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Musings Report 2019-2 1-12-19 The Role of Evolution in Solutions
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For those who are new to the Musings reports: they are basically a glimpse into my notebook, the unfiltered swamp where I organize future themes, sort through the dozens of stories and links submitted by readers, refine my own research and start connecting dots which appear later in the blog or in my books. As always, I hope the Musings spark new appraisals and insights. Thank you for supporting the site and for inviting me into your circle of correspondents.
Recent Podcasts You Might Enjoy:
Jonathon Twombly and I discuss The Everything Bubble and its Effect on Real Estate Investing
Drew Sample and I discuss being an entrepreneur in the local economy and my new book Pathfinding Our Destiny
Thank You, Contributors!
January is when the most stalwart financial supporters of Of Two Minds send in their contributions--thank you, John D'A., Ken W., Jay S., Edward J., Brian E., Lawrence M., Jia-En T., Edward D., Kent M., Amy C., Susannah W., Steve W., Ron O., Bindu M., Wendell D., James L., Marsha F., William H., John S., Ajay G., Daniel E. and Terrance J.
Thank you and welcome new (or returning) subscribers-patrons Peter M., Walter G., Ted B., Milo L., Daniel J., Max-Elie S., Unai G., Cosmin L. and Heidi & Anthony L.
The Role of Evolution in Solutions
The ultimate goal of my work is to offer solutions to the full spectrum of human endeavor from individuals and households to communities all the way up to entire societies and economies (hence my proposed CLIME system).
This is not an academic exercise, as the past few years have been extremely challenging for me and my household, and so I've had to seek principles that inform real-world solutions in my own life.
Those of you who've read my latest book Pathfinding our Destiny know that my focus on the principles of evolution as the source of solutions has sharpened, as natural selection and other evolutionary principles guide human systems as well as natural systems.
As I discuss various solutions in the coming weeks, I'm going to be referring to these evolutionary principles as guiding concepts:
1. Evolution doesn't have goals--humans have goals. As Herman Pontzer wrote in the January 2019 issue of Scientific American magazine, "Evolution has a great memory but no plans.... evolution isn't trying to get anywhere. We were not inevitable."
("Evolved to Exercise," page 28)
The philosophic word for an intentional end-state is teleology, so we can say that evolution is non-teleological. But unlike natural systems, human systems can be intended to reach a goal or end-state. This means human social-economic evolution, while sharing the processes of evolution, is fundamentally different from natural evolution: we can choose to evolve toward a specific goal.
2. Life is much more complex than our often simplified models. A leading example is the microbiome, the immensely complex ecosystem of micro-organisms in our gut (digestive system). It turns out this complex system is in effect a second brain, affecting every aspect of our life as it communicates with the brain in our head.
("How the Brain Listens to the Gut," same issue, page 46)
The microbiome and its synergistic dynamic with the second brain (the gut) turn out to be far more consequential than we thought, as it is now being linked to auto-immune diseases and even autism and dementia. (I'll have more to say on this in future Musings.)
3. Evolution doesn't operate at one speed--it responds dynamically to the stress of change. Organisms whose environment remains stable have little selective pressure to adapt, so they don't. The Goblin shark species (deep-sea dwellers), for example, is over 100 million years old.
But when the environment changes drastically, evolution accelerates as individuals' genetic variations are put under intense selective pressure: those that make a big improvement are conserved while those that confer no real advantage or create a negative effect die with the individual with the unhelpful variation.
This is known as punctuated equilibrium: the relatively slow rate of evolution in times of equilibrium/stability are punctuated by brief explosions of rapid, dramatic evolution.
4. Human organizations undergo a very similar process when stressed by rapid, drastic change: those that fail to generate a wide array of variations and put all the variations to the test will fail to evolve. This is the core message of my latest book: only societies and economies that retain the capacity to generate dissent, variation and flexibility can successfully adapt in eras of non-linear change.
The same is true of households, communities and enterprises. Evolutionary dynamics are scale-invariant, meaning they work the same way regardless of the size or scale of the entity.
5. All creatures, humans included, are selected to conserve what's worked in the past and be wary of modifying what's worked well so far. But when a change is compellingly advantageous--for example, eye glasses in the 1400s, the first production facilities being described in Venice--then the changes spread very rapidly. Members of the Chinese court managed to get spectacles manufactured in Europe within a few short years of their introduction in quantity in Italy.
The key is to have a system that doesn't just enable variation (what we refer to nowadays as innovation) but encourages it and provides the means to propagate it quickly.
This is the tragedy of pre-modern Chinese innovations: China was the home of hundreds of innovations that never spread in China, much less to the rest of the world. While this is a complex topic that lacks a single definitive answer, most experts concur that Chinese society put stability of the social order far above technological advances. Lacking the mechanisms of capitalism and the free flow of knowledge via mass-produced books, China did not have the system needed to develop and propagate productive variations.
