Chaos, Swans, and Counterinsurgency

Socwall gives us one of Leonid Afremov's beautiful works.

I read Ms. Sramana Mitra's interesting post on An Innovation Conundrum. She does a great job of looking at 'Capitalism' from a Randian, entrepreneurial perspective. The article mentions the issues of culture existing in America's capitalism, specifically the value of speculators v. creators, movement from education to finance, and concludes with a note that "the rewards of prestige and money should go to the value creators, not the speculators."

I've been keeping track of Chaos theory since reading James Gleick's Chaos, Making a New Science. I've been looking at Outliers and Black Swans since reading Malcolm Gladwell's Article on Taleb, then reading the Black Swan and Fooled by Randomness. I've been an avid student of David Galula's Counterinsurgency- Theory and Practice, "a taxonomy of favourable and unfavourable settings for a revolutionary war from the point of view of the loyalist or revolutionary forces," since reading it for my Post-Conflict Reconstruction and Development class.

And all of these readings combine to say exactly this; building a place where entrepreneurs flourish is a combination of people moving into weird specialties at the right time, the existence of people willing to bet on failure and smart enough to not go under doing so, and Galula's keys for flourishing in the face of outright oppression.

The issue of compensation for creators is based around the fact that creation is always a risky, directly opposed process. In the words of Machiavelli, "The innovator makes enemies of all those who prospered under the old order, and only lukewarm support is forthcoming from those who would prosper under the new."

Once the creation has a foothold and a market, the speculators are rewarded for trying to sell it, simply because there is no way to get closer to creation and remain a profitable large-scale investor. Too many creations have no mass market, flourishing in the long tail but never striking a chord with the everyman.

The creation of these failures can't be subsidized in the view of the large investor, simply because the current distribution systems require a mass market and can't support only the tiny individuals of the long tail.

Yet the failures, built en masse, pave the way for the next big innovation. Without various universities and organizations working in computers and trying to share information piecemeal, no one would have had either the technical expertise to build the foundations for the internet, the knowledge of how and when to use the internet to get it off the ground, or the inspiration to pitch the project to funding.

The 'failures' of trying to build integrated file-sharing communication represented the fractal solutions to the problem of spreading information over computers; a simple formula, acted out on the graph of organizations everywhere, with solutions of differing scales but the same essential nature, sensitive to the initial conditions under which the first solver began working (their expertise, motivation, and team size).

Here is where Chaos theory comes in; that simple equation of a solution to communication using computers was eventually standardized to the point where it was valuable for everyone, allowing it to be profitably scaled up.

But no one, even the eventual creators of the processes leading to the internet, knew what the strange attractor behind these dispersed solutions was.

The entrepreneur needs someone willing to invest in the field they work in and look for strange, scaling solutions to the problems they are individually solving, not someone who thinks the specific solution of a specific business is going to scale into huge profits in the short term.

They need a Venture Chaoticist, not a venture capitalist who works with the idea that evolution is a competitive but linear process, with a solution that is possible to see from the outset to someone smart enough.

The important lesson from Chaos in this field is that you cannot predict what will be necessary to survive the changes from small scale solutions to large scale. You can't even make a reasonable guess as to whether each solution will work. There is no path with a clear solution.

But the underlying question which built the answer being worked on now is worthy of consideration and investment.