My first column oriented readers to systemic thinking, and the second oriented them to systemic lists of whatever prominent operations are actually driving a given system, using fiscal operations as an example. Having noted parallels between molecular networks in an amoeba, and economic networks in a “market-amoeba”, we are now ready to start exploring the many, changing operations that do and will effect your immediate prospects, and those of your descendants. This search for “investable” dots linking investors to aggregate options reduces primarily to a search for those tools and practices which will allow subtle increases in aggregate coordination. Today’s column will lay out principle options to be explored in detail in future columns.
Some emerging tools which changed past options are obvious, such as the historic effect of railroads on commerce, war and emigration. Others are obvious only in retrospect. In the case of railroads, some of the many stepping stones tools were large scale metalworking, casting, smelting, and mining, and some of the enabling practices were stable markets, funding of basic research, and thought experiments as subtle as Carnot’s theories on heat engines.
It is clear that the enabling catalysts for market growth are ALWAYS many, subtle, completely unpredictable, and hence “selected” only by the test of time from whole spectra of alternate options. Who says biological selection is no longer occurring for humans, cultures and markets? The option to achieve insanely great progress is always present, all we have to do is explore our options. How do you get people and whole populations to explore options? The history of countless biological model systems tells us that it is simply being on your toes so as to recognise a coordination opportunity when you and your nation inevitably trip over it. Those populations that do this will be selected. Those that don’t will disappear from history, along with all their individual investments.
Here’s my mantra for groups exploring options, selection, and coordination.
Interactions drive broad awareness.
Awareness exposes random opportunities.
Opportunities demand context-dependent parsing, and just-adequate reactions.
Reactions expose opportunity consequences … to choose from, carefully & quickly.
Even brief consideration of what this means for markets will lead investors to novel and very useful perspectives.
Some readers may recall a powerful analogy from my earlier columns, which will hereafter be used continuously. Every human population, local or national, is, by default, an analogue-computing-system. For brevity, we’ll call an analogue computing system an “ACS”. The net intelligence expressed in any ACS is held in the body of system message passing – even in digital ACS simulations. Those who work with bio models, system models or even Linux computing clusters such as Don Becker’s original Beowulf software know this well. It also follows that net system capability is held in the body of resource passing. In humans, that means that the net, wieldable intelligence of the USA is always held in our body of discourse, and that our net capability is a function of resource deployment patterns. Next time you’re engaged in any communications medium, you might ask whether the data being manipulated comes anywhere close to a statistically useful sampling of the relevant data – for whatever context you or your community are in. If you can follow this argument at all, you will realise that the need for statistically adequate sampling ALWAYS applies to all stages of the mantra stated above.
Back to our question. How do you get people and whole populations to explore options? If the USA market-amoeba is to someday enjoy the benefits of 10x or 100x the degree of population coordination we’ve currently achieved, what tools and practices might enable such coordination? Where might some of the surprising subtleties be, which subtle catalysts might unleash better/faster/cheaper use of existing technologies, and what might we do with our new coordination capabilities?
The simple answer is that these options must be selected from many trials, so we should be investing proportionally more in the interactions and practices of ourselves, our children and our neighbours. That’s where high coordination return options are generated, not just in the technologies and tools we use.
Emerging tools obviously do have value, and are more visible than emerging practices, so we can more easily follow momentum in the industrial “pseudopods” extended by our previous market-amoeba forms. Starting with telegraphs, radios & telephone, some milestones were coast-to-coast rapid communication lines, lowering of production costs, and more pervasive deployment. In systems terms, our population became far more “instrumented”, allowing mobilization on a scale that even Bismarck didn’t imagine. Where is the current momentum in these tools? Many feel that it is parallel deployment of mobile instrumentation plus cloud computing infrastructure capable of serving the real emerging needs of the populations now being instrumented. Obvious market trends during the last decade included companies like Google, ARM Holdings, and various firms allowing miniaturization of displays, radio chipsets and battery technologies. None of these will come as a surprise, but people digging into those areas MIGHT have a good chance to adequately distribute some bets on the emerging technology roulette table. To select well, however, you’d also have to consider the confluence of practices AND tools.
