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The Attention Span. “Recipe for Disaster.”

Reflecting on the wild volatility of the last three years in business and finance, there’s been one theme that really sticks out. It helps us all recognize a universal recipe for disaster.

“Recipe for Disaster.”

[8 minute read].

“If only there were evil people somewhere insidiously committing evil deeds, and it were necessary only to separate them from the rest of us and destroy them. But the line dividing good and evil cuts through the heart of every human being. And who is willing to destroy a piece of his own heart?”

- Aleksandr Solzhenitsyn

Source: Stable Diffusion AI.

One of the iron laws of finance is that people with rocket scientist IQs will always find ways to develop complex investments that eventually blow up in spectacular fashion.

During the Global Financial Crisis, Felix Salmon wrote a classic article called “Recipe for Disaster: The Formula That Killed Wall Street.” Essentially he argued that a single mathematical formula, the Gaussian Copula, was applied to bundles of mortgages. This alchemy allowed them to be packaged together and declared effectively riskless. We all know what happened next. A toxic combination of greed and ignorance helped cause total chaos.

Over the last three years, this general disconnect between model and reality has spread into a wider array of markets. Liron Shapira has coined the term “hollow abstraction” to spearhead a scathing critique of the imploding Web3 bubble. A hollow abstraction is an idea that sounds clever, but doesn’t have any business model or real-world use case. Web3 originally promised decentralization of wealth and power. But (so far at least) it’s been most effective at enabling a generational epidemic of fraud and ponzis. As the digital world has expanded to encompass an increasingly greater proportion of our lives, it’s become harder to spot dangerous abstractions.

I would argue that the Gaussian Copula and hollow abstractions are symptoms of an incredibly interesting universal phenomenon. I call this recipe for disaster: left-over-right.

Our brain’s left hemisphere is highly intellectual, logical, articulate, and rational. A central premise of Dr. Iain McGilchrist’s 2009 book, The Master and His Emissary, is that the left hemisphere makes a great emissary but a terrible master. Experiments have repeatedly shown that it’s overconfident, lies, and fails to understand the whole picture. The Gaussian Copula sounded smart in a prospectus, but abjectly failed to reflect the complex reality of the real world.

Tools are neutral: you can use a hammer to crush a skull or construct a cathedral. The Gaussian Copula didn’t cause the financial crisis; the flawed people misusing it did. The left’s powerful tools should always be used in service of the right.

The wildly popular TV shows Better Call Saul and Breaking Bad both perfectly illustrate this underlying theme. In Breaking Bad, Walter White uses his analytical chemistry skills to make methamphetamine. He slowly transforms from a benign and morally-conflicted teacher to the amoral drug kingpin alter-ego “Heisenberg.” In Better Call Saul, Jimmy McGill uses his incredible eloquence to lie in pursuit of money and power. He slowly transforms into slick criminal lawyer “Saul Goodman.” As the title “Breaking Bad” implies, the underlying theme of both shows are a series of poor decisions that lead both characters into increasingly tragic circumstances. They misuse their powerful left-hemispheric gifts and destroy their lives and those of everyone they love.

One of my favorite current writers is the anonymous N.S. Lyons. They recently wrote a massive essay titled “A Prophecy of Evil: Tolkien, Lewis, and Technocratic Nihilism.” It’s all about left-over-right. Lyons makes a similar point as I did in my article Death Wish: when you place the human will above nature in pursuit of power, tragedy is often the result. Lyons notes that both J.R.R. Tolkien and C.S. Lewis saw the subtle dangers of this mindset decades ago. The evil Sauron in The Lord of The Rings is obsessed with control, power, and order. We see this reflected in the common trope of the mad scientist or evil genius.

Our catastrophic human interventions are frequently well-intentioned. Mao’s “smash sparrows” campaign was intended to protect Chinese grain stores from birds. But blindly pursuing control over nature imbalanced the ecosystem, the locust population exploded and contributed to a famine that killed over 50 million people. It’s arguably the worst man-made tragedy in history.

