Peering Into The Crystal Ball, We See… Instability Leading To Collapse – Investment Watch

Written by Charles Hugh Smith via OfTwoMinds blog,

We can only choose one: open stability, dynamic (evolution) or autocracy (instability and collapse).

When the fundamentals of life change, every organism must evolve or die. This is equally true of human organizations, societies and economies.

Evolution requires keeping what still works and experimenting until something works better. We call the fundamentals changing selective pressure and the process of experimentation with mutations/variations natural selection.

In genetics and epigenetics, this process is automatic. In human organizations, those with power influence the choice of what is retained or replaced and what is replaced. Those who benefit from the current deal will fight to keep it as it is, while those weakened by selective pressure and those who hope to gain advantages from a new deal will fight to replace the old with the new.

Longtime correspondent Ron G. recently shared an insightful economic characterization of this dynamic: wealth defense vs wealth creation. Those with the wealth of the system have little incentive to risk changing the system, as such changes could undermine or erode their wealth. They have incentives to limit evolutionary forces that threaten their wealth as a means of defending their wealth.

Those who have lost wealth and those who have little wealth have incentives to change the system to favor wealth creation.

We can describe the first as orthodoxy– evolution threatens the stability of the status quo, therefore limiting evolution to the margins – i heretics being the second option that throws the status quo in favor of a more advantageous variation.

This is not either/or, of course. As Ron points out, corporations have incentives both to preserve stability and to adopt variations that increase revenues and profits by expanding the markets for the firm’s products. In Ron’s words: “The function of orthodoxy or corporate policy/rigor is to mitigate variations that would diminish stability.”

In other words, there is a danger of throwing the baby out with the bathwater. Dynamic equilibrium is based on a constant flow of variations and experiments, i.e. low-level instability, continuously modifying the system to maintain core stability.

Without this constant flow of low-level instability, sources of instability build up, unnoticed and uncorrected, until they become consequential enough to destabilize the entire system. The system implodes, crashes, triggers, etc.

We can understand this flow of variations and experiments as evolutionary turnand this binding requires two things: a constant flow of mutations/variations feed the process of experimentation, and transparency so advantageous variations are not suppressed. In a transparent evolutionary system, data and information about each variation and experiment flows freely between all nodes in the system.

You see the problem. Those who benefit from the status quo are threatened by variations that could replace that which defends their wealth. Those in power benefit from the status quo, so their first job is to suppress evolution by limiting transparency and variation, which includes dissent.

In theory, those in power favor evolutionary advances that enhance their power and wealth, but anything powerful is generally a double-edged sword: slightly modified, it could disrupt the entire status quo and fatally undermine their power

Therefore, the safe bet is to remove all evolutionary rotation except for those upgrades that can be used to further consolidate its power. These are by definition autocratic.

You see the delicious irony: Autocrats suppress evolutionary turnover and transparency as threats, but evolutionary turnover and transparency are the essential forces that maintain the system’s dynamic equilibrium. Once the system’s dynamic equilibrium decays, systemic instability builds up and eventually causes the entire system to crash.

Because this process is obscured by the authoritarian suppression of transparency, “nobody saw it coming.”

As those in power adopt ever stronger authoritarian measures to limit potential threats to transparency and evolutionary turnover, they accelerate the fatal instabilities that accumulate within their kleptocratic and self-serving social, political, and economic systems.

By suppressing the evolution and transparency that maintain the dynamic balance of the system, they condemn their regime to collapse.

The crystal ball is not cloudy, it is crystalline: a growing instability leading to collapse. “No one saw this coming,” except those who understand that evolution requires evolutionary movement and transparency.

Collapse is a perfectly good evolutionary solution. Stability is dynamic or not actually stable; it is only a sham of stability that slides into instability and ruin.

The best option is to embrace evolution and transparency and accept compensation: we can only choose one: open stability, dynamic (evolution) or autocracy (instability and collapse). Choose wisely, because once the systems go down, there’s no going back.


This post was based on an essay published as a Weekly Reflections Report sent exclusively to subscribers and patrons at the $5/month ($54/year) level and above. Thank you, patrons and subscribers, for supporting my work and my free website.

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