If you’ve been reading my work recently, thank you! And a warm welcome to those of you that just joined after my appearance this week on Jim O’Shaughnessy’s podcast Infinite Loops! You’ve arrived just in time for things to get even weirder.
This piece is my longest and strangest so far, but it’s probably the most important. I also don’t fully understand what conclusions to take from it yet, but hopefully it will point you down some interesting rabbit holes to pursue yourself. Indeed- the desire for obvious takeaways and bullet-point instructions is a symptom of the incomplete way many of us currently view the world.
I’m attracted to topics other people don’t seem to be talking about. As I read more, I felt like I was uncovering something insightful, mysterious, novel and true. So please pour a cup of coffee and join me!
[As you’ll read below, The Knall/Cohen/Pence Group’s Tom Pence has been an important influence. His latest market commentary and presentation from this week is available here]
“Be the Butterfly.”
[13 Minute Read]
The combination of globalization, urbanization, and digitization has made the world incomprehensibly more complex and interconnected in only a tiny sliver of human history. One of the features of complex systems is that they are famously vulnerable to very small changes in initial conditions. Colloquially we know this as the butterfly effect: where the flapping of tiny wings can alter the course of a typhoon. In fact, history seems necessarily shaped by this phenomenon. A cloudy day meant that it was Nagasaki, not Kuroko, where the second nuclear bomb was dropped. Alexander Fleming accidentally discovered penicillin after leaving a petri dish out when he went on vacation. Archduke Franz Ferdinand’s car stalled outside a café where his assassin was getting a sandwich, thus triggering World War I. Massive changes in complex systems can often be traced back to seemingly tiny causes.
Look at the last couple of years alone. A microscopic virus shuts down the entire world. A ship runs aground in the Suez Canal and brings global trade to a halt. One cyberattack disrupts fuel supplies for the entire East Coast, another takes out 20% of U.S. beef production. A hiccup at a single cloud company manages to bring down a huge swath of the internet for a couple of hours. As René Girard said:
"When the whole world is globalized, you're going to be able to set fire to the whole thing with a single match"
We’re now ringside for watching all the ways the overly-rigid modern world is vulnerable to these shocks. The market has become increasingly fat-tailed. As the foundations of business have increasingly digitized, thus so have binary outcomes. The relentless pursuit of efficiency has made everything insanely fragile. And it’s only accelerating by the week.
You can either be the butterfly or the static system it disrupts.
Source: Getty Images.
A common response to this bewildering complexity and volatility is nihilistic surrender or an authoritarian control response. It seems like 99% of the current discourse revolves around how to become more rational so as to better control and understand the system.
The Western mentality too often looks at the world as an outside observer, intending to subjugate the environment. Anyone who has seen Jurassic Park knows that doesn’t always work out so well. Author Michael Crichton’s insight into chaos theory was that any attempt to control nature by force was doomed to failure as “life, uh, finds a way.” You’ll recreate dinosaurs, try to cage them, then all get eaten by Velociraptors. By far our biggest mistakes as a species are those times when we put ourselves outside of a system or at its apex. When we put ourselves outside of the system we disregard the risks of ecological disaster and mass extinction. When we put ourselves at the apex of a system, such as communism, fascism, or Nazism, industrial mass-murder has often been the result.
As the world gets both exponentially more interconnected and more transparent, we’re all seeing that the traditional model of linear cause and effect just isn’t how most things really work. If they ever did.
Robert Mercer, founder of arguably the world’s most successful hedge fund, Renaissance Technologies, said that the signals they trade “make no sense, otherwise someone else would have found them.” The implication is that the compulsion to find clear cause and effect blinds you to butterfly effects that are very real, but not obviously or immediately intellectually explicable. If we had enough information we might understand why a drought in Chile makes Vietnamese stocks rise. But since we can only be consciously aware of something like a trillionth of what’s “out there,” there will almost certainly be relationships we can never fully understand.
That’s why the trail ends here for most people, because the next step requires a conceptual leap of faith. This is the hard-pivot to the weird I warned you about.
“Systems thinking” may sound a bit abstract and pretentious. In some ways it is. But everything we inhabit and interact with is part of a complex system, so stepping back and really understanding the theory should prove to be valuable across an entire lifetime. There’s far, far too much information out there now, so learning something applicable at every level of reality is the best use of our attention. The fact that a lot of the attitude to the world it reveals is so radically different for everything I was ever taught or thought I understood just makes it even more fascinating.
