The Ship of Theseus is a philosophical concept discussing whether or not a subject matter that has had its constituent parts replaced remains the same. The theory was developed in comical style by the writers of the TV series Only Fools and Horses, while discussing Trigger’s broom. Trigger declared that he had the same road-sweeping broom from the council for over 20 years. He had photographic proof and received a reward for his dedication. Even though the broom had had 17 new heads and 14 new handles, he proudly maintained it was the same broom.
Arguments over the Ship of Theseus thought experiment have raged for centuries. A river might seem the same until you realise that it is replaced by “new” water constantly. Is it, therefore, truly the same river? Is a sand dune that gets ravaged by high winds the same sand dune afterwards? Is the ship bearing the name Theseus on its bow the same ship after it receives a new mast? Or a new hull? Is it the same if it is renamed Antioch?
On one level the paradox is easily resolved by concentrating on our human perception of identity. We try really hard to pin identities on items of importance. We still refer to the ship, the Titanic, even though it is now a wreck at the bottom of the ocean incapable of sailing. Ancient monuments that have clearly been eroded away by wind and rain are identified in their original form.
Sports teams and music groups like orchestras or rock bands are modern-day examples. As members move on and players replaced, is it the same band or team? We rationalise this conundrum by latching on to the identity of the group/team and not the individual members.
What of financial markets? Their constituent parts have been removed and replaced many, many times over the years. Can they possibly be the same? Our brains say yes because we recognise the identities of some of the parts; money, banks, insurance, deposits, loans. But all of these individual items in the modern world aren’t even remotely similar to what went before. Nevertheless, we cling to the identity of financial markets. Maybe it’s time to change our thinking?
Can we conceive of the ludicrous proposition that investors in government bonds are being charged not rewarded for their money? Pension funds are teetering on the brink in this environment and many will not survive. Traditional investment strategies are being replaced. Finance is being turned on its head by the thought of huge debt representing a strong balance sheet.
If we could break out of our fixation with identities, we might realise that the real question is not what will the constituent parts of financial markets look like in the future – but what will provide us with the trust that we crave. Because trust is at the soul of our contract with finance. Financial markets will be replaced but the soul of the Ship of Theseus will survive!