Personal systems you need

First I would like to say that this text is the last one during this year. It will be a short one.

The quality of your life depends on the quality of your systems. The problem with this fact is that you have tens or even hundreds of systems. Most of them do not even recognize. All your habits are systems. All your other behavioral routines are systems. What separates the other behavioral routines from habits is that they do not have clue-routine-reward order. Their electronic ”fingerprint” in your brain is not the same. Your life also depends on systems other people built like companies. In this text, I will focus on the personal systems you need. I will have a list of them, but I do not explain it to them very much. Most of them are self-explanatory and even obvious. Some of them you do not recognize as systems and some of them should be systems but are not in your daily use.

Let's start with the most obvious ones. You need to have systems to get enough sleep, to have high-quality nutrition, to have enough exercise, and to recover from your daily efforts at work or from the efforts in learning new things. You also need to have systems to use your hours as efficiently as possible, like using your best hours of the day in the most important things. You need to have systems for moving from one place to another, no matter what they are. As you can see, these things are not rocket science.

You need habits. You also need to have systems to change your habits and create new ones. Everyone has bad habits and you can only change them. Therefore, the former is harder than the latter. This means that they take more time and effort.

You need decision-making systems. You need to have decision-making systems for less and more important decisions. For example, you can have different systems for making decisions about small amounts of money and a large amount of money. You can also have different systems for intuitive tasks and deliberate ones.

You need to have practice systems to improve your understanding and skills in any endeavor you want to be better. One system is deliberate practice. It does not work in all skills. You need to have systems to maintain your edges in skills that are better than your competitors. You also need to have support systems to deal with your weaknesses and blind spots. You need a system that either destroys or confirms your strongest beliefs. This system has to focus on reality, not things that you believe are true. You need a system that produces constructive criticism. You may also need separate systems that measure the results of your actions and decisions. This system has to separate skill from luck or randomness.

You have to build strategies to get what you want from life. They are systems like the rest of the mentioned things. They have also subsystems but let's not get into them. You also need back up systems in the most important things.

I will update this list later.

Merry Christmas and happy new year!

-TT

Common antidotes to psychological biases

Psychological biases can be working in any situation. This text is about common antidotes to all of them. Each of them also has some specialized antidotes which I will not go through today. Most people think they are more invulnerable against the tricks of persuasion professionals than average. Most people think they can be rational in any situation. This is not true. When the moments come that you think you are the best way prepared to ward off all manipulations, you have the highest odds to be vulnerable. This applies even to people who know about the ways they are manipulated. It can be the worst position to suffer from persuasion. It is the position that can have the largest possible bad effects on the decisions you make. Confidence in your abilities is the worst foundation for these moments. Be suspicious about your abilities.

Even though I mentioned that confidence is bad for you, you have to first recognize these situations in which you are vulnerable. And this can make you feel you can resist anything. It is better if you do it before you have to deal with them. Avoiding them is the best solution. One of the most common situations, when you cannot avoid the effects of persuasion professionals, is when your willpower is low. This happens when you are tired, stressed, have external influences like other people to lead you the way, etc. One of the best signs of these situations is your overreaction to stimuli, whatever it is.

Bitter pills can work. When you voluntarily expose yourself to less harmful persuasion professionals, you can recognize your vulnerability to them. This makes you less confident about your abilities to resist them. When professionals have deceived you with small things, you can have better odds in avoiding persuasion attempts in bigger things. For example, book salesmen are not as harmful as car salesmen. Analyze your reactions to salesmen, their tricks, and how they deceive you or try to do it. Plan in advance. Do not expose yourself to a situation that can cost too much. You can also see these professionals at work, but with other customers, if you do not trust yourself enough to be a customer. Go to a cafe that has direct access to a shop or two. Have a coffee and watch it. You do not even have to hear what they say and you can still learn. You will learn less, but with smaller problems.

You can also practice your reactions to these situations. If you like to wander in a mall or you have to go and buy something from them, you can use so-called if-then scripts. For example, if a persuasion professional approaches you to sell you something, then tell him your wife takes care of these things in your family. You can also tell him that you have a job interview and you have no time to talk. You can invent more of these scripts yourself. Use your imagination and I am sure you will find something to say.