The late complex systems expert Donella Meadows wrote a wonderful article called “Dancing with Systems” (below). After a lifetime of study, she outlines all the ways to think about interacting and merging with systems, rather than trying to dominate and control them. There is no prediction and control, but there’s adaptation and flexibility.
The idea of dancing with the system is totally antithetical to a lot of Western orthodoxy about the inherent controllability of the world. Science and technology promises inevitable dominion over nature. The alternative goes back to what we recently talked about in Picking Fights. If you can see the present clearly and understand the true reality of “what’s going on” before you even start, you’ll see the potential inherent in the situation. Then the self-transforming mind adapts to it, works with it, and succeeds almost inevitably. Dance, don’t fight.
Nobody was more surprised than me when I kept finding the themes being re-discovered by modern neurology, complex adaptive systems, and chaos theory reflected in the millennia-old Chinese philosophy of Taoism.
In fact, I no longer think of Taoism as a “philosophy” at all. The Western philosophy I studied in college is too often overcome with semantic gymnastics and meaningless abstraction. “What the meaning of ‘is’ is.” In contrast, Taoism is a practical attempt to get to grips with living in the real world. Taoism was born out of a similarly chaotic time, the “Warring States” period, and it actually has a lot of extremely relevant wisdom for today’s messy transition phase. Taoism reflects a state of balance. Order and chaos in harmony. Now some of the wisest systems theorists and scientists have ended up where the Taoists already were! It’s a framework that teaches you how to operate beyond frameworks. As Meadows puts it in her typically lyrical prose:
“It is in this space of mastery over paradigms that people throw off addictions, live in constant joy, bring down empires, get locked up or burned at the stake or crucified or shot, and have impacts that last for millennia.”
They have become the butterflies, the Taoist “sage.” They not only work in alignment with the system, they can subtly influence and co-create with it. Harmonizing with the world around you requires a relaxation of your blind desire for action, which is why Taoism is known for its paradoxical instructions like “trying not to try.” You actually become best evolved by trying less hard. It’s about achieving success, but the terms of your flourishing will be set by the system itself rather than your myopic personal goals. This rebalancing, whether it’s more slack, more “irrationality”, more creativity, or more flexibility, could be a defining trend for the rest of our lives.
Clearly some impressive people agree. Tim Ferriss’ excellent book, “Tools of Titans,” asked 100 myriad “world class performers” for their key life insights as well as their favourite book. The Tao Te Ching was the most popular (along with, hilariously, Atlas Shrugged, which is literally the opposite philosophy).
As an individual butterfly, the Taoist sage is optimally situated at the edge of chaos within their environment, co-evolving effortlessly. What does that actually mean? David Jones and John Culliney wrote a fascinating paper (below) on “The Fractal Self and the Organization of Nature: The Daoist Sage and Chaos Theory.” Like Meadows, they make the case that the Taoist sage should try to merge with the system itself.
“In performing their activity, sages may appear to be doing nothing because they are so attuned to the natural patterns of their world. In reality, however, the sage as butterfly transforms the world by making the finer distinctions and discriminations appropriate to the flowing of Dao…… This vision is wholly antithetical to the concept of mastery over a system or of conquering nature. What happens, rather, is that at the moment of congruence, the master achieves participation from within rather than an effect from without. The surfer in the curl of the wave, the player in the zone of the game, the carver in the contours of meat or marble, all contribute a new identity to the system. Something new appears in the world. The participation of the self fractally alters the world and shifts its flow.”
This probably sounds absolutely absurd at first. Yet we’re all quite literally being presented with evidence of how tiny nudges are altering the whole world every single day. The snowballing nature of online “virality” is just one example of thousands.
How does the sage, or, er, the rest of us, achieve this? That’s a topic I plan to explore in a little more detail in future (I mean…. what could be more important?). There are also lots of surprisingly practical investing and business applications. This idea is relevant to everything, by definition.
But on a personal level, it’s about finding your own unique capacity for “genius,” then co-creating with the environment. It might be the most optimistic idea I’ve ever encountered. This is because it frees us from the sense of powerlessness we can feel in the face of such an enormous and complex world. It may not require a huge, obvious intervention to save us from catastrophe. The tiniest act from a sage acting as a butterfly may be all we need. By becoming uniquely yourself, you merge with the system and help it evolve.
