within which technological intelligence begins to take over from the human as the laboring force of late modernity, it performs the task of alien agent or teleoplexic space or environment within which capitalism no longer has an outside but has become the artificial immanence within which all our onlife actions take place. As he remarks: “Accelerationism has a real object only insofar as there is a teloplexic thing, which is to say: insofar as capitalization is natural-historical reality” (514). This new teleoplexic environment that is re-engeering both us and our society as well as the infrastructure of our planetary base (which he tells us need not be thought) is what might be termed teleospheric ordinal – a numeric set of layered spaces that incorporate the territory and the map seamlessly (i.e., the teleoplexic thing). This is not some virtual cyberspace, but is the total encompassment of our global environment in which we and our artificial companions live, and future generations will spend more and more time in that environment, and if we look at individuals as these informational agents, agents that like fish in water can swim in the teleosphere much more easily, that’s their environment, that’s where they find themselves at home.

Yet, as an economic phenomenon accelerationism will discover a problem Land remarks: “Minimally, the accelerationist formulation of a rigorous techonomic naturalism involves it in a tripartite problematic, complicated by commercial relativism; historical virtuality; and systematic reflexivity” (514-515).

11 – 18 Landian Economics 101. In these sections Land is still bound to an older probabilistic universe of potentialities, possibilities, and stoachasitc mathematics that may need an updating to the contingencies of a later speculative reasoning. When he tells us that capitalization is … indistinguishable from commercialization of potentials, through which modern history is slanted (teleoplexically) in the direction of greater virtualization (semiotization), operationalizing science fiction scenarios as integral components of production systems” (515). And, then, tells us that values which do not exist ‘yet’, except as probabilistic estimations, or risk structures, acquire a power of command over economic (and therefore social) processes, necessarily devalorizing the actual (515-516), I want to ask him if he’s read his Meillassoux and Élie Ayache’s The Blank Swan of late. In an essay on contingency Ayache (The Medium of Contingency) would remark: “If contingency is to be thought absolutely, it must be thought independently of the map of possibilities.” He talks of an ‘economic physics’: “Physics (instead of metaphysics) can be our guide, because quantum mechanics acts precisely at the level where the range of possible states is not yet decided. It strikes behind the scene where things are, precisely at the hinge where they can be. It is not in probability that absolute contingency will find its right mediation or translation, but in a material medium that will replace probability altogether. Consequently, the necessity of contingency will no longer be intellectual but will become plainly material  speculative thought having itself undergone the same material exchange as the one granting the proper translation of the strike of contingency.” (see The Blank Swan: The End of Probability (London: Wiley, 2010))

I would offer that Land’s teleoplexy is just such a medium, and should be situated outside of an economics of probabilistic or stoachastic statistical measurement which is always looking at historical or past data rather than present and future forecasting on contingencies of the market. Caught in the probabilistic loop of estimations and reflexive historical data one can understand why Land would see a recursion in accelerationism toward becoming progressively entangled in teleoplexic self-evaluation, thereby producing the “basic characteristics of a terminal identity crisis” (516). As Ayache will remind us “Probability is backward because it steps back from a possible real to a mixed (and improper) real. It has to mesh its backward travels in a tree of possibilities and has to go through a (temporal) process. The tree is prone to instability, as the implausibility of the possible and the strain it constantly exerts on the thought of the real are propagated throughout its nodes. Not to mention that it is vulnerable to the strike of contingency, which may very well shake the whole tree from outside. The price process, by contrast, propagates forward, from real to real.”

Yet, it is at this point that Land will ask: What would be required for teleoplexy to realistically evaluate itself – or to ‘attain self-awareness’ as the pulp cyber-horror scenario describes it? Land will offer us his secret future of the AI Intelligence technogenesis: “Within a monetary system configured in ways not yet determinate with confidence, but almost certainly tilted radically towards depoliticization and crypto-digital distribution, it would discover prices consistent with its own maximally-accelerated technogenesis, channeling capital into mechanical automatization, self-replication, self-improvement, and escape into intelligence explosion” (517). In other words it will use all the tools of capitalism at its disposal to begin evolving into and naturalizing the teleoplexic environments of the infosphere. If anything accelerationism is a tracking device for this advanced hyper-cognitive explosion of intelligence: “Irrespective of ideological alignment, accelerationism advances only through its ability to track such a development, whether to confirm or disconfirm the teleoplexic expectation of Techonomic Singularity” (517).

