The stench of war once again fills the air. At times like this, I’ve learned that recycling the news and generating more noise is worse than useless.
Thankfully we have The KCP Group's Tom Pence to offer his thoughts on both the investment implications and context provided by 30 years of experience. It’s available here.
From my own big-picture perspective I found myself compelled to revisit one of the darkest ideas I’ve ever considered. The why of war. I first encountered it in the most hopeless period of my life. Thankfully I believe its opposing force is winning, both within me and the world around us.
These two concepts have also helped me gain a deeper understanding of resilience and decisive action as a leader during chaotic times. How to act rather than watch.
“War, Moloch and the Tsar Bomba.”
[14 minute read].
Moloch whose mind is pure machinery!
Moloch whose blood is running money!
Moloch whose fingers are ten armies!
- Alan Ginsberg, Howl.
Source: Getty Images.
On October 30, 1961, the Soviets dropped the Tsar Bomba over the Russian Arctic. It was the single most physically powerful device ever deployed on earth. The atomic test explosion was equivalent to three thousand Hiroshimas, or ten times all of the ordinance fired in the Second World War. The mushroom cloud was seven times higher than Mount Everest. The shockwave shattered windows in Finland and Norway. Unfortunate onlookers would have suffered third degree burns 100 kilometers away.
Why did the Cold War result in enough weaponry to destroy the entire world multiple times over? A pretty good answer is “Moloch.” Moloch is the Canaanite god of child sacrifice, made famous by a chilling Alan Ginsberg poem and Scott Siskind’s equally intense essay “Meditations on Moloch.” It reveals the emergent nature of pure evil and is hands-down the most terrifying thing I’ve read in my life.
In short, Moloch describes the situation when you compete for a single, abstract target. This often results in a “multi-polar trap,” where everyone chasing the same goal leads to literal and metaphorical arms-races. The wrong incentives result in everything going off track. As Siskind puts it:
“In some competition optimizing for X, the opportunity arises to throw some other value under the bus for improved X. Those who take it prosper. Those who don’t take it die out. Eventually, everyone’s relative status is about the same as before, but everyone’s absolute status is worse than before. The process continues until all other values that can be traded off have been – in other words, until human ingenuity cannot possibly figure out a way to make things any worse.”
This kind of narrow competition increasingly leads to zero-sum outcomes. The whole system becomes imbalanced, fragile, and vulnerable to external shocks and crises.
Like many of the most valuable concepts, Moloch is applicable at many different scales; from global down to individual. At the planetary level, it’s how we end up with environmental destruction, wars, genocide, and nuclear arms races.
At the economic level, Moloch is not a simplistic criticism of capitalism, it’s a criticism of simplistic capitalism. The evidence our system has descended into Moloch territory is the explosion in winner-takes-all outcomes coupled with a significant increase in financial shocks and crises. According to IMD, the average lifespan of an S&P 500 company has dropped precipitously from 61 years in 1958 to 18 years today.
At the company level, myopic focus on short-term earnings has often had devastating effects. In the book Lights Out, authors Gryta and Mann talk about how General Electric’s culture of “making the numbers at all costs” gave rise to “success theater” and “chasing earnings.” This contributed to what Bill Gates has called “one of the greatest downfalls in business history.”
Within our currently-dominant business models, a focus primarily on engagement algorithms has led to social media that amplifies negativity and polarization. Once social media apps started using hidden beauty filters, all the others had to do the same. As a result, self-esteem gets damaged for our most vulnerable children.
Within individuals, narrow pursuit of abstract Moloch leads to the same fate as King Midas. We wish anything we touch would be turned to gold, and everything we love also becomes inanimate and lifeless as a consequence. Moloch is the god of child sacrifice because his promise is simple: throw that which is most valuable on the flames and I will grant you power. How many of us surrender our whole lives to abstract things that don’t bring us any joy?
It’s also commonly the story of how one person chasing power, driven by fear and scarcity, is willing to throw the whole world into the fire.
What’s the antidote to Moloch?
Critiques and dissections are easy and not very interesting. The much deeper idea is the alternative to Moloch. Siskind also explored the idea in a long companion essay a few years after called “Studies on Slack.” I wrote about it briefly last year, but so much has happened since then. Like Moloch, the concept of slack also has profound applications across global, corporate, and individual systems. It may seem like a contradiction, but slack becomes exponentially MORE important during a crisis.