Stefan Zweig was one of the most famous writers of the 1920s and 1930s. The Knall/Cohen/Pence Group partner Tom Pence recommended I read his wonderful autobiography, “The World of Yesterday.” The book describes his passionate study of the greatest geniuses of his time. A defining moment of his life was watching the sculptor Auguste Rodin at work. Rodin utterly lost himself, turning around with a shock after an hour had passed, to find Zweig still in his company. Rodin was so completely absorbed that he had completely forgotten time and place. The experience was a profound one for Zweig:
“I had seen the Eternal secret of all great art, yes, of every mortal achievement, made manifest: concentration, the collection of all forces, all senses, that ecstasis, that being-out-of-the-world of every artist. I had learned something for my entire lifetime.”
By literally concentrating our essence, unifying all our physical and psychological resources, we can merge with our surroundings and become part of the creative unfolding around us. The system we are inextricably a part of has its own intrinsic “intelligence,” and the sage contributes to that process from within. The single most interesting article I read last year (below) was by chess grandmaster Jonathan Rowson explaining how concentration is the critical mindset required for navigating today’s infinitely complex world.
Concentration is the marriage of intention and attention- both sides of your brain operating in harmony. And it’s in increasingly short supply.
What might you concentrate on? I actually have some much more specific thoughts on practical approaches. I could write a lot, lot more about this. And will.
“A genius is the one most like himself” - Thelonious Monk.
- Read: “The Fractal Self and the Organization of Nature: The Daoist Sage and Chaos Theory” by David Jones and John Culliney (Paywalled, $16 for access.).
- Why Read: If any of this resonates to you, then this piece will be fantastic. It basically explains how modern chaos theory is only now catching up to Taoism. It has some helpful pointers on acting like a Taoist sage.
- “The self of the sage seeks the heart of the system, such as the controlling forces of ocean or game — the essential elements that are non-self — and con- joins them, forming a new system. Through training, the self becomes fractally receptive or structurally and dynamically adept within the system, meaning that the self’s integration with the system reaches its highest level.”
- Read: “Dancing With Systems” by Donella Meadows (30 Minute Read).
- Why Read: It’s a bit more mystical than the paper above (which is saying something), but it strongly reinforces all the key points about how to think about our crazy world.
- "Systems thinking leads to another conclusion–however, waiting, shining, obvious as soon as we stop being blinded by the illusion of control. It says that there is plenty to do, of a different sort of “doing.” The future can’t be predicted, but it can be envisioned and brought lovingly into being. Systems can’t be controlled, but they can be designed and redesigned. We can’t surge forward with certainty into a world of no surprises, but we can expect surprises and learn from them and even profit from them. We can’t impose our will upon a system. We can listen to what the system tells us, and discover how its properties and our values can work together to bring forth something much better than could ever be produced by our will alone."
- “People who are raised in the industrial world and who get enthused about systems thinking are likely to make a terrible mistake. They are likely to assume that here, in systems analysis, in interconnection and complication, in the power of the computer, here at last, is the key to prediction and control. This mistake is likely because the mindset of the industrial world assumes that there is a key to prediction and control.”
- · “Defy the disciplines. In spite of what you majored in, or what the textbooks say, or what you think you’re an expert at, follow a system wherever it leads. It will be sure to lead across traditional disciplinary lines. To understand that system, you will have to be able to learn from–while not being limited by–economists and chemists and psychologists and theologians. You will have to penetrate their jargons, integrate what they tell you, recognize what they can honestly see through their particular lenses, and discard the distortions that come from the narrowness and incompleteness of their lenses. They won’t make it easy for you.”
- Read: Concentrate! By Jonathan Rowson (23 minute read)
- Why read: I’ve flagged this in a previous piece, but in case you missed it. Over the last few years, I've come to believe judicious use of attention is at the root of meaningful human experience. It's our most valuable resource, and now one of the most threatened. This is a wonderful article by a chess grandmaster about the power of concentration in life and decision-making. It's a critical skill in an increasingly complex world.
- “Unless we can learn to concentrate better, we have no chance of perceiving, thinking, talking, and deciding in the ways required of us in the 21st century. There is no hope for us if we start from a vantage point that sees each problem as a discrete issue, ciphered off into an expert silo to be analyzed by a distinct discipline. Albert Einstein was right when he said that we cannot solve our problems with the same thinking that caused them — but, in the world as we find it, genuinely new thinking calls for a reappraisal of concentration.”
Have a great weekend!