Embrace Chaos!

October 22, 2016

embrace-chaos

Are you ready? (Phew!) Here we go again! I am back with another mind**** of a post! NNT does this to me! I do this to you! Like I said before…blame him! Is this chaotic enough already? Don’t know what to expect? Exactly! Embrace it! Have you ever wondered what is the difference between the career choice of a taxi driver and a bank clerk. If you had a choice between only these two paths which one would you choose? I’m guessing it would be that of a bank clerk right? It’s secure. Monthly paycheck in the bank. Guaranteed paid leave and a gold watch once every 25 years! Who can beat that? The comfort of certainty! No drug like it! On the other hand we have the poor old taxi driver trudging through in a sea of uncertainty. He has no idea what’s in store for him tomorrow if anything at all. This can’t be the way to go now can it? Well if history has taught us anything it’s this, “if you don’t embrace uncertainty…uncertainty will embrace you.” Remember the Black Swan?Certainty is an illusion. The bank clerk is avoiding small turbulences only to be a victim of that large Black Swan event. The event that crashes the stock market and makes the the financial sector spin out of control. While the top execs of that bank negotiate a bailout the little guys don’t quite get so lucky! And guess what? While the bank clerk is made redundant and sees himself out the door with no fall back plan whatsoever, those execs still walk away with hefty bonuses for saving the day! The taxi driver on the other hand is juggling with occasional volatility of a few rough days but he is inherently protected from that earth-shattering externality that could hand him more than what he bargained for (although Uber is the Black Swan for a Taxi driver but that’s a subject for another post). The same goes for pretty much any natural system. Small turbulences may cause some distress but will not break the system down. Take our health for example. You can consume extra calories on a certain day but nothing you do will double your weight in a day, in a month or even in a year. In the larger scheme of things those excesses will average out (assuming those excesses are indeed limited to a few days). In the same way the taxi driver will have bad days, some really bad ones. While on other days he may even choose to take it easy off his own accord. However, in the end all those zero days would average out. Embracing uncertainty to a certain extent is far better then embracing an illusion of certainty that is likely to implode sooner or later.

The same applies to large systems like governments and economies. There is something about intervention, even if it is well intended, it always seems to have the opposite effect. The more we seek to protect ourselves from uncertainty the more we leave ourselves exposed to Black Swans. Recently, I came across the latest Country Brand Index report by FutureBrand. Can you guess which is the number one country on that list? Switzerland. A country that is the perfect example of self-governance. Yes, they have no standing army. They have no government. No intervention. It is the closest thing to a natural system – open to small scale volatility but protected from those large scale disruptions. Do you ever recall hearing about elections in Switzerland? The entire country is divided into self-managed small cantons united as a confederation. They squabble internally from time to time but in the end they solve their own problems without any bureaucratic involvement.

Another reason why this approach to governance works, is because there is a human aspect involved as well. There is something powerful about close proximity between the governing and the governed. Daniel Kahneman in his research related to Behavioral Economics has often cited our inability to grapple with probability. Numbers and statistics are hard for us to empathize with. Did you know that every seven seconds a person is dying of diabetes? But can we process the pain? No! The media doesn’t help here either. Driven by ratings and the need to sensationalize they bombard us with images of flying houses and those few people affected by that hurricane rather than an obviously larger issue of diabetes because that story doesn’t warrant immediate attention. It’s the way our brains are wired and they play on it. We are likely to be more perplexed by the crying of a child in an airplane then by the hundreds of children being bombed in Aleppo. Statistics don’t move us. How is this related? It seems when a country is run through tiny cantons where everyone seems to know everyone else you are not a statistic. The governor is someone you are likely to bump into. He is close to the problems of his people. He sees them. It is hard to make a decision against someone you interact with on a regular basis. The same can’t be said for larger systems. Governing people bureaucratically from a distance can make problems appear as statistics and numbers. Less empathy. More disconnect.

So how is this related to our core premise? When it comes to governance centralizing control is primarily driven by the need to reduce uncertainty and avoid chaos. This leads to the kind of problems our bank clerk got into. Interfering to avoid uncertainty and chaos leads to just that. This explains why Switzerland continues to be a safe haven even today. However this form of governance is not a new practice. The Roman empire and the Ottoman’s even at the peak of their power weren’t centralized the way governments are today. It’s not like they had the internet or even a telephone for that matter. Messengers riding the fastest horse would take days if not weeks to coordinate in a centralized manner. They did not intervene unnecessarily but gave a lot of autonomy to the city states in their Empire. In their case they had no choice. But the idea was to let them self-govern as long as they contributed to the state. Whatever disruptions and squabbles that arose were limited. Instead of artificially forcing control that would lead to problems in the long run the loose form of control they imposed was far more effective. Like the British “divide and conquer” approach to rule, they would divide their empire into smaller self-governing units and let the city-state rulers focus on economics while they took care of defense and overall military control.

Bring in centralization, and this illusive sense of control and you have Black Swans popping up everywhere. From the Austro-Hungarian empire to the Ottomans, their fall can be traced to centralization when the new ruler tried to exercise greater control leading to ineffectiveness and economic downturn. Contrast that to the nation-sates of today. From the two World Wars to the Great Depression and the not-so-distant Great Recession, all have unnecessary intervention to blame. The need to curb volatility and avoid chaos by interference and aiming to predict and manage things that can’t be controlled has a big role to play in the occurrences of these events. I guess at this point it is hard to see how those major historic events were purely a result of bad intervention aimed to avoid chaos and enforce control. It clearly can’t be so simple! That answer will have to wait for another post (and further study).  But one thing is for sure. Embracing chaos and uncertainty is the only way to go! Taxi drivers do it, The Romans did it! The Ottomans did it! So can you!

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