6. If the current global system of debt-funded "growth" runs into hard limits within a decade (as many of us consider inevitable), every participant and organization will enter a period of do-or-die evolution: only those who respond with variations, flexibility and experimentation will adapt successfully. Those who cling to the old ways will not adapt and thus will be unlikely to survive.
Our search for solutions rests on the foundational principles and processes of evolution and adaptation.
Highlights of the Blog This Past Week
Where Will You Be Seated at the Banquet of Consequences? 1/11/19
The Recession Will Be Unevenly Distributed 1/10/19
If We Can No Longer Tell the Truth, We've Failed 1/9/19
2019: Fragmented, Unevenly Distributed, Asymmetric, Opaque 1/8/19
Could Stocks Rally Even as Parts of the Economy Are Recessionary? 1/7/19
Best Thing That Happened To Me This Week
Finished trimming a large old lychee tree that hadn't been properly thinned in years or perhaps decades.
Musings on the Economy: Commercial Real Estate
In the podcast mentioned above Jonathon Twombly and I discuss the Everything Bubble with a focus on the potential impact of the Everything Bubble on real estate.
Very few analysts ever predict a downturn in real estate, as most earn their living within the industry, or hesitate to make bold projections that may blot their reputation if their predictions fail.
Yet the writing is on the wall that we're at the top of the cycle. Jonathon posted this comment on my Facebook thread:
"As I was driving around Brooklyn today, I noticed yet another popular restaurant driven out by high rents. And it occurred to me that these businesses are also victims of the everything bubble.
Loose money is causing inflation in Brooklyn real estate, as everywhere else. Inflation (combined with investor FOMO) is causing investors to overpay for these assets. They justify paying inflated prices by underwriting higher rents. So, when leases come due, they are raising rents to levels that local businesses cannot afford.
These rents are not demand-driven. Brooklyn is full of empty storefronts in prime locations with heavy foot traffic.
The issue is greedy - or perhaps desperate (because they overpaid) - landlords raising rent to levels required by their overpayment for properties.
This does not mean they will actually get these rents - as they are at levels at which local businesses cannot afford to rent. And there are only so many bank branches and Walgreen stores to go around. That's why there are so many store vacancies even with a cranking economy. Many of these building owners are also mom & pop owners, albeit the wealthier end of Mom & Pop.
The business owners who lost their locations and the owners who purchased these assets at inflate prices are all or will be victims of the Everything Bubble when this is all over."
Simply put, small businesses can't afford to stay in business at current commercial rents, and as vacancies pile up then highly leveraged owners (i.e. those with not much equity and massive mortgages) will default.
The supply of buildings for sale will increase and once the belief that values can only go higher fades, buyers become scarce at current prices. The combination of ample supply and weak demand will eventually push prices lower. That's what happens at the top of the cycle.
From Left Field
A Business With No End: Where does this strange empire start or stop? -- weird maze of interconnected retail sites...
To Help Put Recent Economic & Market Moves in Perspective -- by guru Ray Dalio...
Banishing Truth -- and dissent, variation and experimentation...
Brexit: Stage One In Europe's Slow-Burn Energy Collapse
The report underscored that cheap energy flows are the lifeblood of economic growth: and that as we shift into an era of declining resource quality, we are likely to continue seeing slow, weak if not declining economic growth.
Sleeping Rough in the Mattress Economy
What psychology experiments tell you about why people deny facts -- more painful to change our minds than cling to what we "know"....
If You’re Over 50, Chances Are the Decision to Leave a Job Won’t be Yours: A new data analysis by ProPublica and the Urban Institute shows more than half of older U.S. workers are pushed out of longtime jobs before they choose to retire, suffering financial damage that is often irreversible. -- better start on self-employment at 45...
The sociopathy of social media -- this was tin-foil hat territory two years ago, now it's conventional wisdom...
Kenneth Anger: Where The Bodies Are Buried -- for the arty crowd...
The Fed’s Obama-Era Hangover: By paying banks not to lend, the central bank diminished its ability to control interest rates.
Wielding Rocks and Knives, Arizonans Attack Self-Driving Cars -- not against technology, just against this technology....
Why Professors Are Writing Crap That Nobody Reads
82 percent of articles published in the humanities are not even cited once. Of those articles that are cited, only 20 percent have actually been read. Half of academic papers are never read by anyone other than their authors, peer reviewers, and journal editors. -- perverse incentives in the higher-education cartel....
Every Building on Every Block: A Time Capsule of 1930s New York-- lots of small businesses that would never make it in today's high-cost world....
"A doctor can bury his mistakes but an architect can only advise his clients to plant vines." Frank Lloyd Wright
Thanks for reading--
charles |
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