Destruction is a Choice

When you're packing to move house with family, you can afford to be a little sloppy about what goes where. So long as you make sure the old house is empty when you head out, you don't need to keep track too carefully. If you are missing something, it'll end up in one of the other boxes packed by a family member. It'll get to the new house. Of course, there will always be a certain amount of loss and breakage too. Moving houses is a small-scale, personal example of wholesale, systemic creative destruction, where the degree of destruction is a function of of the choices made by the social group involved.

Family is, in general, a high social luck environment: many mistakes and accidents are likely to be spotted and fixed by others at little to no cost. Friends and friendly competitors too, constitute a high social luck environment.

Nice people don't think they have enemies. Nice people try to surround themselves with family, friends and friendly competitors. Nice people operate with sloppy defaults and poor op-sec because they (correctly) assume an environment of high social luck. Nice people don't choose to destroy when they don't have to. Nice people actively try to preserve things of value to others when it doesn't involve too much personal cost, and hope for the same in return. Nice people try to live by the Golden Rule: do unto others as you would have them do unto you.

For nice people, true enemies are a distant abstraction at best, usually in another geography. Nice people can move fast and break things because -- they hope -- somebody will likely have their back when it comes to mistakes and accidents.

So what happens to social luck when the environment turns adversarial?

P.S. I'll be in London next week. Check here for a couple of events or if you want to meet up.

Mistakes in an adversarial environment

Social Luck

We don't usually bother to distinguish natural and social luck. When we say "being in the right place at the right time," we conflate the two.

Natural luck is relatively easy to think about. When I discuss business problems, I often use metaphors like the grain of wood, or sailing against/with the wind, or upstream/downstream, to talk about how the natural environment adds good and bad luck to our actions. There are momentous kinds of natural bad luck (think hurricanes) and good luck (think gold being discovered). Natural luck is a sort of apathetic mildly net-negative (by the second law of thermodynamics) force in the environment.

Social luck though, is different. It is a function of conscious choices made by others in relation to your actions. In particular, your mistakes. Social luck can swing wildly from extremely positive (family/friends) to extremely negative (true enemies).

Social luck in fact dominates our fortunes under modern conditions. Your success or failure is largely attributable to how others respond to your mistakes, accidents, and transgressions. And their fortunes depend on your responses too. The math is simple: it is often much cheaper for people to fix each other's mistakes than everybody trying to fix only their own, unaided. It's a sort of cooperation surplus: society as a giant open-source project where many eyeballs make all bugs shallow. The free lunch of aligned values and motives.

And this is true even without getting into actual opportunities and happy accidents. Just covering for each other's mistakes increases the odds and rewards of success all around.

My cartoon above illustrates this. We have 4 yellow barges going west, and one green barge going east, on a placid lake. Natural luck isn't doing much here. The effect of an accident depends on which barge you are on. If a box falls off the green barge (A), and is picked up by a yellow barge, it goes in the wrong direction. If it falls off a yellow barge (B) and is picked up by another yellow barge, it goes in the right direction. It is easier for a yellow barge to fix a mistake by another yellow barge than by a green barge, and vice-versa. If they are enemies, there is value in not fixing the mistake at all (ignoring a box that's fallen off), or even exploiting it (stealing it). Human motives vastly exaggerate the range of possible outcomes here.

Will your mistakes usually be used against you, or generally fixed for you? That's two entirely different worlds.

Two Theories of Enmity

In business, the advice to ignore your competition is often good advice, because competition is usually friendly competition, situated within a broader culture of fair play. Trying to play your game better has higher returns than trying to make the competition play their game worse or exploit their mistakes.

Friendly competition is adversarial without being entirely hostile. A friendly coworker might compete with you for a plum assignment, and a neighbor might strive to beat you at tennis, but both will likely return a wallet you drop. The baker across town will try to bake better bread than you but will not usually try to set fire to your bakery. In fact, they will likely call the fire department if they notice a fire in your bakery.

Competition can in fact get too friendly in a generally prosperous and complacency inducing environment, as in the case of informal employee-non-poaching agreements. This was considered socially good behavior in the 60s and 70s (by employees as well as employers) but is considered social foul play against employees today. This is not so much about laws as a consensus about the degree of social luck we owe it to each other to create at different levels; about the extent to which we expect to cover for each other's mistakes (and going beyond mitigating bad luck, the extent to which we owe each other creation of good luck, by passing on leads for new opportunities for instance).

It is tempting to believe that social luck turns to social bad luck as a result of prosperity turning into decline. The economic theory makes sense on the surface. Conflict is costly and a baseline of cooperation is often best for everybody. So long as you're winning as much as you want, there is no particular reason to want others to lose. But -- so the theory goes -- when there is not enough growth for all, others' losses can become your gains. When there is no growth at all, or negative growth, the only way you can gain is if others lose.

