Why do bad things happen to good people?

Part of the answer is that the universe needs intelligence to read itself into existence, and intelligence has to evolve. Evolution runs on competition, and competition inevitably produces suffering. The hope is that the paradise state works this out in the end and restores the people the bootstrap phase hurt. The other part is how harm moves. A harm writes an entry into a record other people read. Left unrepaired, the entry becomes a residue with an address, and every repair running near it pushes it somewhere else. On a small network of twelve observers, a single unit of leftover disagreement ends up on a different observer depending only on the order the repairs ran in. In a family or a town, whoever the repairs reach is rarely the person who wrote the entry, which is how a harm turns up in people who did nothing. Hidden harm is deferred repair, and the bill falls on observers who did not write it.

Also in Chapter 40: Does It Feel Like Anything, and What Is Left to Decide?, Chapter 6: Why Isn't Agreeing With Your Neighbors Enough?.