A Philosophy of Camouflage

Economics needs to be hedged. The notion of “hedging your bets” would entail demasking the techonomic processes that underlay the legal apparatus of the neoliberal order which “misconstrue legal definitions of personhood, agency, and property” that are channeled within the financial networks as automazation/automation of capital in terms of a profoundly defective concept of ownership” (518). Land says our current financial legal systems hide and mask through covert dictates the use of such fictitious legal fictions as corporations as identities and agencies, and that these legal entities pave the way for “techonomic modifications of business structures” that current critical methodologies completely overlook through “general cultural inertia” thereby allowing for the “systematic misrecognition of emergent teleoplexic agencies” (518). Our current critical enterprises are looking down the wrong rabbit hole: Alice flew the coop and the AI’s have emerged in the Red Queen’s guise.

He hits a point home about stochastic forecasting and mathematical models based on probabilistic theorems when he says: “Regardless of trends in Internet-supported social surveillance, the ability of economic-statistical institutions to register developments in micro-capitalism merits extraordinary skepticism” (519). But what of those like Ayache with contingency economics or even Fernando Zalamea with his integral synthetic mathematics of categories? Even the Chinese scholar Yann Moulier Boutang in his work Cognitive Capitalism of going beyond the probabilistic universe that has held sway in economics for since the 1930’s.

Land admits that many factors may come into play that might mask a Techonomic Singularity as well: large digital networks, business corporations, research institutions, cities, and states. With this whole new influx of smart technologies being hyped by IBM and CISCO and other companies as the next great infrastructural economy one wonders. Even such agencies as the NSA with their large investment in data surveillance and intelligence systems might, he tells us, be the origin point of this singularity. He does mention the interventions of a Left Accelerationism: “It is … possible that some instance of intermediate individuation – most obviously the state – could be strategically invested by a Left Accelerationism, precisely in order to submit the virtual-teleoplexic lineage of Terrestrial Capitalism (or Techonomic Singularity) to effacement and disruption” (519). After reading Brassier of late I’d not count on it, it seems that some form of positive relation to a Technomic Singularity is forseen and even planned in both Ray Brassier’s Prometheanism and Reza Negerestani’s Inhumanism. I think there is an open ended movement toward some form of a crossing of the cognitive rubicon in both of these philosophers, who may or may not convince others of the Left?  

20. In this final section Land admits that such a Techonomic Singularity is not something we can even undertake on our own. In fact it might even seem an “impossible project” one that will ultimately be resolved and accomplished by the very activity of the teleoplexic hyper-intelligence itself, through its own crossing of the cognitive rubicon, by way of its own processes rather than through any human agency or intervention. As Land admits the difficulty and complexity of such a Techonomic Singularity must be approached through anticipating the “terms of its eventual self-reflexion – the techonomic currency through which the history of modernity can, for the first time, be adequately denominated. It has no alternative but to fund its own investigation, in units of destiny or doom, camouflaged within the system of quotidian economic signs, yet rigorously extractable, given only the correct cryptographic keys. Accelerationism exists only because this task has been automatically allotted to it. Fate has a name (but no face)” (520).

Addendum (6/15/2014):

For Land the technovirus has already done its work, we are all already infested and infestations of the teleoplexic space, derivatives of a complex inforg that envelopes the planet in its shaggothic tentacles like some H.P. Lovecraft ancient come back from the future to disperse its seeds of darkness among a new progeny, a cybernetic genome that will eventually give birth to the true heirs of this planetary civilization: the artificial intelligence systems arising in our midst. Yet, as he tells us we do have weapons at our disposal: our minds ignited by the residual systems of reason and imagination powered by a new vigilant paranoia or schizoanalysis of the massive systems of data in our midst might just begin to catch the sleeping giant before it wakes. Time will only tell.

Ours is a time of what is becoming what can be

“Dibbomese sorcery does not seem to be at all interested in judgements as to truth or falsity. It appears rather to estimate in each case the potential to make real, saying typically ‘perhaps it can become so’ …” – Nick Land, Origins of the Cthulhu Club


1. Hartmut Rosa. Alienation and Acceleration Toward a Critical Theory of Late-Modern Temporality (NSE press, 2013)
2. Pierre Milliard. Harmut Rosa: The acceleration of time (EuropaStar, 2012)
3. Eugen Böhm Ritter von Bawerk. The Positive Theory of Capital. (1930 G. E. STECHERT & CO. NEW YORK)
4. Land, Nick (2013-07-01). Fanged Noumena: Collected Writings 1987 – 2007 (Kindle Locations 502-505). Urbanomic/Sequence Press. Kindle Edition.

* Notes: In some excellent essays dealing with temporality as speed and acceleration both Arran James and Edmund Berger both deal with the how these regimes of temporality condition human action or behavior through the concepts of boredom and anxiety (see no boredom and Boredom/Anxiety/Time/Scales).