I think this theory is wrong. Friends don't turn into enemies because prosperity turned into decline. Prosperity turned into decline because friends turned into enemies.

This is why ignoring the competition is generally good advice, but ignoring actual enemies is not.

Enmity is a Choice

Enmity is a state of mind more than a material condition. What is more, it is one that is chosen.

What you choose when you choose enmity is to create bad luck for others. With passive enmity, you pick a point somewhere between not covering for their mistakes when it would be easy/cheap for you to do so, to actively foiling fixes or exploiting their mistakes. With active enmity, you of course, actively try to destroy their wealth as cheaply as possibly, if possible by forcing them to make self-destructive mistakes with a minimal use of weaponry.

This choice is not necessary, and not dictated by the environment. Even under the worst conditions of armed conflict or material deprivation, we find gestures of fair play and "friendliness" in the competition. Conversely, even in the most prosperous conditions, when there is obviously enough for all, we can see the ugliest patterns of enmity and adversarial behavior break out.

The Fog of Peace

How does enmity destroy prosperity and manufacture decline? The answer lies in how accidents and social luck operate. Think about various kinds of mistakes and accidents in an adversarial environment:

  1. I find $20 you left on your desk and keep it. I gain $20, you lose $20. Textbook zero-sum.

  2. I find your wallet and keep it but don't try to use your cards or identity. I gain the cash you lose, but the hassle of replacing your driver's license and credit cards is all cost to you, your banks, and the DMV.

  3. I am a baker and I see your bakery burning, but don't call the fire department. There is net loss to society, but I gain a small fraction by taking some of your customers.

  4. I am not a baker and don't eat bread, and have nothing to gain by your bakery burning down. I just happen to dislike you and don't call the fire department.

  5. I am not a baker, but I do eat bread. But I dislike you and let your bakery burn down. As a result, the other baker in town turns into a monopoly, his quality goes down, and I suffer slightly.

You can think through other cases (including blocking good luck of course: I don't tell you about an opportunity I know you'd be great for).

The point is, the abstractions of zero-sum or negative-sum conflict are actually rather meaningless when it comes to material wealth, because the material world is a lot messier than our intentions. There is a lot more friction than we assume.

I call this the fog of peace.

It's the natural cloud of good and bad luck transformed by human intentions towards each other into a social cloud of good and bad luck. A healthy fog of peace is positively loaded. An adversarial one is negatively loaded.

The well-known idea of a fog of war is actually the fog of peace deliberately amplified, catalyzed, and actively loaded with extra adverse consequences for others (with the upside of good luck being blocked for good measure).

The fogs of peace and war imply that t's not always easy to convert an adversary's losses into your gains with 100% efficiency. Sometimes you have no material gains at all. Sometimes you have to suffer a small material loss in order to inflict a larger one on the enemy.

Why would you do that? In material wealth terms, it makes almost no sense.

But if you start with enmity, things become a lot clearer. If your losses are intrinsically of value to me, even if I experience no material gains at all (or even experience smaller losses myself), we are now playing a whole different game. A much uglier one that does much more than redistribute wealth: it actively destroys wealth for psychological gain.

Enmity and true conflict destroy material wealth but creates dark wealth of the psyche -- schadenfreude, a sense of validation of resentments, the fulfillment of revenge motives, feelings of accomplishment rooted in the humiliation of others, outright sadism, and so on.

Look at before/after pictures of war zones and all this becomes clear. Tribal-war economics is not about choosing between prosperity for your tribe versus the other tribe. It is about creating bad luck and misfortune for the other tribe, even at high cost to your own.

Civilization is Social Luck

Nature of course, creates a nice baseline of bad luck for all. There are hurricanes and slippery floors and falling rocks all around us. In general, humans try to create an environment of high social luck for each other, and it works. That's what "civilization" is: an environment of general social luck. A positively loaded fog of peace.

There is a temptation to intellectualize this point too much. I have heard arguments made that the leap in wealth and prosperity of Europe after the Middle Ages was due to the clean slate conditions created by the Black Death. Or that American post-World War 2 prosperity was due to the devastation of Europe and East Asia during the war, creating easy growth markets for American businesses.

There is some truth to such arguments of course. Wealth -- real wealth, not token representations thereof -- does depreciate, become obsolete, and even turn into baggage and liability. It often requires dismantling and removal/recycling as it ages and degrades. But there are plenty of ways to drive renewal and regeneration with means other than devastation.

In fact, the challenge of economic innovation is in fact to find better and better mechanisms to achieve renewal and regeneration of wealth. Without wars and plagues.

Economic Innovation

The familiar metaphor of breaking eggs to make omelets is a very bad one. It creates a false equivalence between the debit and credit sides of economic innovation as though there is some sort of karmic law of balance in effect, and no possibility of free lunches.

