Highway to Hell

I came across this news that Cristian Sporis was named Deputy Finance Minister for the state treasury and noted that it was a remarkably unremarkable piece of news. Ho hum, another banker being appointed to help run a country’s finances, a move quite common everywhere from Italy to Greece to the United States and beyond.

But it got me to thinking about banking in general. One of the odder things about capitalism is that it is absolutely predicated upon the existence of banks, which themselves are completely exempt from all the hallmarks of capitalism. If you save your pennies you can open an ice cream shop, a trucking company or a massage parlor but no matter how much money you have, you can never open your own bank.

All banks as we know them today have a monopoly on access to the currency itself, issued as an exclusive product by a central bank (which is usually owned by private interests, as odd as that is). It is impossible to avoid banks because even if you live on a farm and grow your own food and make your own clothes from deer skins, you’ve still got to pay your taxes using this currency and, as noted, this is controlled exclusively by banks.

However what truly angers me and frightens me to my very soul is that even assuming these “wise old elves” of the banking world were benevolent people with only the best intentions in mind (which they aren’t), they have a fundamental flaw in their understanding of reality. And it is that flaw, similar (although distantly) related to my piece on violins that is of vital importance to understand.

Last year I wrote a fairly long piece on the subject but I’ve been struggling with a way to put it into more comprehensible terms. And so today I’d like to discuss something absolutely real and concrete that lets us get to the heart of the matter without being baffled by (deliberately) obfuscating terminology and complicated mathematics.

Here in good old Unicorn City almost all of the city buses use an old mechanical punch system for the tickets. You slide a paper ticket into a little device and it punches out three holes in your ticket. The driver periodically opens up the punch device and moves a series of pins to change what holes are punched in your ticket.

The inside of the punch mechanism is a grid of 3 by 3 holes making for nine total spaces. Assuming there are no pins in place, the inside looks something like this:


To make things simpler, we’ll assign numbers for each of these positions, as such:

1 2 3
4 5 6
7 8 9

The driver then can re-assign these pins wherever he likes. So let’s make a sample pin selection, remembering that there are always three pins in place (never 2 or 4):

X 2 3
4 X 6
X 8 9

Therefore this pin combination could be expressed as “1, 5, 7”. With me so far? Now how many total pin combinations are there?

Well the first pin can be in any of 9 positions, the second in any of 8 positions (because one slot has a pin in it already) and the third pin can be in any of 7 positions. Therefore multiplying 9 x 8 x 7 we get a total of 504 pin combinations*.

Considering that each ticket is valid for two separate rides, I could buy 252 separate tickets, punch each and every one of the possible 504 combinations and then be assured that whenever I ride a bus in Cluj I’d already have a ticket pre-punched with the matching holes. All I’d have to do is slip a blank strip of paper into the punch, see what combination the driver has chosen and find the appropriate pre-punched ticket.

BTW considering that the total cost of these 252 tickets at 3.5 lei apiece would be 882 lei, I could effectively make a “cost benefit” analysis concerning the potential for receiving a fine for traveling without a ticket. Depending on how often I ride the bus and what the fine is, it might be cheaper to pay off the fines than buy the tickets ;)

Now here’s where the bankers and economists always fuck up and this is crucial. Assuming you and I were riding a bus and decided to make a wager on what the pin combination would be, how would you assess the odds? The bankers and economists would say any single guess would have a 1 in 504 chance of being correct.

Mathematically that’s more than correct. Except that people are not computers and they don’t truly choose the pin placements at random. For instance I’ve never seen three pins in a single horizontal row all chosen. I’ve also noticed that one driver in particular seems to prefer the symmetry of diagonal pins (1, 5, 9 or 3, 5, 7). The point is that if you collected all of your punched tickets for a long enough period of time (which I’d do if I could) you’d begin to see patterns emerge – and these patterns are far from random. Some pin combinations have a far higher likelihood of 1 in 504 chance and others have far less. And after a while you could even begin to figure out which driver had selected the pins solely based upon the combination you saw when you punched your ticket.

In other words, with a bit of data collection and some patience, you could save a lot of money while riding the bus, all based on an understanding of actual human behavior rather than relying on safe and satisfying mathematical algorithms to calculate probability.

Sound too far-fetched? Well consider the fact that one of the greatest secrets (at the time) of World War 2 was that the Allies completely broke most of the German’s encrypted transmissions. They were often able to decrypt commands from headquarters before the German officers in the field received them. In fact, one of the most secretive and important missions for the Allies during the war was figuring out how to both use the decrypted information to attack the Germans and at the same time not alert the Germans to the fact that they had gained their intelligence from decrypting their transmissions.

