I wrote this opinion piece for the New York Times in the fall of 2008. Since then I’ve become addicted to financial crisis entertainment and parables of the second gilded age: books, movies, documentaries, Matt Taibi in The Rolling Stone, and the incomparable Gretchen Morgenson in the New York Times business section.

The gateway drugs were William D. Cohan’s House of Cards and the Oscar-winning documentary Inside Job by Charles Ferguson, followed by Michael Lewis’s The Big Short, Andrew Ross Sorkin’s Too Big To Fail, and Reckless Endangerment by Gretchen Morgenson and Joshua Rosner. The first serious crisis film that made me feel the fear was HBO’s adaptation of Too Big To Fail; unfortunately it’s not out yet on DVD. But Margin Call looks quite promising, released in theaters and Video On Demand via Amazon and others.

As far as I can tell, the $65 trillion is still missing. Nobody has been prosecuted. And the Fed and the Treasury are still trying to pretend that the money will show up one day, if they can just keep up appearances until it happens.

Rise of the Machines, by Richard Dooling, from the New York Times, Sunday, October 11th, 2008.

“BEWARE of geeks bearing formulas.” So saith Warren Buffett, the Wizard of Omaha. Words to bear in mind as we bail out banks and buy up mortgages and tweak interest rates and nothing, nothing seems to make any difference on Wall Street or Main Street. Years ago, Mr. Buffett called derivatives “weapons of financial mass destruction” — an apt metaphor considering that the Manhattan Project’s math and physics geeks bearing formulas brought us the original weapon of mass destruction, at Trinity in New Mexico on July 16, 1945.

In a 1981 documentary called “The Day After Trinity,” Freeman Dyson, a reigning gray eminence of math and theoretical physics, as well as an ardent proponent of nuclear disarmament, described the seductive power that brought us the ability to create atomic energy out of nothing.

“I have felt it myself,” he warned. “The glitter of nuclear weapons. It is irresistible if you come to them as a scientist. To feel it’s there in your hands, to release this energy that fuels the stars, to let it do your bidding. To perform these miracles, to lift a million tons of rock into the sky. It is something that gives people an illusion of illimitable power, and it is, in some ways, responsible for all our troubles — this, what you might call technical arrogance, that overcomes people when they see what they can do with their minds.”

The Wall Street geeks, the quantitative analysts (“quants”) and masters of “algo trading” probably felt the same irresistible lure of “illimitable power” when they discovered “evolutionary algorithms” that allowed them to create vast empires of wealth by deriving the dependence structures of portfolio credit derivatives.

What does that mean? You’ll never know. Over and over again, financial experts and wonkish talking heads endeavor to explain these mysterious, “toxic” financial instruments to us lay folk. Over and over, they ignobly fail, because we all know that no one understands credit default obligations and derivatives, except perhaps Mr. Buffett and the computers who created them.

Somehow the genius quants — the best and brightest geeks Wall Street firms could buy — fed $1 trillion in subprime mortgage debt into their supercomputers, added some derivatives, massaged the arrangements with computer algorithms and — poof! — created $62 trillion in imaginary wealth. It’s not much of a stretch to imagine that all of that imaginary wealth is locked up somewhere inside the computers, and that we humans, led by the silverback males of the financial world, Ben Bernanke and Henry Paulson, are frantically beseeching the monolith for answers. Or maybe we are lost in space, with Dave the astronaut pleading, “Open the bank vault doors, Hal.”

As the current financial crisis spreads (like a computer virus) on the earth’s nervous system (the Internet), it’s worth asking if we have somehow managed to colossally outsmart ourselves using computers. After all, the Wall Street titans loved swaps and derivatives because they were totally unregulated by humans. That left nobody but the machines in charge.

How fitting then, that almost 30 years after Freeman Dyson described the almost unspeakable urges of the nuclear geeks creating illimitable energy out of equations, his son, George Dyson, has written an essay (published at Edge.org) warning about a different strain of technical arrogance that has brought the entire planet to the brink of financial destruction. George Dyson is an historian of technology and the author of “Darwin Among the Machines,” a book that warned us a decade ago that it was only a matter of time before technology out-evolves us and takes over.