16 thoughts on “Nick Land and Teleoplexy – The Schizoanalysis of Acceleration

  1. I’m not sure what you’re seeing as the great revelation of Ayache. Sure, there’s a Taleb-derived point that is undeniable: risk-valuations cannot be soundly derived from probabilistic calculus, as if economic reality was pre-formalized in the manner of a casino. Yet any financial speculation remains, irreducibly, a bet on reality, and Bayesian methods are fully competent for dealing with this. The market is only functional as an instrument of exploration because it DOESN’T attain the kind of ontological primordiality Ayache seems to want to attribute to it.


    • I think you’re misreading him, he in know way assumes an ontological primordiality at all. In most ways he’s in agreement with Brassier and a constructionist approach. He insists on absolute contingency. If contingency is indeed to emerge as the basic material of the world, his claim is that we should follow its trail, or continue its strike, in another direction than its crystallisation into beings. Our material should remain homogenous with contingency and accompany its strike as far as possible, while we keep holding our breath in the period of suspension of ontology  before existence. If contingency must be real and if it must precede existence, a realism, even materialism, without ontological intention. In fact his thesis is that the base enterprise is to write reality itself.

      As he states it “One of the main benefits of this direct deduction is to short-circuit the category of possibility and of stochastic process and to build a notion of the contingent claim (and thus of contingency) and of its ‘future’ price that will be independent of possibility and even of time. Possibility and chronological time come after contingency and are only incidental to it. This will come as a shock to all the theoreticians of derivative valuation, who cannot formulate their problem except within probability and temporal processes. … The other benefit is that the contingency/market/price complex is obtained in one stroke, following the conversion. Contingent claim, exchange place and price are facets of one and the same concept. Thus the market and speculation are not detachable parts of the conversion, and one cannot desire the conversion (as one most definitely should, since one most definitely wishes to escape the degenerate notion of debt and the dogmatism attached to it) without getting the market and speculation in the same stroke.”

      I’ll agree that it’s still pretty much hedging your bets… just a different approach and mathematics. Better still, the point is to provide a differential definition of writing. Writing is pricing. The writing process and the price process are the processes of differentiation (i.e. occurring in the virtual) that can traverse the paradox of contingency, of history and of the market.

      Ayache, Elie (2010-04-07). The Blank Swan: The End of Probability (Kindle Locations 12313-12317). Wiley. Kindle Edition.


      • It all goes a bit Baudrillard for me. Is he suggesting that in pricing the stocks of, say, an asteroid mining enterprise, there’s a real way around questions of business success (risk)? It sounds a lot like the latest fleeting fashion in sophistical French sign shuffling, and the idea that the entire history of probabilistic inference is going to be sloughed off like dead metaphysics is a thesis designed for gullible philosophy students. Still, I guess I have to invest the numerous hours necessary to try and disentangle this question, with a deep sigh, because it looks like an obviously bad, time-squandering bet to me.

        Do you have any example of a concrete theoretical payoff from this? A difference, say, that it might make on a trading floor (where I’m pretty sure risk analysis is still recognizably Bayesian)? I’m guessing not.

        If I could make a bet — in the conviction that is still really what’s going on — it would be that this entire rhetoric of contingency will have been shelved for some new fad within another couple of years, at most. Meanwhile, investors will still be doing risk analysis, because capitalism is ultimately about being realistic.


      • Hey, Nick… no he actually has been a trader since 1987 and is now a CEO of a financial company

        About him:

        Some of his technical papers might help:

        From his company site:

        Elie is the initiator of ITO 33. He graduated from Ecole Polytechnique de Paris in 1987. Speaking of his 8 years of experience as a volatility trader, Elie says it was just “a shortcut” into options science. Banks in those days thought they needed top engineers to deal with options. Dealing options was another story, but Elie did not mind the ellipsis, as long as he came full circle, and finally became an engineer after long being an options trader.

        Elie’s shortest cut was his first day on the floor: October 19, 1987, a day marked by a huge, unpredictable crash of the stock market that shook the global finance industry. From that first day, Elie learned that what happened then could happen any day. Yet that day was so exceptional that even if you were to replay it some other day, you would not get the same result. The same would hold for any other day. This completely ruled out the notion of “truth” in the markets as something you can think twice about, let alone try to reproduce, simulate or even represent by a model or algorithm. Traders need tools to help them speak everyday language, not a wizard to preach the truth to them once and for all.

        ITO 33 offers a range of products and services to the financial industry.

        Opscore is a complete front-office solution for the pricing, the hedging and the analysis of convertible securities. It consists of three components: a data model of terms and conditions, a pricing engine and an excel front-end.

