The Philosophy of Finance

Six Propositions

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Text for the exhibition “Volatile Smile” by Geissler and Sann, at NGBK

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1. Interaction

In his work on surveillance, Michel Foucault identified a characteristic relation of power. Its terms were these: distanced observation – coercive force – internalization of the law. This disciplinary relation was embodied and exemplified by the Panopticon, where the gaze of an unseen warden gradually becomes part of the prisoner’s consciousness, alleviating or eliminating the need for forceful intervention by the guardians. The panoptic diagram spread throughout the Western societies: it molded productive subjects to the demands of a military and industrial order.

In our financialized era something new comes to the fore, redoubling if not entirely replacing the previous paradigm. Its terms appear as a dialectical reversal, and therefore a sublation of the discipinary relation. These new terms are: immediate participation – enabling communication – reflective proliferation. The interactive diagram is embodied and exemplified at the desks of the high-frequency traders.

On the trading floor knowledge is no longer distanced, invisible, authoritative: it springs into presence on the waiting screens, always connected to a keyboard. Coercion has not disappeared from society, but at the desks it’s not an issue: communication networks exist to suggest and transmit every decision. No internalization of the law is achieved or even demanded by the flickering screens. What happens is a multiplication of self-reflections, an outpouring of subjectivity into electronic connections. Communication produces infinite variations on a single theme: an explosion of pulsating terminals that build cities around themselves, the mirror-architecture of contemporary capitalism. The screen-relation spreads throughout the globalized societies, at a pace with megagentrification. At each stop it releases smiling wizards into the expanding trap of their own creativity.

2. Fluctuation

In 1990s China, those who left their villages, work brigades and sleepy bureaucracies for a risky entrepreneurial career called it xiahai, “jumping into the sea.” Perhaps they didn’t realize back then, but the currents sweeping them away were currencies.

With the wreck of the Bretton-Woods treaty in 1971 all the major monies had lost their anchor, the gold-backed dollar, and they began floating chaotically against each other. Imagine the panic that might have ensued: if you are a businessman in country X, with manufacturing in Y and markets in Z, how do you plan production for profit if nothing is worth the same next weekend? Milton Friedman rang the bell at the opening of the first currency futures market in Chicago in 1972, the year of Nixon’s visit to China. You could buy tomorrow’s exchange rate today: the financial equivalent of ping-pong diplomacy. A proprietary network with a terminal screen, the Reuteurs Monitor, appeared one year later to provide live prices for forex trading. What gradually took form was a fluctuating world where every currency investment would be hedged with many others, using a panoply of trading instruments (spot deals, forwards, FX swaps, currency swaps, options). Commerce didn’t crash, it soared. Today, the Thomson Reuters conversational dealing platform links some eighteen thousand forex professionals in over four thousand organizations – mostly major banks scattered across the globe.

The job of finance is to bring liquidity to capital markets, but also to provide insurance, security. Money moves in electric waves, as currencies transmute into their counterparts. The speed is continually increased, in the name of greater stability. Four trillion dollars change hands (or at least computers) on the forex markets every day. Has everyone finally jumped into the sea? How will we know when we really hit water?

3. World-creation

Karen Knorr Cetina helped invent the sociology of high-energy particle physics. For her, laboratory practices make up an “epistemic culture,” a research site that builds a world. But then she moved her activity, as so many physicists do, to financial trading floors. Two things tie these disparate cultures together. The first is complex math, modeling invisible realities whose existence can only be inferred from its effects, measured with purpose-built instruments. The second are global communications nets that bring together thousands of people around single experiments, where distance does not block co-presence. Of course there are key differences. Traders live not in a disseminated laboratory, but in the “world-on-screen.”

Flows of information, price quotes, statistics, news flashes, voice brokers, intercoms, telephones: the shape of the market escapes, disperses, tantalizes, only to come together suddenly in the conditions for a deal. How do we relate to temporally unfolding objects? Dive in, take a position. Here the cut creates the flow, produces the difference, relaunches the progression. Strange desire, for a fundamental lack of completion. Knorr Cetina recalls Lacan’s concept of the mirror stage, where the speechless infant is fascinated by the sight of its own body as a whole, and at the same time disoriented by the inward perception of a morcellated, untotalizable body-in-pieces. She stresses that “binding (being-in-relation, mutuality) results from a match between a subject that manifests a sequence of wantings and an unfolding object that provides for these wants through the lacks it displays.”

The deal is a bridge between one gap and another. Just buy and sell the missing link, aim and pull the trigger. By unfolding the object into the flow of networked time, a world is created. I bet, therefore we are. The screen is the site of a speculative performance.

4. Just in time

Electronic trading exemplifies the interactive diagram. That means it formalizes a pattern which is adapted to other fields. Instantaneous exchange casts a long material shadow. It’s called just-in-time production.