Nature tends to be resilient to crisis in a way that human-created things aren’t. Your laptop won’t fix itself when it breaks, but your finger will. This requires slack and flexibility. For example, at any one time, only about half of an ant colony is out foraging, and the other half are just sitting around in the nest. A management consultant would fire them. But if a flash flood wipes away the ants outside, the whole colony survives because of redundancy.
Survival-of-the-fittest Moloch can work staggeringly well over short time horizons but is actually very weak over the long-term. Evolutionary theory is slowly discovering that cooperation eventually trumps competition. Tyrannical alpha chimps eventually get overthrown by the rest of the community uniting against them. Even successful apex predators exist in balance with their prey.
The entire developed world has seen a massive injection of slack during COVID. Many people literally had more time on their hands. Others benefitted from unprecedented government stimulus. This has meant many jobs with more limited social mobility still remain unfilled. Upward wage pressure has been most pronounced among “low skill,” high school education or less, and the bottom quartile. Slack has materialized where it was needed most.
As a result, we are being faced with a global reassessment of priorities. Some interesting trends have already flooded in to fill the open space. Creative projects and small business formation have exploded. A recession may temporarily reverse these trends, but not the reawakening of a mindset. It is also driving a reappraisal of business models that incorporate more resilience.
At the corporate level, quality businesses tend to successfully borrow a lot of nature’s cleverest tricks. According to a study from the Bank of Korea, of 5,500 companies over 200 years old across 41 countries, 56% of them are in Japan, and most are small family businesses. One thing that was interesting is that these Japanese companies typically maintain high cash balances, often as much as two years’ worth. But many contemporary managers and companies can’t afford to simply build a massive war chest and wait.
I have been fortunate to come to know William Oliver, co-founder of In Practice. Through an incredibly robust series of thousands of interviews with experienced business managers, William and his co-founder have been building toward a library of what they views as “quality” companies. In many of our conversations, we have been struck by how few quality companies there are now in public markets; all perceived inefficiencies get competed away or targeted by short-term activists and management consultants. The private markets can sometimes provide a small defense, as can an aligned shareholder base. There are two resonant examples.
Four people I deeply trust have all independently told me to read Becoming Trader Joe. Brandon Beylo recently did a great summary (below). There are many insights that reinforce the paradigm shift we are watching unfold in American business and culture. Trader Joe’s regarded vendors not as competitors but almost as their own employees. A healthy ecosystem benefits everyone. Likewise, their own employees were paid well above market, especially their buyers.
This reminded me of another Joe; Joe’s Stone Crab in Miami. It’s is the highest-grossing independent restaurant in America, despite being closed for 3 months of the year. The restaurant industry has an average of 75% annual personnel turnover. Joe’s hourly employees stay an average of 10 years, and overall staff for 15 years. They also pay above market wages, and the entire restaurant is structurally “inefficient” in a whole range of ways. But the balance of sub-optimal ingredients creates an emergent, thriving whole. There’s an implicit balancing act common to quality companies.
What does this mean for leaders?
Let’s take these two abstract and tricky concepts and relate them back to practical applications, especially during a crisis.
The role of the individual is to reconcile these two opposing forces. To act and compete (Moloch) but in balance and relationship with the outside world (slack).
The U.S. Marines have a heuristic for when things go awry: “keep moving, seek the high ground, stay in touch.” A response to chaos requires dynamism, perspective, and relevant external information. No static plan survives contact with the enemy. The critical skillset in that situation is expert intuition gained from experience: see the world clearly and act decisively.
Thus you’d anticipate that elite managers also have an intuitive sense for balance and rapid reaction. And this is exactly consistent with Lia DiBello’s compelling argument that “superstar” businesspeople all share the same mental model of business (see Cedric Chin’s article below). She believes expert businesspeople can intuitively and dynamically balance the three key pillars of supply, demand, and capital.
“Unlike most business professionals, they are attuned to the early indicators of widespread change. Beyond this, they are expert at keeping the triad in balance, or shifting the balance when external conditions are conducive to do so.” [Emphasis added]
This further reinforces a simple yet overwhelming conclusion across every source I’ve found. The key to flourishing is prioritizing and balancing dynamic, ever-changing external information over static internal models. Flowing life beats stale Moloch.
Perhaps most damningly, focus on abstract ideas and intellectual concepts has distracted many leaders from real-world constraints. As George Orwell wrote, “sooner or later a false belief bumps up against solid reality, usually on a battlefield.”