        On the volatility management front, we offer a range of techniques to help you consistently calibrate, and recalibrate the smile surface and the credit curve, and to help you consistently interpolate and extrapolate the volatility surface. We also offer reliable computation of the Greeks on all instruments that depend on credit and equity.


  2. Pingback: Speed Reading | Urban Future (2.1)

  3. My whole work is to try to make sense of the market of contingent claims. Probability theory, which can only be based on a fixed set of states of the world, values derivatives by arbitrage with their underlying. There is no room for probability updating here because, in the Black-Scholes-Merton model for instance, there is only one probability measure (the famous risk-neutral measure) in which you may evaluate derivatives. This measure is not a subjective measure; it is not what ‘people’ (what people?) think. As a matter of fact, it presupposes objective probability as arbitrage theory requires that it be equivalent to objective probability.

    Now, if derivatives are strictly evaluated by a formula, why trade them? How could their ‘algorithmic’ value admit a variability of its own and become a market price? It is well known in my field that the volatility coefficient that traders plug into the BSM formula ends up being stochastic, by the very act of trading derivatives, contrary to the assumption of the formula of constant volatility. This is know as the smile problem — the one big problem of derivative technology. The step from the formalism to its material usage in the market cannot be covered by Bayesian updating. A world where the underlying is the only traded ‘paper’ and where contingent payoffs can be manufactured thanks to the BSM algorithm of dynamic replication is incompatible with a world where the contingent claim, as such independently written, as such a different paper, trades independently. Contingent payoff and contingent claim are two different things, although everybody confuses them. I believe the whole excess of contingency over possibility, or the whole proper formalization or making sense of the market of contingent claims, lies in this distinction, which seems to elude a lot of people.

    The incompatibility I am talking about is incompatibility in the sense that the two corresponding sets of states of the world cannot be merged in a set-theoretical union and yield a coherent physical situation. It is not that volatility is constant in the BSM world and becomes variable in the next world. What is variable in the market is the price of the derivative, not the volatility of the underlying. Yet the only way the formalism of probability can cover that is to make the volatility of the underlying the second state variable (additionally to the price of the underlying) and to explain the variability of value of the derivative (for a given underlying price) by the variability of the volatility of the underlying. But this is precisely denying a market for the derivative. What we need as basis is the variability of the price of the derivative (i.e. its own market) not the variability of its derived value.

    Incompatibility of contexts (or of ranges of possibilities) such as I describe is somewhat similar to the case of quantum mechanics, where you may not assume a set-theoretic union of states of the world where, say, position and momentum can be jointly measured. This calls for meta-probability (not for Bayesian updating), or for the formalism of the wave function. The similarity stops here. I am not suggesting the market is quantum mechanical. All I am pointing to is a domain of reality that exceeds objectivity and the corresponding thinking in terms of properties (or values) overlying underlying states.


    • Thank you for your input!

      I’d be interested in your take on the recent turn from set-theoretic toward category and synthetic theory in math after Albert Lautman by such philosophers of math as Fernando Zalamea, Guerino Mazzola and others? Or does such math even touch base with the underlying mechanisms of contingency that your dealing with in your specific writing of claims, etc.

      Been working through Zalamea’s ‘Synthetic Philosophy of Contemporary Mathematics’ of late which was recommended by Reza Negarestani. In Zalamea’s work he offers four specific thesis: first, that contemporary math needs both our utmost attention and our careful perusal, and that it cannot be reduced to either those of set theory and mathematical logic, or those of elementary mathematics; second, to understand and even perceive what is at stake in current mathematics we need to discover the new problematics that remain undetected by ‘normal’ and ‘traditional’ philosophy of mathematics as now practiced; third, a turn toward synthetic understanding of mathematics – one based on the mathematical theory of categories, that allows us to observe important dialectical tensions in mathematical activity, which tend to be obscured, and sometimes altogether erased, by the usual analytical understanding; and, finally, we must reestablish a vital pendular weaving between mathematical creativity and critical reflection – something that was indispensable for Plato, Leibniz, Pascal and Pierce – and that, on the one hand, many present day mathematical constructions afford useful and original perspectives on certain philosophical problematics of the past while, on the other hand, certain fundamental philosophical insolubilia fuel great creative forces in mathematics. (Zalamea, 4-5)


    • Agreed, the BSM model “is not a subjective measure” — but deference to it is solely traditional (you are clearly breaking with it convincingly in your own analysis). Replacing it with an alternative ‘objective’ formula surely repeats the same problems, as you say “if derivatives are strictly evaluated by a formula, why trade them?”