Some situations are more dangerous than others. If someone creates new expectations and wants to fill them, you have to be smart. For example, a company sells you some sugary and fatty foods and it also sells diets to lose weight, you have to be careful about it. That company wins twice. First, it sells you an unhealthy snack, and then it sells you something that lessens the bad effects of it. The other sign of a hidden agenda is selling something you have not experienced before. Try this new product X and enjoy it. This can be something like a test drive, or a new service, etc. When new things are free, be extra careful.

Frame these situations in different ways if you want to avoid them. Distance yourself from them. Think like you are an outsider. For example, ask yourself what others would do if they were you. Would they say yes or no? Practice their answers. You can also find outsiders about their opinion in advance. Use your critics if you can. Try to be neutral. Think about finding the truth and nothing but the truth. Be aware of your prejudices. Be careful when your response is too strong for the situation. It is the best sign that something is wrong.

This is all for today,

-TT

Losses, Gains and Possessions

You tend to worry more about losses than you care about the gains. This is one form of excessive self-regard. Even though you worry more about losses, you tend to be optimistic about having fewer possible risks than others. You believe that other people suffer more from unemployment, bad break-ups, and bad illnesses. The availability of possible risks changes the way you see them. You do not have to suffer from these incidents yourself. You just have to see them happening to someone else. If you lose something, your risk level rises to get it back. Overreaction to these incidents is a normal human trait. It protected your ancestors from irreversible harm. Today´s world is different.

The ratio of hurting more from losses than enjoy gains is about two to one. 200$ gain feels as good as 100$ losses feel bad. This fact leads to many irrational decisions. It can have bad effects on the outcomes of your life. This does not mean you should always choose the option of getting larger gains than avoid losses. You can do this when losses do not cause you any bad damage. For example, it is smart not to bet your last 1000$ if you can win 1500$ and chances are 50%. But you can bet your 1000$ to win 1500$ when chances are the same if you have a significant amount of extra money. In the long run, you have to use these possibilities to your advantage if you want to have a life you deserve. Constant choices for avoiding losses are not the best way to live your life.

Losses and gains produce some other irrationalities in your life. One thing that makes the difference is the total amount of your gains and losses. This applies not only to the sums of money but to how many times you lose or gain something. It s more painful for you to lose 100$ twice than losing 200$ once. When this happens to you in the sum of gains, winning 100$ twice feels better than winning 200$ once. There are limits to the effects of gains and losses. Losses feel less painful after a certain point. For example, if you have 1000$ and you lose 100$, it feels less painful than if you have 500$ and you lose 100$. The same applies to gains. For example, gaining 100$ when you have 1000$ feels less good than having 500$ and winning 100$. This applies to your wellbeing too. After a certain point, your wellbeing doesn´t increase when you get more money than you felt before.

Possessions

Anything you own is more valuable to you than before you owned it. If you pay 100$ for an item, its value to you increases. This applies not only to your possessions but the effort you put to get them. IKEA furniture is a good example of this effect. When you buy something from the store, you have to assemble it. Putting screws, using a hammer, and other efforts to put pieces together increase the value of the items. When you put these two things together, your items become much more valuable than you paid for them. Your emotional attachment to your possessions grows when the time goes by. The more you use them or the more available they are to you, the more valuable they become as their availability in your mind grows. Riots and revolutions usually happen after something are taken away from people. They do not happen when people never had anything. Even small possessions that are taken away destroy governments.

Framing losses and gains differently

Framing losses and gains differently can help you get what you want. Frame all the undesirable things in a way that they feel like losses. For example, risks with negative expected value can be framed to feel like losses. For example, frame lottery tickets as losses of the money you pay for them, not to the opportunities to gain millions. Risks with positive expected value can be framed in ways that not doing them feels like losses. For example, not accepting a coin toss to win 1500$ and lose 1000 will be a loss of 250$ of expected value. There is a certain way to make gains feel better and losses feel less bad. Always bundle your losses and separate your gains. Separating gains and losses is a bad idea when the gains are bigger. Talk about investments, not losses.

Valuing possessions

Avoid most pay later to get something now deals. You will feel like an owner before you have paid anything. This possession may feel more valuable than they are. Do not underestimate the value of ownership. If you cannot afford something, do not even try it. Be realistic about your possessions. Most of them are not so valuable to others than they are to you. Do not overprice things you own if you have to sell them. Ask experts about their real value. Most and for all, understand the value of your currency. The dollar is a dollar and pound is a pound, no matter how much effort you have put to your possessions and how available they are in your mind.

-TT

Do you update or calibrate your beliefs?

