The Future of Everything

August 28, 2008

Future of biology

Filed under: Uncategorized — David @ 1:44 pm

Just returned from the International Conference on Systems Biology in Gothenburg, where I presented a brief talk on chronotherapy (see this New Scientist article). For me the most interesting session was the last one which featured keynote talks by two founders of systems biology (or at least systems biology institutes): Hiroaki Kitano of the Systems Biology Institute in Japan, and Leroy Hood of the Institute for Systems Biology in Seattle. Kitano started with a summary of the environmental problems such as global warming and ecosystem collapse which he believes threaten our civilization. He then focused on the importance of ocean systems and particularly coral reefs as carbon sinks, and explained some of the systems biology of coral and their problems coping with rising ocean temperatures. Coral reefs support a huge range of biodiversity and also absorb a lot of carbon, so their loss would be a double blow to the health of the world system.

Kitano’s talk was fascinating, though I’d have liked to hear his thoughts about another species that is important for carbon exchange, namely ourselves. If systems biology can be used to analyse coral reefs or the growth of yeast, maybe we could use it to analyse our own economy. An earlier talk, for example, had shown that yeast colonies are more robust to environmental shocks when they are growing slowly – are there implications for our own pro-growth economy?

Hood’s talk was very different, and was about how new technologies that can scan a drop of blood for protein markers will revolutionise healthcare. The idea is that every six months we will prick our finger with a machine that will send the info for analysis. If anything is out of whack, we get a message outlining the problem and telling us to check with a doctor. The machines could, at very low cost, test for thousands of proteins that act as advance markers for diseases including cancer.

Of course, the idea that we can accurately predict health sounds a little ambitious, given that we can’t predict the weather or the economy despite having excellent data. However just as observational weather data help us spot the development of storms, it’s easy to imagine that this technology will help detect and diagnose serious health problems. It will also be useful for analysing how patients are responding to toxic drugs such as chemotherapeutic agents.

Advertisements

August 8, 2008

UK House Price Crash?

Filed under: Uncategorized — David @ 9:59 am

UK house prices have now fallen by 11% in the year to July, according to Halifax. This is the first double-digit retreat since the Halifax index was started in 1984 (see this report in the Guardian). In recent months, prices have been falling at the annual rate of about 20%. When will they hit bottom?

Some believe that the severity of the recent falls means that prices will soon bounce back. An article in the Financial Times argued that pent-up demand means that “the market could change very quickly and this downturn could end up being short-lived compared with the five or six years of pain suffered last time.” Others such as housepricecrash.co.uk are calling for a fall of around 35%.

As with any asset, house prices don’t follow a completely regular cycle, but it’s still instructive to compare with history. The figure below shows how prices have expanded in recent decades in real terms (annual data from 1975 to 2007, prices rebased to 1975).

 

UK house prices, rebased

UK house prices, rebased

According to this it look like prices have a long way to fall. But it’s a little misleading, because most people buy with a mortgage, and interest rates are much lower than at the peak of the previous boom, so houses are more affordable. The next figure shows how estimated relative monthly costs look, after taking interest rates into account.

Estimated relative monthly payments

Estimated relative monthly payments

The plot is only approximate because it makes assumptions about how costs scale with mortgages, but it shows that what is remarkable about the recent boom was not so much its magnitude, but its duration – it took a long time to get to the top. A similar phenomenon was seen in other countries. The OECD Economic Outlook No. 78 notes that until the mid-1990s, many housing markets tended to follow a cycle, expanding in about six years and contracting in about five years, but this pattern broke when the global economy entered a regime of low interest rates and inflation.

One interpretation is that these factors set a kind of timescale for the economy. When inflation and interest rates are high, we learn to expect sudden price increases, and value also decays more rapidly, so economic time seems to be moving faster (an analogy in biology is the decay rate of proteins, which affects the size and rate of fluctuations in its level due to stochastic effects). That would explain why prices took so long to get to where they are, but it’s less clear how things will move on the way down, because the dynamics are different – more like a sudden release of tension than a slow build-up of force.

Whenever there’s a bubble in asset prices, a story is always developed that makes it look plausible – for example, house prices are high because the UK is an island without enough housing stock. But just because a place is crowded, doesn’t necessarily mean it’s expensive. Apart from its slow speed, the recent boom isn’t much different from previous booms, and the fall won’t be too different either. Real falls of at least 30% from the peak in the next few years don’t look at all unrealistic.

August 1, 2008

Business apoptosis

Filed under: Uncategorized — David @ 9:26 am

Interesting meeting last week with people from the Strategy Institute, a kind of thinktank run by Boston Consulting Group. We talked about the difficulty in predicting complex systems like the economy, and the biggest problems faced by managers. A surprising candidate was that companies are good at growing, but they don’t know how to die. There’s an analogy with biology. In the body, when cells are damaged or no longer viable, they usually undergo a process known as apoptosis, where the cell is taken apart in an orderly fashion and its constituents recycled for use by other cells. A less favorable outcome, which often happens for example in the core of solid tumours, is that cells become necrotic, and burst open to release toxic substances that damage nearby cells.

In business, companies are naturally focussed on growth, so when a particular product loses market share the emphasis is always on finding a way to boost its presence or find a replacement. This is fine and healthy up to a point, but if it leads to denial about unpalatable realities, the business or one of its divisions can implode in a disorderly fashion that is toxic for everyone from employees to shareholders to customers.

One of the benefits of capitalism is that bad ideas will eventually fail, but it seems that the process could be improved. Maybe we need to develop a business version of apoptosis. After all, if there’s one thing in business that can be predicted, it’s that nothing lasts forever.

Blog at WordPress.com.