His essay — Economic Dis-Equilibrium: Can You Have Your House and Spend It Too? — begins with a history of “stock,” originally a stick of hazel, willow or alder wood, inscribed with notches indicating monetary amounts and dates. When funds were transferred, the stick was split into identical halves — with one side going to the depositor and the other to the party safeguarding the money — and represented proof positive that gold had been deposited somewhere to back it up. That was good enough for 600 years, until we decided that we needed more speed and efficiency.

Making money, it seems, is all about the velocity of moving it around, so that it can exist in Hong Kong one moment and Wall Street a split second later. “The unlimited replication of information is generally a public good,” George Dyson writes. “The problem starts, as the current crisis demonstrates, when unregulated replication is applied to money itself. Highly complex computer-generated financial instruments (known as derivatives) are being produced, not from natural factors of production or other goods, but purely from other financial instruments.”

It was easy enough for us humans to understand a stick or a dollar bill when it was backed by something tangible somewhere, but only computers can understand and derive a correlation structure from observed collateralized debt obligation tranche spreads. Which leads us to the next question: Just how much of the world’s financial stability now lies in the “hands” of computerized trading algorithms?

Here’s a frightening party trick that I learned from the futurist Ray Kurzweil. Read this excerpt and then I’ll tell you who wrote it:

But we are suggesting neither that the human race would voluntarily turn power over to the machines nor that the machines would willfully seize power. What we do suggest is that the human race might easily permit itself to drift into a position of such dependence on the machines that it would have no practical choice but to accept all of the machines’ decisions. … Eventually a stage may be reached at which the decisions necessary to keep the system running will be so complex that human beings will be incapable of making them intelligently. At that stage the machines will be in effective control. People won’t be able to just turn the machines off, because they will be so dependent on them that turning them off would amount to suicide.

Brace yourself. It comes from the Unabomber’s manifesto.

Yes, Theodore Kaczynski was a homicidal psychopath and a paranoid kook, but he was also a bloodhound when it came to scenting all of the horrors technology holds in store for us. Hence his mission to kill technologists before machines commenced what he believed would be their inevitable reign of terror.

We are living, we have long been told, in the Information Age. Yet now we are faced with the sickening suspicion that technology has run ahead of us. Man is a fire-stealing animal, and we can’t help building machines and machine intelligences, even if, from time to time, we use them not only to outsmart ourselves but to bring us right up to the doorstep of Doom.

We are still fearful, superstitious and all-too-human creatures. At times, we forget the magnitude of the havoc we can wreak by off-loading our minds onto super-intelligent machines, that is, until they run away from us, like mad sorcerers’ apprentices, and drag us up to the precipice for a look down into the abyss.

As the financial experts all over the world use machines to unwind Gordian knots of financial arrangements so complex that only machines can make — “derive” — and trade them, we have to wonder: Are we living in a bad sci-fi movie? Is the Matrix made of credit default swaps?

When Treasury Secretary Paulson (looking very much like a frightened primate) came to Congress seeking an emergency loan, Senator Jon Tester of Montana, a Democrat still living on his family homestead, asked him: “I’m a dirt farmer. Why do we have one week to determine that $700 billion has to be appropriated or this country’s financial system goes down the pipes?”

“Well, sir,” Mr. Paulson could well have responded, “the computers have demanded it.”

Richard Dooling is the author of “Rapture for the Geeks: When A.I. Outsmarts I.Q.”

My latest New York Times Op-Ed contribution is on the new National Institute For Civil Discourse.

Others I have done over the years, may be found here and here.

The new IT article on health care: How American Health Care Killed My Father, by David Goldhill, writing in the September 2009 Atlantic.

Richard Dooling on NPR’s Talk of the Nation discussing his opinion piece in the New York Times, “Heath Care’s Generation Gap.”

It was my first novel, and I wrote it almost two decades ago, but I doubt I’d change a word of it. If anything, the money and the madness changing hands in the ICU have only gotten worse. When I wrote Critical Care, circa 1990, total expenditures for health care ran at roughly 10% of our gross national product. Now, as my opinion piece in the New York Times indicates, it’s 16% and headed for 31% in the next 25 years, unless something changes.

The new hysterical fear is that if we counsel elderly patients about end-of-life choices it means we are “pulling the plug” or sending them off to suicide parlors. People need to know what all of this aggressive, no-holds-barred, spare-no-expense intensive care buys you at the end of life. It’s not pretty, and that is the real subject of Critical Care: What happens when modern medicine doesn’t know when to quit.