One of the forms of excessive self-regard is that you overrate your beliefs about the world, people, and ideologies, etc. Beliefs are good when they are right. You could not get anything done without them. Reality proves that most of your beliefs are right. Therefore, doing choices based on your beliefs make your life better. Unfortunately, you have to update or calibrate your beliefs in the modern world or you will lose the grasp of reality. To a certain extent, this happens to all of us. It has happened to me, at least.

Belief formation is a simple process

You form your beliefs with a simple process. First, you hear or see something. Second, you choose to believe it. Of course, sometimes you choose to ignore it. Let's keep things simple and focus on things you have approved in your mind. Most of your beliefs have common sources. When you are young, some kind of authority figures is the first sources of your beliefs. Your parents, other family members, and teachers tell you what to believe. Sometimes your friends are your sources. No matter who the sources are, your ability to question them is poor. When you get older, the number of your sources grows. At some point, the number of sources starts to diminish.

Beliefs and reinforcing feedback loops

The longer you live, the higher the odds that you do not calibrate or update your beliefs. Your beliefs are hard to change because you process new data in a way that strengthens your existing beliefs. The validity of your beliefs is hard to question because your brain seeks the data that confirms your beliefs and ignore the data that question them. This process is a self-reinforcing feedback loop that keeps strengthening until you disrupt it. The same reinforcing loop is at play when parents transfer their beliefs to their kids. This loop can continue centuries.

One of the misunderstandings about one´s beliefs is that the smarter you are, the better you are in changing your existing beliefs. The fact is a complete opposite. Even though smart people are better at processing data, they are also better at corrupting the data. They are better at finding people, research, and facts that support their point-of-view. They also have stronger beliefs because they can better explain themselves why their beliefs are the right. Therefore, they discard the evidence that contradicts their beliefs even when it is right. If the data is in the form of numbers, the better you are in twisting them to support your beliefs. The majority of the less smart people have higher odds of changing their beliefs. Intuitively, this makes no sense to you at all. The smarter you are, the more useful it is to you to find other people who disconfirm your beliefs.

How to calibrate and update your beliefs

Most scientific facts have been proven wrong. In the course of history, things that have been certain in people´s minds, like the earth being a center of the universe, have changed to other facts. You have to be prepared to update your facts and beliefs when new facts contradict them. It is not a sin to change your beliefs. The biggest sin is to cling on your false beliefs after you have learned new data about them. Unfortunately, the complete opposite has higher odds of happening. When you get disconfirming data about your beliefs, your brain often clings on your beliefs even harder.

Sometimes facts do not change completely. Then, you have to calibrate and/or update your beliefs. If you want to do that, you have to first acknowledge the fact that most of your beliefs are not certain. Nothing in life is 100% sure or 100% wrong. Therefore, you have to define odds with everything. You have to think about how confident you are about anything. For example, you can be 99,999% confident that gravity exists or you can be only 75% confident that you are qualified enough to do your job. You can also use a range of possibilities and put odds to the range. For example, you are 80% sure that your income will be between 50,000$ and 75,000$ in five years.

One way to see if your beliefs or facts need updates and calibration is to check their long-term track records. For example, if you believe in socialism, find out how well it has worked in the history of mankind. After you have done your due process, ask yourself whether you have found proof that it has worked before somewhere. If you have ways to measure the effects of your beliefs and facts on you, do it for a long time. Then think again if you have to update them or not. For example, if you have had a diet for a year, one way to see if it has worked is to measure your weight and/or the length of your waistline at least twice a year. Adjust your beliefs about your diet if you have to. You can also find out expert opinion about your beliefs or ask their critics to give you feedback about them.

This is all for now,

-TT

Two system archetypes and feedback loops

To understand this text, you should first read about feedback loops if you are not familiar with them.

Systems have the same principles and share common characteristics. Systems that have enough common characteristics can be described as archetypes. Systems that belong to the same archetype have a similar structure, goal, or purpose and their behavior is similar over time. Similar feedback loop behavior is the main common denominator in system archetypes. Reinforcing feedback loops produce archetypes more often than balanced ones. Reinforcing loops usually produce behavior that is too much for the balancing loops. It is a rare occasion when balancings loops produce archetypes.

Limits to success archetype

Sometimes success is too hard to handle. Most people are not prepared to handle it. Limits to success archetype usually have a self-reinforcing feedback loop and a balancing loop that keeps reinforcing loop stable. When the balancing feedback loop cannot handle the acceleration in the self-reinforcing loop, problems will start to occur. After a while, the reinforcing loop cannot produce growth and your balancing loop becomes the dominant one. Then your success starts to deteriorate.