Since our popular discourse seems much slower at recognising emerging practices that enable coordination on a greater scale, I’ll go out on a limb and suggest that following practice trends may be a more fruitful approach for people who do not currently consider themselves to be technical or financial experts. There is an old adage saying that people that invent a new tool may make $1million, people that train others how to use it may reap an easy $10million, and the market segment that successfully adopts the tool may benefit to the tune of $100million.
What practices make one population choose to retrain and re-employ/re-deploy faster than another? What practices make one market-amoeba adopt focussed use of new tools faster than another one? One hint is that the most powerful armies, or “market-amoebas” are those which actually practice and drill at optimal, continuous re-deployment of emerging technologies. Concepts such as full education, full-employment and additional mobilization of under-leveraged populations through so-called micro-finance practices immediately comes to mind, including domestic variants of Grameen Bank.
How do you invest in rate-limiting practices that lower bureaucracy, reduce fraud or lesson the habit of bribery? How do you invest in client ability to recognise net benefit, not just production volume or nominal returns? The return on such increased coordination dwarfs all other returns.
Instead of micro-finance, coordination-entrepreneurs may prefer the more general concept of micro-coordination practices. There are many, many options in this area, once it is more broadly defined as micro-coordination. As always, however, extreme selection pressures apply, and the vast majority of micro-coordination options will definitely NOT survive in their present form. Nevertheless, once all population survival tasks are defined in terms of coordination and mobilization metrics, it is obvious that extreme resource disparities of the sort now evident in the USA are a certain indicator of a system of declining net intelligence, and hence growing vulnerability. If coordination is the highest cost, then the safest investment is always in the most coordinated systems with optimal tool, practice & resource deployment – i.e. the most adaptive systems. For lone-wolf investors, the choice is always whether to abandon ship, or to invest in improvement of shipyard capabilities. The latter pays in multiples, but only if done, and done successfully.
How many people would even recognise half of the key practices that enabled us to wield the amazing technology invented in recent decades? Some of the diverse practices that come to mind were patent laws, securities regulations, compulsory education, professional standards organisations, and statistical process control in manufacturing – but most notable perhaps would simply be standards and practices for sending representatives to Congress.
For a taste of the impact that processes and practices can have, readers may want to review the history of our original Continental Congress, or look up Walter Shewhart, WE Deming and the amazing increases in productivity which occurred during WWII. The USA has never again come close to the degree of mobilization achieved in 1945, which at that time was done entirely with paper and pencil, plus a few mechanical calculators. Another hallmark was escaping the limitations of the gold standard.
How many people will recognise the name Marriner Eccles, or many other civil servants during the Great Depression and WWII years? Those people facilitated the pace of practical experimentation that allowed previously unbelievable levels of national mobilization and national coordination to occur. How did US citizens invest in those practices, to enable the beneficial outcomes we all enjoyed? The 1941-1945 transition of the USA to dominant world superpower is not immediately recognisable from most financial or investment charts. For US investors, most of the real value created during those years was intangible, in the system of market practices itself. We did, with the same tools, what other countries were not able to do, with those same tools and resources. Our coordination practices made most of the difference.
What additional or expanded practices will be used if we are to achieve insanely great further expansion of mobilization and coordination? Back to the analogue-computing-system (ACS) model and the mantra above, I’ll go out on a limb and predict that only a significant surge in net population interactions will increase the net intelligence of our market-amoeba. Our political, fiscal, monetary, securities, domestic, foreign, education, employment, industrial and all other policies can only work if we first imagine what a statistically relevant sampling of perspectives even means, as a bare minimum, and then actually achieve that level of exposure, discussion, analysis and option testing. Without exploring enough options, the chances of successful selection drop catastrophically. Here are some questions that I would like to pose to people investing in the future of the USA.
When you choose tasks you’d like elected public servants to solve, which of them are rate limiting for the survival of your town, county, state and the entire USA? How would you even accurately determine rank in that hierarchy? How much time do we have to find a solution? How would you even accurately estimate that time window? If both the form and kinetics of those selection processes had to be drastically accelerated, what practices would you like your elected public servants to FOCUS on, and what tools would you like them to be using in order to facilitate both their focus and their work? Do you have a way to invest in those tasks? Do you have a metric for comparing the real return on those platform investments, compared to the nominal returns in your personal portfolio? Would you rather look great on paper, or be a citizen in an intangible market-amoeba superpower?