_How much you break in order to make what you make is a strong function of your choices. _

Take the much-maligned philosophy of neoliberalism for instance. Between the early 1980s and today, it caused enormous social disruption around the world, as entire industries re-imagined supply chains and manufacturing. Entire towns were economically devastated in places like the American Rust Belt, while entire regions in China, India, and Mexico leveled up to the middle class. Vast amounts of wealth was liquidated and transferred from public to private control during this process. Very little has flowed back into a new and improved public social/institutional order so far.

To enemies of neoliberalism it is a sign that the holders of liquidated wealth -- generational middlemen of sorts (with a few exceptions like sovereign wealth funds in oil-rich countries, these middlemen have been private) -- simply want to keep it all for themselves. To supporters, it is a sign that we haven't yet imagined forms of more broad-based institutional wealth into which this privately concentrated wealth can flow back.

There is a lot to dislike about the restructuring of the world caused by neoliberalism. In the worst case reading, the evil global 1% class saw an opportunity to permanently wrest control of politics, and appropriated most of the world's wealth for itself. There is some truth to this.

In the most generous reading, on the other hand, neoliberalism was a case of the world-as-a-family moving houses. Except this was a family with some serious issues. Even outright enmities. For 40 years, as we were moving houses, we tried to create a lot of good luck for each other, but also chose to create a lot of bad luck for those marked as enemies. Some of the damage caused by the move was inevitable and natural. A lot was chosen and unnecessary.

Costly and difficult though it was, the period did in fact renew and regenerate the wealth of the world as it existed around 1979. And arguably did so at a lower cost than World War 2 or the Black Death.

That's economic innovation. It's ugly, but it's better than an inescapable eggs and omelets karmic equation with fixed terms.

Things like the opioid epidemic and generations facing crippling student debt or precarious retirement represent a terrible human cost of the neoliberal economic transformation of course, but they are certainly to be preferred to world wars and plagues.

The story of neoliberalism is not exceptional. If you look back in history, you will find that every single example of economic regeneration and renewal is accompanied by conflict and destruction, both natural and artificial. You will find plenty of good and bad luck, both natural and social. You will find plenty of near misses, exploited mistakes, forced and unforced errors. You will find many fogs of war and peace.

But you will also find a huge range in the social costs that were paid for similar amount of regeneration and renewal in different cases. The divergent fortunes of North and South Korea serves as a clear example.

Historically, some moves were made with just some minor unpleasantness and economic distress, others devolved into entirely unnecessary bloody wars, in some cases turning moves designed to move forward into great leaps backward. Most were somewhere in between.

The difference is always the same: _where people consciously choose enmity and destruction, the cost is always orders of magnitude higher, often turning the balance sheet net negative. _

For the last decade, we have arguably been in a condition of intense creative destruction. A new moving-of-economic-houses from the late industrial to the early Internet era. A move that is making the neoliberal leap -- which isn't done yet -- look tame by comparison.

Our Choices Today

We are in the middle of making a lot choices, big and small, about how much good and bad luck we create for each other. About how much enmity we choose. The choices we make today will have consequences for decades, just as the choices made in the 70s and 80s are today.

Are we choosing much more enmity and destruction than we perhaps could? I believe we are.

A small sign visible in the tech economy is the 180-degree shift in the social luck environment faced by entrepreneurs.

Twenty years ago, society at large was behind the technology sector, creating good social luck. The benefit of doubt was with the technology sector. People outside of it often worked to cover for mistakes and accidents, and took pride in its achievements. There was a vast amount of goodwill for the industry.

Today, the opposite is true.

Mistakes are openings for a range of implacable and very angry adversaries. Anything you do or say can and will be used against you. Any mistake you make will be spotted and exploited to the hilt. If you call yourself an entrepreneur, you will be presumed an asshole until you prove otherwise. If you are an engineer, you will be assumed to be doing damage unless you prove you're not.

We can and do analyze all this to death, from both sides.There are new enmities galore, and new scars from software eating the world being overlaid on old ones from 1980s deregulation and globalization. Besides itself becoming an adversary for many, technology has also become a new means to pursue old enmities. The culture wars and political turmoil are not entirely attributable to software eating the world, but that's a big part of it.

So yes, we are choosing a lot of enmity and destruction. Vastly more than necessary I believe.

Will this mean software eating the world turning into a great leap backwards?

It is entirely possible.

The good news is, it depends on the choices we make.

The bad news is, it depends on the choices we make.

Do we feel socially lucky, punks? Do we?

Feel free to forward this newsletter on email and share it via the social media buttons below. You can check out the archives here. First-timers can subscribe to the newsletter here. More about me at

Check out the 20 Breaking Smart Season 1 essays for the deeper context behind this newsletter. You can follow me on Twitter @vgr

Copyright © 2018 Ribbonfarm Consulting, LLC, All rights reserved.