A common characteristic of adaptive businesses is a receptivity to solid reality; information from the edge of their network; whether it’s their workers or consumers. We’ve written before about how W. Edwards Deming rapidly and radically revolutionized Japanese manufacturing after World War II. He did this through relentless focus on establishing consistent quality. U.S. consumers came to prefer Japanese-made transmissions because their superior precision led to the cars running noticeably better.
Domino’s “cardboard” pizza used to rank at the bottom for customer satisfaction. They rapidly responded to harsh customer complaints, revamped their entire recipe, and streamlined their customer experience.
When thinking about how to build the mindset of a superstar businessperson, there’s an awkward but inevitable conclusion. Any formal training system or strategy risks becoming an abstract target, and we’re right back at Moloch. The key point, one that I think seems intuitively true to all of us, is that real-life experience tends to trump mental models. But this doesn’t mean the acquisition of experience can’t be accelerated. How do we dial-up the influence of external life on our internal processes? Cedric’s article below has a fascinating, deep examination of how you optimize for the acquisition of expert intuition.
For example, the U.S. Military has both a lot of money and significant interest in the rapid acquisition of expertise. The gut feeling a veteran operator gets when he senses an Improvised Explosive Device (IED) might be nearby is a case of expert intuition being the difference between life and death. But they face the same problem; book learning hasn’t been able to keep up with the rapid evolution of warfare tactics. So the military developed a simulation where soldiers played as the insurgents when placing IEDs. This rapidly gave them an intuitive sense of where within a complex environment they should look for danger. There are few better ways to adapt to your environment than inhabiting the evolving headspace of your adversary or customer.
In another of the wonderful, mysterious synchronicities of my work, a friend and reader reached out while I was writing this to recommend a podcast. Tim Ferriss just interviewed South African lion tracker Boyd Varty. It’s rapidly become one of my favorite podcasts ever. It’s an unusual mix of hilarious stories and profound wisdom, but there’s a remarkable section from 45-52 minutes where he talks about tracking as a metaphor for life. It is precisely consistent with the conflict between slack and Moloch. If you primarily pursue lifeless things, everything becomes less vital. But the reverse is also true.
“The idea that there is information in your life, if you are looking for transformation, but you have to teach yourself to attune to it. And so, what do you need to attune to in transformational processes? Things that make you feel expansive, things that make you feel alive, letting go of your rational idea of what you should do and noticing what you move towards. Noticing what you’re curious about, noticing the people who energize you, the activities that make you feel more alive.
….A big insight was that where your attention goes, your life goes, and if you are constantly putting your attention on living things, this more aliveness in your own life.”
- Read. Accelerated Expertise by Cedric Chin (53 minute read.)
- Why read. This is a long but rich piece from Cedric piece practically assessing a resonant piece of operational wisdom. It’s a deep dive into the mechanics of how people gain expertise and acquisition quickly. I would also recommend Every Great Business Person Has the Same Mental Model of Business. It elaborates on DiBello’s theory of intuitive balance and reactivity to external information. But what’s true for superstar businesspeople is a good lesson for all of us.
- Read. Becoming Trader Joe- A Book Review by Brandon Beylo (16 minute read)
- Why read. As stated above, this book was recommended to me multiple times by great people. I haven’t read it yet but Brandon has, here’s his great summary.
- Listen. Tim Ferriss with Boyd Varty: A Lion Tracker’s Guide to Life (2 hour 32 minute listen).
- Why listen. I often wonder whether I’m going completely mad. But the response to my personal 2021 highlights piece The Magic Octopus revealed that many of you are crazy in the same way I am. Varty’s account of what he learned about taking direction in life from nature is mysteriously close to my own, but from the African bush rather than a high-rise in Manhattan.
- The first thing that you will have to do, if you want to go track a lion in the wild, is you will have to become super uncomfortable with unknowns... All trackers operate using unknowns to almost bring them to life.
- The idea that there is information in your life, if you are looking for transformation, but you have to teach yourself to attune to it. And so, what do you need to attune to in transformational processes?
- There is a part of you, you might call it your wild self. You might call it the track of your life, or as native people call it your medicine way. A part of you that beyond rational thought reacts when you become more in tune with yourself
- Different cultures, the psyches are structured differently, and in a more Western setting you might say that in a society where the individual self is disconnected from the greater interconnectivity of life, the search for meaning is reduced to a constant state of comparison.
Have a great weekend. Best wishes to you all.