For example, when you become suddenly famous and successful and you are not prepared to have a balancing feedback loop that is strong enough to handle your success. The demands for your success will increase. Your growth can be in danger because later some limiting factor that was not a problem before like time appears. This growth becomes less sustainable because maintaining the growing demands more of your time. Suddenly, growth disappears because the balancing loop begins to dominate the system and your time and other resources are tied to the wrong places.

You have to make changes to solve the problem, but you have to figure out the main cause of it. Did your priorities change? Did the problem of saying no to less important things become a real problem for you? What you have to do is to find the right limits for these activities that weren´t your problem before? When you have found them and you cannot limit the time used for them yourself, you might need to hire somebody else to manage your time and say no to less important things so that you can focus your efforts on the most important things.

Escalation archetype

Competition is usually a good thing. But it can go too far and produce some unwanted consequences and escalate into a full-blown war between two or more competing entities. Usually, the escalation archetype is consisted of limited stock, competitors, and balancing loops. Escalation is more or less a zero-sum game. If two competitors have limited shares of goods, one of them cannot have more than 100%. This means that these two can have a combined share of 100% of the goods. Usually, competitors fight from a slowly growing amount of goods. And this fight usually is pretty stable because of those balancing loops. When some variables in balancing loops change as things escalate, self-reinforcing loops inside the balancing loops are shaped. These loops create problems.

Before escalation, the shares of goods are almost or completely stable between the competitors. All their efforts go to maintain this balance in the shares of goods. Escalation begins when one competitor changes its behavior and another sees that behavior as a threat to their position. What happens is that the competitor who was interested in maintaining balance has to react to the first mover´s behavior. For example, this can result in a price war escalation. The first mover reduces the price of their goods and the other competitor has to follow. This can change into a self-reinforcing pricing war with several rounds of price reductions. It usually ends when both competitors are not able to reduce their prices or one/all competitors are destroyed.

Competition is good for society and actors in it. Even escalation can be a good thing. Positive goals are good. Many escalating competitions can produce good results for societies. For example, competition in developing new medicines can produce better ways to cure diseases. If this competition escalates, it helps others. It can even help companies if they develop faster processes to develop medicines. The best way to reduce the problems of this archetype is to avoid it. Collaboration is often the best way to manage things. It should be your first choice.

There are many other system archetypes and most of them usually are about feedback loops and their mismanagement. Changes in the variables in feedback loops can produce unintended effects and these can change system behavior in a completely different direction. Sometimes it is about changing goals or dominant interconnections that produce addictions.

There are many good books about systems and you can find more information about different archetypes from them.

Source:

Learn to Think in Systems, Albert Rutherford

Until next time,

TT

Systems Thinking

This text is about introducing you to systems thinking. It continues from what you have learned about systems, feedback loops, and interconnections. Please check the previous links if you are not familiar with these themes before reading this text. This text gives you the rude basics of systems thinking.

You live in a complex world with lots of interactions between systems and their elements. It is hard to understand the world without systems thinking. It can be described as a typical mindset. It is used to get a big picture of your systems and how their elements produce different cause-effect relationships. Systems thinking does not work in a way that you focus on one element and forget its effects on others. This latter way of seeing things produces severe misunderstandings about the world. And systems thinking reduces the number of misunderstandings.

The world is full of systems within systems

Your skin is a system within your body which is a system too. You cannot understand your skin without understanding the interconnections between your body and your skin. When you do something to your skin, your brain reacts to your action. If you burn your finger on a stove, your brain sends a signal to remove your finger from the stove. For this to happen, your skin is a receptor of the heat which sends the signal to your brain that it has detected something that is too warm for keeping your finger on it. Without these interconnections, the skin in your finger would burn for a long time on a stove.

Systems thinking helps you to figure out the longer-term effects of the effects of your actions. It does not focus only on here and now the effects of your actions. When you do something without thinking about the longer-term effects, you can have many unintended consequences which you could prepare for, if you had used systems thinking. With systems thinking, you can have higher odds of understanding the future than without it. It also helps you to remove your focus from the causes you cannot change to causes you to have the power to change. This saves you lots of time and effort without having many negative effects. Systems thinking helps also you to make sense of the structure of your systems. It deepens your understanding of them. You can see how different elements in your system interact. When one element changes, others react to this change. Then the whole system behavior will change, at least a bit.