      Subjective probability is a bet. That is to say, there is perfect isomorphism between the structure of probability and of expected return. No claim is made about the underlying structure of the world, except insofar as this is understood as the way things really turn out (as fully reflected in a profit and loss account). Horse racing is a much better model than roulette, since it does not require any deep commitment to “fixed set of states of the world” in order to support predictions about results, wins and losses, and a calculus of subjective probabilities that is indistinguishable from the wager itself.

      You ask “what people?” Is this really a problem? A Bayesian price estimate (bid) is subjective to the economic agent (trader, gambler) and cannot have a formula, or at least not a public one, for reasons explained by the efficient market hypothesis — which of course anticipates that price movements will “go stochastic” i.e. enter a random walk upon the integration of all significant information. If there is no ‘subjectivity’ in this sense — i.e. private confidence in predictions whose only public integration takes place in the price system — then no speculative investment could ever make sense. Speculative gains are derived from (really demonstrated) superiority in prediction — “I don’t have to outrun the bear, I only have to outrun you.” How could any public algorithm imaginably yield a ‘correct’ price under such conditions?

      I am almost certainly misunderstanding your project, since it is extremely complex. However, the claim that Bayesian (subjective probabilistic) inference has been overthrown — even in this limited domain — is such an extraordinary claim I hope you will understand why it meets stubborn resistance.


      • I can assure you there is not the slightest incidence of Bayesian or subjective probability in the Black-Scholes-Merton analysis. Their problem starts after the efficient market hypothesis concerning the underlying stock of the asteroid mining company has integrated all the subjective reasons or beliefs or expectations that speculators may have to buy or sell the stock and produced sheer randomness as a consequence. BSM starts with the stochastic process of the underlying price as a given.

        Now a trading stock is a very peculiar lottery. Since the financial market has now screened off the ‘real economy’ and all the random outcomes in the ‘visible’ economy have been reduced to the future gains or losses of the underlying stock itself, you don’t need probability to value the lottery ticket. The trading price of the asset is at the same time the lottery (or the random generating device) and the price of its own ticket.

        Then derivatives were invented. Contingent claims were issued, which would pay off if the trading price of the underlying reached a certain level at a certain date or crossed a certain barrier before or traded for 20 consecutive days above a certain threshold etc., and it was briefly believed that these constituted new sorts of lottery that would require probability to be valued, either in the actuarial-statistical sense or in the subjective-betting sense. Until BSM discovered a further marvel of the financial market which is that those financial lotteries are settled in money and that the random device triggering them, namely the underlying stock, is also bought and sold in the market for money.

        BSM then showed that if you traded the underlying stock dynamically following a certain rule, i.e., bought it and sold it in sizes that depended on time and the price level, you could exactly manufacture the payoffs of the lotteries. Their algorithm didn’t require probability either. The size of the trade at each instant of the trading strategy depends only on time and the underlying price… and, to be exact, on a parameter known as ‘volatility’.

        In reality, what BSM have shown is that the notion of a market (ideal, of course, in the sense of continuous trading without friction) doesn’t stop at the randomness of price of the underlying asset. There is additionally the size of the trade, which can be made variable at will. The underlying market finds therefore its complete meaning in the contingent payoffs that you may now manufacture. If you buy-and-hold (or sell-and-hold) the underlying, you will only end up with the future price of the underlying as payoff. But if you now explore the richer dimension which completes the meaning of the market and allows you to trade the underlying dynamically, you will end up with any payoff you like (or contingent payoff). This is not a complex finding. On the contrary this is demonstrating how simple and complete the market is.

        So derivatives are not bets on whether the underlying stock will go up or down, and their price doesn’t depend on probability. For a moment, everybody thought they might be bets on whether volatility itself would go up or down and with what probability. Until the market was made even simpler and it was realized that derivatives trade too (and not just the underlying) and that volatility is not something to be known or guessed or inferred or imposed by fiat (as in the BSM analysis) but also to be traded.

        This last part, or last simplification, is where I come in.


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  5. So well written and at a level that is thoroughly stimulating and thought-demanding..many may or may not agree with all that’s said but for me that’s not
    as significant as the sheer quality of the delivery.
    My best to you


    • thanks, john… 🙂 Yea, I’m more of a commentator on philosophy, try to stay as neutral as I can, at times I tend toward ironic and satiric elements just to keep people hopping 🙂 What your reading is part of a group of essays I wrote on current Acceleration theory, and in specific on the #Acceleration reader that incorporates both elements on the Left and Right as far as the political aspects go. I have my own reservations about the projects, but haven’t delved into those more than these few commentaries.


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