Say there’s a whole industry making bread. Why do they do that? We want to know what’s make them tick.
For instance want to know what we should copy if we were to take this to another country. We may want to know if they make money by working hard or just by bribing government officials. We may have an innovative idea on how to improve the process, but we need to know exactly how the process works.
First step is to look at patterns in their transactions. For that we gather all public book keeping material. Historic transactions are a good starting point, as good as any. Let’s turn that into a giant database of all transactions the industry had for the last decade. And then we start to build a taxonomy of different types of transactions. Clustering them.
Ah, they’ve sold 139 breads to John. Actually, there seem to be a lot of people like John. Let’s summarise all thise that to “Sold bread to people like John for Money”
What else is there. Ah they made good on loans to banks, they paid taxes, they paid dividends to shareholders, they paid transporters, machine makers, employees. Lets summarise those.
People from the baking industry exchanged
- a stream of work and bread with people like John for Money
- a stream of work and interest stream with people like Terence the Banker.
- a stream of work and tax payments to people like Otto the Taxman for a licence to operate, property rights protection, rule of law and industry regulation.
- a stream of work and money with people like Jack the Miller for a stream of flour.
- a stream of work and money with people like Mary for a stream of more work.
Notice transaction pattern: People like “u” exchange a stream of “s” with people like “y” for a stream of “z”. So there is a pattern of exchanges.
But wait there are some strange listings:
People like us from the baking industry exchanged
- a stream of work and flour with themselves for a stream of bread
- a stream of work and customer data for market insights with themselves.
To sum up. In order for the bread baking industry to survive it exchanges combinations of stuff with anybody including itself in a recurring stream of transactions.
But wait there is more.
These transactions are dependent on eachother in a loopy way. The output of one transaction becomes the input of another. And in turn the output of that transaction goes into another still. It’s a stream so it’s recurring. It’s an algorithm because outputs become inputs. It’s recursive because the system loops.
People like “u” exchange “s” with people like “y” for “z” in order to exchange “x” with people like “p” for “t” etcera.
Industries exchange with themselves and others. The patterns of exchange are recursive algorithms.