A process with many questions

To understand how your system works, you have to ask many questions. You have to figure out which effects are related to which causes. You cannot understand and/or improve your system without understanding what happens and why. You can also solve problems related to your system with this process. Many of the questions you ask are not related to any special system. They are the same questions, no matter what system is concerned. Problem-solving and system improvement process has three steps:

First, when you start figuring out the effects of one element, you create wider views about the element and the timeframe you focus on. You ask questions about the interactions of many elements and what the future of the system will look like. Questions, like ”How will system elements interact in the future?”, ”If I change one element, how will the other elements behave in the future?”,

Second, you start figuring out how does the system behavior arises and changes. You ask questions like, ”What are the key circumstances and how fast do they change?”, ”In what directions do the key interconnections move?”, ”Do the feedback loops in a system balance or reinforce the interactions of the system?”

The third and final step is all about improving the system. These questions focus on the simple truth that systems are almost always improvable. You can ask questions like: ”Is this system as simple as possible, but not simpler?”, ”Do I need all these elements to get what I want from the system?” or ”Can these elements be improved somehow? The question about the last step is: Does the system improvement produce better results than the time and effort you will put on it? If not, you have to focus on other things.

-TT

Paradox of options

If you go to your local supermarket, you will find too many shelves with too many options. I am almost sure that you have never seen all the products they have in their collection. If you start looking for all the options you have, it is almost impossible to make the optimal choice. Then you will either choose the brand you are familiar with or the product you have always chosen. The odds are in favor of the latter option. During the day, you will have tens of these kinds of decisions to make.

Some freedom is a good thing

Most people think that increasing the number of options is mostly a good thing. The world has changed from life with limited options to unlimited options. This change has a cost. You have limited bandwidth in use in your brains. You will get problems with too many options faster than you think. Your decisions will have three different bad outcomes if you have too many options. They reduce the number of decisions you make, they lower the quality of decisions, and the satisfaction you get from them.

Complexity increases all when you increase the number of options. Some complexity is good, but too many different options bring you analysis paralysis. Each added option multiplies the amount of work and time you use for making a decision. You cannot make any decision after a certain amount of options. What happens is that you use lots of time to make a decision that never materializes. And this time is away from other tasks or decisions. Sometimes not making a decision is a good thing. There are decisions you should not make. If the outcome of not doing the decision is better than the cost of lost time, your outcome becomes better and indecision is a blessing.

Too many options create another unwanted consequence. The quality of your decision becomes lower. Too many options can create a situation where you make a decision that is based on less important parameters. Mating is one of these situations. You might encounter many approachable possible partners in a nightclub. The odds of a decision based on outer appearance grow higher. And the outcome will have less quality. If you are trying to find a partner, you can probably increase your odds by going to a party with a smaller amount of possible partners and make a better decision.

Too many options bring less satisfaction. This is maybe the weirdest negative outcome. Why doesn´t it bring you more satisfaction because you have put more effort into making a decision? One reason for this is that you can imagine that many of your options could have been better than the option you chose. You are more interested in what you could have lost than what you did gain from your decisions. The attractive parameters of other options are more represented in your brains than the attractive parameters of your choice. You will start regretting immediately after the choice you made. These are some of the reasons why fewer options after a certain point mean higher satisfaction.

Sweet spot

Any decision you make has its sweet spot in which there is an optimal amount of options available. In this spot, the number of decisions, quality of them, and the satisfaction you get from being optimal. When you have a single option, you feel disregard for the decision. After you have added enough options, you will arrive at your sweet spot of options. If you will add more options after your sweet spot, each of them is bad for the quality of your decision. You can add options forever, but the result is that the odds of having a good outcome becomes smaller.

Sweet spots differ from decision to decision and from person to person. This makes them hard to find. The process of trial and error will help you find them. This requires situations that repeat each other. The problem with this process is that it consumes time. And your time is limited. You have to make decisions about considering your options. These decisions can be more important than your last choice.

More information about the topic you can find from Barry Schwartz´s book Paradox of choice or his interviews on Youtube.