There are dozens of wonderful books on the Enigma system (the code name for the German’s encryption algorithm) but today I’d like to point to one particular fact about it (the link has an excellent summary of what Enigma was and how it worked):

The operator has to select 3 letters randomly [to encrypt the message]. But sometimes they use “AAA”, “BBB” or the diagonals of the keyboard (QFL), any abbreviations, his own initials or any dirty words.

A German operator in southern Italy frequently used his girlfriend’s initials.

A real German in the middle of the real war repeatedly used the same key to encrypt real Luftwaffe transmissions! Likewise you see that sometimes they just used “lazy” combinations. That was good for the Allies and it would be good for our hypothetical “cracking” of the Cluj bus line “codes” but it makes it almost impossible for economists and other experts to write algorithms to predict market behavior.

Honestly I’d say the two stupidest group decisions on humanity’s part in modern times have to be to base a world economy on a non-renewable resource (petroleum) and then to trust the handling of that economy to a secretive cartel with a monopoly on the medium of exchange (money) that bases its entire existence on a “science” that looks exceedingly well on paper and in computer software programs but in reality is deeply flawed. I am not joking when I say I’d rather have the finance minister use astrology to make decisions than this crap.

But hey, nobody asked me and all of us are just along for the ride, eh? ;) Long live the bankers!

* Considering that the pin combinations are in a square and that there is no “upside down” or “right side up” to the holes on the paper, effectively the true total possible pin combinations are 6 x 5 x 4 or 120 total combinations (or 60 tickets total, a much more manageable number and a total cost of just 210 lei). For instance “1, 5, 7” upside down is “3, 5, 9” to the (human!) eye of any bus ticket inspector.

6 thoughts on “Highway to Hell

  1. If I may interrupt this self-righteous tirade against the evils of capitalism.

    Central banks haven’t always been around – in fact, they’re quite a recent creation – born out of the need of kings to finance their wars.

    And their are not inherently necessary for the functioning of “capitalism”. There is a thing called “free banking” – and, when properly implemented, it worked well.
    The reason it is not well-spread is – you guessed it – politics. Politicians want control over the money supply.

    In fact, I’d argue that central bank are a destabilizing factor. They are what you’d call a “single point of failure”. If they’re asleep at the wheel – like they were in 2008, like they were in 1929 – it all goes belly-up. And it gets blamed on the “free market” !!

    So don’t blame banks (they actually do provide a valuable service) or capitalism – for what is, essentially, an attempt by a government agency to control things.

    Also, I do realize that capitalism is unnatural and that people were much happier as hunter-gatherers. However, we’re stuck with it. Might as well make the best of it.

    PS – you really should read this



  2. Money, to begin with, is just a sign, a mere common symbol to help ease count the added value of a transaction. Imagine going to the market, selling some produce like a good farmer: without money, you’re stuck bartering, bringing home other goods right now (or writing a contract for future delivery). With money however, you’re free to spend the extra income whenever you feel like, whenever you think it’s best. Ain’t that something?

    Of course, having the money system tied to the gold supply is one kind of hell, whereas having virtually unlimited money if you go fiat currency it’s another kind of hell. I’m not sure which is preferable.

    Now, if you want to see how an independent currency works in the real world, you can always research Bitcoin. It’s a currency mined with computation power, and the network nodes retain the transaction logs (multiple machines have to confirm a transaction); once you transfer something, it’s forever. No taxes, users are highly difficult to trace – though if the stakes are high, i.e. drugs, can eventually be traced.

    I’m quite curious how this democratic currency is going to fare in the real world. It’s possibly the best choice if one deeply hates centralized banking & the likes.


  3. I just recently saw a show on the decrypting from the enigma. Churchill had a difficult decision to make when he learned a particular town in the north was to be bombed. Warn the citizens and risk the Germans knowing the Allies had the codes or remaining silent. He had to remain silent as difficult as it was for him. Bankers are idiots!:P


  4. you can choose not to buy a ticket or a monthly pass but at the end of the year the company will draw the line and see which route doesn’t have pasengers and close it, so what do you win? a free walk :P


  5. For what it’s worth, we always did this when I was in secondary school/highschool. Everyone had collections of tickets and a stack of paper bits to test the punch pattern. (Bucharest used the same system that Cluj has now.)


Got something to say? Try to be nice!

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.