Here then, by popular demand, is an excerpt from an early chapter of Critical Care: A Novel:

Resignation was the order of the day. Everybody from the nurses on down to the respiratory therapists and the lab techs had already privately agreed that Bed One would ‘code’ sometime tonight, code being short for Code Blue. Bed One’s heart would stop beating, or he would stop breathing, or both; the hospital operator would then announce: “Code Blue, Ninth Floor Intensive Care Unit” three times over the hospital’s public address system, and a dozen or so specially trained personnel would then descend on Bed One, snap Bed One’s head back, pump Bed One’s lungs full of oxygen with an ambu bag, inject massive doses of expensive drugs in some of Bed One’s veins, draw blood for expensive tests from other veins, shock Bed One with electricity, beat on Bed One’s chest, and generally do everything possible to jump-start Bed One, as if Bed One were a ’57 Chevy that should have been taken to the junkyard twenty years ago, and the doctors and nurses were a bunch of drunk teenagers whose car had broken down on the way to a pig roast.

It would go on for hours. It would require more blood, stool, and sputum specimens to be drawn and sent to the lab. Worse yet, everything would have to be scrupulously documented for the Legal Department. Afterwards, there would be witness interviews, probably depositions, just like the ones they had after the craniotomy in Bed Seven was struck by lightning that came in through the TV set.

Bed One had no business dying from a simple valve replacement. The lawyers knew that.

Because it was 3:30 A.M., Werner was solely responsible for the likes of Bed One. All the real doctors and primary physicians had gone home, had barbecued steaks, had watched a few hours of cable TV and had gone to bed. In Werner’s capacity as House Officer, Werner had to respond to every medical emergency occurring outside the normal hours of the medical work day: like Bed One dying too soon.

“This is what makes it all worthwhile,” he said to a wombat at his elbow. “Being able to help people. This is where training pays off.”

Werner looked the impending medical crisis squarely in the eye and measured himself against it, his self-confidence barely surmounting sleepless anxiety. As usual, he fought the urge to panic by silently reminding himself of his credentials: I am Doctor Peter Werner Ernst. I graduated at the top of my medical school class. I was Editor-In-Chief of the University’s Journal of Medicine. I am qualified and capable of practicing medicine. I will not panic or succumb to stress and make the wrong decision. That would be irrational and inconsistent with my past performance.

Given the hopelessness of Bed One’s situation, another medical resident might have thrown up his hands and accepted the inevitable descent of the patient. Another resident might have been discouraged by the resignation on the faces of the Intensive Care Unit nurses–faces that said ‘Bed One is about to code, creating boatloads of pointless labor and paperwork for us all.’ Yes, another resident might have allowed the normal course of human events to degenerate into chaos, death, and a Code Blue. But not Werner Ernst. Werner was blessed with a superior medical mind, trained in the healing arts.

Werner’s rigorous training had prepared him for this moment, when he, the House Officer in charge of the Medical Center and the resident physician immediately responsible for the welfare of Bed One, would come up with the right combination of medications to drip into Bed One, just the right mix of dosages given at just the right intervals, to keep blood pressure up, keep CO2 down, keep heart beats passably even, and urine flowing . . . keep everything just so, for six or seven hours at least . . . so that Bed One would go down the tubes and croak on the Day Shift, not the Night Shift. So that Werner could eat and possibly nap tonight, instead of presiding over the death of a corpse. So that the ICU nursing staff could embroider or read romance novels through the wee hours. So that Bed One could sleep one, last, peaceful, vegetable sleep before being assaulted by a Code Blue wrecking crew trying to save his life. And, above all, so that all the wicked, ridiculous insanity concerning the demise of Bed One (who, only two months ago was a grandpa, a loving husband, and dad to the people who had brought him here) would come down on Bed One’s primary physician and the Day shift. The Day Shift had advised Bed One and Bed One’s family that eighty was not too old to try for another valve replacement. Eighty? Bed One’s primary physician, Bed One’s chest surgeon, and Bed One’s family made Bed One’s bed of slaughter and anguish, why should Werner and the Night Shift sleep in it?

Excerpted from Critical Care: A Novel, by Richard Dooling

If you’d like, you can read all of chapter one at Amazon.

Almost all of the op-eds I have written for the New York Times over the years are available at Dooling Op-Eds.