Originally it was a Japanese method for integrating external suppliers to the rhythms of the factory, which only produced cars when they had already been sold to clients. Inside the plant, paper tallies known as kanban cards circulated backwards in the empty bins, informing workers how many pieces to deliver to the assembly lines, and when. American managers took the paper kanban cards and made them into computer categories, to be filled with remotely gathered data and processed according to sophisticated algorithms. They began to organize global supply chains: design in the metropolitan cities; production in the Chinese factories; advertising through the multimedia networks; containerized delivery to the big-box stores of the heartland. All these operations are coordinated in real time, recorded in so-called “data warehouses,” and analyzed statistically to generate models for the future. Finance provides the credit for massive expansion. Mathematics meets materialism. As geographer Nigel Thrift explains: “Through the application of a set of technologies and knowledges (the two being impossible to separate), a style of repetition has been produced which is more controlled and also more open-ended, a new kind of roving empiricism which continually ties up and undoes itself in a search for the most efficient ways to use the space and time of each moment.”

How seamlessly can the local client be connected to the global factory? Soon, financial markets will judge performance from the same feedback information used by big-box retailers. Yet as the recent crisis shows, total transparency produces just one social fact: the “community” of visible blindness.

5. Meta-commodity

“Lurch” is an ambiguous word signifying both the event (a jerk, a jolt, a pitching deck at sea) and our reaction to it (a stagger, a lunge, the desperate attempt to regain a handhold or a footing). “Don’t leave me in the lurch” speaks both to an unexpected shock and to the existential fear of falling.

The credit crunch of 2008-09 revealed the hidden engine of runaway growth: continuous loans to governments, corporations and individuals, each one securitized by custom derivatives (such as credit-default swaps for real estate – or today, for sovereign debt). Every risk could be repackaged as an asset, then sold as an opportunity. To offset the dot-com bust, the US Federal Reserve had flooded global markets with liquidity. The loan-machine became a model for corruption at every level. “We have to dance until the music stops,” said Citigroup boss Chuck Prince. When boom went bust, the bankers’ chairs turned out to have the golden cushions. Millions of people, thousands of companies and even a handful of countries found themselves clutching at thin air.

Marx described the commodity as that product of human labor whose exchange value, seemingly animated with a life of its own, acts to render invisible the social relations that produced it. So a simple wooden table “stands on its head, and evolves out of its wooden brain grotesque ideas, far more wonderful than if it were to begin dancing of its own free will.” Over-the-counter derivatives were sold like simple widgets, magic things. But complex securities have nothing to do with production; instead they manage the risks that weigh on the future of speculative activity. They are meta-commodities that govern the unfolding of the contemporary economic model. Their fascination acts to conceal private deliberations that shape the environment where material production can take place. What’s left in the lurch is the chance for democratic government.

6. Lights out

The world picture, for Martin Heidegger, is “the collective image of representational production.” Within it, he says, “man fights for the position in which he can be that being who gives to every being the measure and draws up the guidelines.” Finance is now this collective image, surpassing nation-states with its capacity for the apprehension, objectification and creation of productive activity. Through the surging rivalries of gigantic trading floors, the screen-relation gives humanity its measure.

The bursting of a bubble left the empty real estate portrayed by Geissler & Sann – detritus of a world picture. The struggle then led onward to the sovereign-debt crisis of the European member states, with a risk of politically induced default for the US. Meanwhile China’s ascent continued, on the uncertain foundations of just-in-time production. After the crisis, the time had clearly come for decisive change. Instead the inexplicable occurred. Rather than declining (“the end of finance as we knew it”) the rhythm sped up. Firms placed huge historical data-sets on ultrafast computers, colocated next to major exchanges. Algorithms automated buying and selling, on the basis of continually adjusted models derived from market statistics. High-frequency trading marks the rise of the machines. As it moves toward nanoseconds, an asymptotic point appears: the speed of light. Imagine a flash-crash that lasts forever, a blinding eternity. By automating human beings out of the picture, interactivity is finally poised to grasp its elusive object.

Artistic depictions of the markets depend entirely on the rhetorics of panic: the heat, the speed, the sex, the crash, the blur. Is power not the command of fascination? When the network is unplugged, the terminals lack the lack that keeps them moving. Geissler & Sann show only black screens. In their pictures, they reveal the architecture of a diagram of power. This choice of representation is political.

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These six propositions have provided the structure for the first half of a class entitled “The Philosophy of Finance: Just-in-Time Production and the World on a Screen,” at the European Graduate School in Saas-Fee, Switzerland, August 9-15, 2011. The second half calls on Félix Guattari for forms and figures of resistance to the present.