Take our US Congress as an example. When a Congressperson considers input from a constituent, what decision framework would you like them to be using in order to best serve the needs of the USA? How could a Congressperson even achieve a statistically valid sampling of perspectives on a context? How could they define a statistically valid sampling of available “group intelligence” from the FULL body of national discourse pertaining to that topic? How could they consider a statistically valid sampling of the entire range of possible options? How could they get statistically valid samplings of any available feedback from all ongoing mini-experiments, so as to even determine whether they know enough to either make an informed decision? Shouldn’t they be able to accurately estimate when more small-scale experiments were required before the colossal risk inherent in large-scale experiments should be taken on? Is the supposed deficit in our own, entirely nominal, fiat currency system even relevant to these considerations?
Let me summarize these queries in two ways. First, how long would you keep taking your car to an electronic tune-up shop if, instead of using available computerized instrumentation to coordinate and tune all motor and car components – they instead just decided to listen to the input from a small number of “lobbyists” offering volume discounts on installation of certain engine or car parts? How long could you afford that approach, or maintain interest even if you could?
Second, how would citizens start investing in adaptive practices that allow the rate of change in our civil-governance coordination to keep pace with the rate of technology change, tool invention and context change?
Unless models for investing in the level of coordination in our market-amoeba are explored, how can we solve that task?
To broaden perspectives, let’s once again return to a particular biology model, the social amoeba Dictyostelium discoideum since it carries so many parallels to human market systems. One of the endearing traits of “dicty” is that these fiercely independent, lone-wolf amoeboid investors periodically aggregate to launch selected representatives (spores) on amazing migration trips, a continued cycle of very selective aggregation and very selective dis-aggregation. The many parallels to our human market-amoebas are striking.
Ignoring endless details, here’s one key question. As some of “dicty’s” predecessors & current relatives continue to dabble in diverse interaction models, exactly which profile of subtle catalyst changes produced the behavioural transition from lone-wolf to coordinated aggregate survival behaviour that “dicty” alone wields? The simple answer is that that profile is both diverse and subtle, but it paid off wonderfully. The individual amoeba making up a “dicty” mushroom aggregate obviously trade off some individual options in return for even more valuable group options. They are not conscious of their choice. They simply survive by falling into those particular behaviour patterns. That is their culture. To do so, their population generates considerable variance, thereby allowing some to survive where others cannot. The message for us is that anything we do to lower population variance too much, can prevent us from being able to spawn surviving combinations. For Benzinga readers, the lesson may be “Get out there & interact more! Invest some tiny fraction in variance? Quickly orient to whatever coordination patterns are exposed by both your interactions and/or your own experiments?”
Since investment in coordination generates the highest returns, here are comparable questions for US investors. What are the smallest/fastest/cheapest profile of investments which would allow the many USA market-amoebas (all known public/private organisations) to coordinate on a far higher scale? How will we define and explore those options? How will we eventually select a profile of subtle investment changes which produces greater intangible changes in real wealth than we ever imagined were possible?
These are tasks for what we can call “coordination entrepreneurs”, and the payoff will likely not be denominated in nominal currency, but rather in real, overall market results.
When it comes to our current political system, one will be excused for calling for a complete re-deployment of system-investments. What part of “make a more perfect union” don’t current politicians, and voters, understand?
There is always far, far more mutual benefit left on the table than the sum of what rival political parties can currently imagine fighting over! A systems view argues that we need new generations of civil servants with far more imagination. As a start, we need investors willing to redeploy civic investments in completely new & imaginative ways.
Roger Erickson is a systems entrepreneur based in Maryland. A biologist by training, he worked for years in neurophysiology system research, at the Humboldt Stiftung, MIT, Yale, and NIMH before becoming more interested in community, business and market systems. Roger’s newest interests are being pursued through several startups as well as pilot agriculture commercialization projects with the USDA. Roger writes a weekly column on Friday for Benzinga.
Business Insider Emails & Alerts
Site highlights each day to your inbox.