What would the rightful return to right-over-left look like? Lewis’ perhaps unfashionable conviction was that there is “an independent reality of values just as concrete as the independent reality of objects.” He refers to this as “the Tao.” For Lewis, not everything is relative and we can’t understand value with our rational minds alone. Lyons quotes Lewis:

“It is the ‘chest’ (or the heart) that – with the aid of the mind’s reason and the guts’ natural instincts – serves as the metaphorical organ capable of intuiting, resonating with, understanding, and adhering to the Tao.
[Lyons: Potentially one could today reasonably argue this organ of the ‘Chest’ is actually the neglected right hemisphere of the brain, as Iain McGilchrist basically wrote a whole book about in The Master and His Emissary.]
It therefore serves as the necessary intermediary ‘between cerebral man and visceral man,’ and the bulwark against either the cold tyranny of mechanistic rationalism or slavery to the raw emotional chaos of unrestrained desire. Indeed, as far as Lewis is concerned, ‘It may even be said that it is by this middle element that man is man: for by his intellect he is mere spirit and by his appetite mere animal.’”

A meta-analysis has shown that the right hemisphere predominates in receiving and transmitting information from the heart. One of the more interesting ideas I’ve encountered over the last few years is that we simply don’t understand the full function of the heart. It’s interesting to me that many other cultures regard the heart as an organ of perception, but we tend to treat references to it as metaphorical. Why is the heart associated with truth, guidance, and love? It probably sounds cheesy and trite to modern ears, but our modern ears are probably part of the problem.

Lyons chillingly juxtaposes Lewis’ words against transhumanist Ray Kurzweil’s assessment of the heart’s ultimate value.

“The next organ on our list for enhancement is the heart, which, while an intricate and impressive machine, has a number of severe problems... It is subject to a myriad of failure modes and represents a fundamental weakness in our potential longevity... Although artificial hearts are beginning to be feasible replacements, a more effective approach will be to get rid of the heart altogether.”

How perfect that we would replace something central to our humanity with a machine, before we even understand what it truly does. It would be the ultimate catastrophic left-over-right move.

In business, right-over-left is about running your company in alignment with resilient natural systems. As an individual executive it means finding ways to accelerate your expertise and intuition. It’s helpful to always consider the ultimate intention of any intervention. However smart something sounds to our ears, how does it land in our heart?

The tough but necessary question I would end with is: “what are my gifts and what are they serving?” In my recent paper, I explored the idea that the path of the Tao is closely related to pursuing positive-sum games. We literally follow our hearts to discover where what we can do meets what the world needs.

“Human genius lies in the geography of the body and its conversation with the world.”

-David Whyte

Related Reading.

  • Read. “A Prophecy of Evil: Tolkien, Lewis, and Technocratic Nihilism” by N.S. Lyons in the Upheaval (80 minute read- paywalled).

  • Why read. This essay is really long, and there are many parts I disagree with. But it’s still one of the most urgently insightful things I’ve read.
    • “The disenchantment and demoralization of a world produced by the foolishly blinkered “debunkers” of the intelligentsia; the catastrophic corruption of genuine education; the inevitable collapse of dominating ideologies of pure materialist rationalism and progress into pure subjectivity and nihilism; the inherent connection between the loss of any objective value and the emergence of a perverse techno-state obsessively seeking first total control over humanity and then in the end the final abolition of humanity itself… Tolkien and Lewis foresaw all of the darkest winds that now gather in growing intensity today.”

  1. Read: The Formula That Killed Wall Street by Felix Salmon in Wired (32 minute read).

  2. Why read: An absolute classic from 2009. Contains all the hubris and nuance you’d expect from an explainer on the subprime debacle. But it’s more useful than that: it helps illustrate the opportunity between map and territory in finance. It’s also a cautionary tale relevant across businesses as to what can happen when managers don’t understand the math and data being produced by the people they’ve hired….

  3. Listen. My appearance on Mutiny Podcast with Jason Buck (1 hour 17 minute listen) (Contains profanity.)

  4. Why listen. Jason Buck was kind enough to have me on his podcast this week. He’s a great conversation partner because he let me really dig into McGilchrist’s thesis from scratch and explore a lot of the key ideas from today’s piece in a fair bit more detail. Plus, we are both obsessed with the same remarkable Amazonian tribe.

Have a great weekend!

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