Until next time,

-TT

Conscious and Unconscious actions

Consciousness is not a simple thing. If you say it is, you probably don´t understand it well. I will not go into detail about consciousness. Before you start reading this text, think about consciousness yourself. Do you think you are always conscious of what you do? Have you ever noticed that you did something without acknowledging it at the moment you did it? Think about more questions about consciousness yourself. Conscious and unconscious actions can be separated into five groups:

1. Always conscious actions
2. Actions that can be done either way
3. Skills that are practiced with conscious actions and become unconscious
4. Actions that can be made conscious but are normally unconscious
5. Actions that are always unconscious

The first group means that you cannot function without conscious thinking. For example, you have forgotten something and you know it. Then you have to put a conscious effort to remember what you have forgotten. This is the most uncommon group of these actions, but people think it is the most common one. Belief in human rationality lies in this misunderstanding.

The second group of actions is skills that can be done either way after once they are well learned. This group of actions does not usually require precise timing or fast execution. Driving is one of these skills. For example, you can take a similar journey from home to work every day without thinking about it consciously during the journey. Sometimes you have to consciously change your journey because of a traffic jam or to stop buying some groceries either in a way back home or to work.

The third group of actions is skilled and initially learned with conscious effort. Usually, this means lots of conscious repetitions. These actions move gradually from conscious to unconscious. The harder these actions get, the more conscious effort you need. Finally, this group of actions becomes automated. After the automatization of the action, conscious actions can fail. For example, if you had watched sports, you might have encountered professional athletes failing in easy situations where they had too much time to perform an easy action. Conscious actions are not as effective in those situations than unconscious actions.

The fourth group of actions is normally unconscious. These actions change into consciousness by getting some feedback about their effects. This feedback is usually biological and aims for controlling bodily functions. For example, you can have a sports clock that measures your heartbeats and you can consciously aim for getting your heartbeat higher or lower depending on your needs. You might acknowledge the changes in your bodily functions, but details of how you do it remains unconscious.

The fifth group consists of actions that are always unconscious and mostly spinal reflexes. You cannot intentionally grow your hair or change your blood sugar level. The latter happens at least when you are not consciously eating or you are sleeping. These actions are unconscious. And some survival reflexes are unconscious, too. For example, avoiding a surprising flying object that comes toward you. These actions keep you alive. Therefore, they are necessary. Without these spinal reflexes, mankind wouldn´t exist.

Some actions are performed better with your unconscious mind and some of them are performed better when you put conscious effort. Speed is one variable that separates the need for the unconscious mind and the use of consciousness. As you have noticed, most skilled actions do not require consciousness. When you look at the experts performing their skilled actions, they seem effortless. This is the result of thousands of repetitions done with conscious thought. Expertise is not the most usual way of performing unconscious actions. Habits are the most usual unconscious actions. The quality of your habits is the most useful indicator to see if you will be successful. What this means is that the outcomes of your good habits must be better than the outcomes of your bad habits.

You cannot only perform unconscious actions in life. Big decisions with lots of variables require conscious thought. They require more time. Therefore, if you have no time, you have to rely on your unconscious mind. It is more prone to errors. Separating the unconscious and conscious mind and decisions is not a perfect model. Without the unconscious mind, you wouldn´t make any decisions. You would think about irrelevant things for hours without making any conclusions without it. Therefore, both are very much needed in every decision.

TT

How to predict better?

Everybody makes predictions. Most predictions are irrelevant in the big picture, but everyone makes them. For example, you can predict tomorrow´s weather. Most of the time, it doesn´t matter whether you are right or wrong. But sometimes you have to be outside for the whole tomorrow and then it matters. You make these predictions without a systematic process. You need to have a systematic process to make better predictions. This text is about making them.

Commit to the truth

The first step for making better predictions is to commit to the truth. You have to recognize the influence of your beliefs, and psychological tendencies and you have to question them. You cannot make predictions that confirm your way of seeing the truth when the evidence does not confirm your beliefs or assumptions. You have to be willing to update your beliefs and assumptions when the objective facts tell you different stories than you would like to see. Your beliefs and assumptions have the power to modify your predictions in wrong directions unless you commit to find the truth no matter what that is. Your goal is to make the best prediction you can make with the facts you can gather. If you think you do not have enough facts, you have to commit to finding them. If you have too many facts, you have to commit to separating the relevant facts from noise.

The process of making good predictions

Most people have three different answers to predictions: ”Yes”, ”No”, and ”Maybe.” People who make good predictions live in an uncertain world. In this world, ”Maybe” is the only right answer. This means that you have to make predictions with probability estimates. Your prediction could look like this: ”There is a 70% chance of raining tomorrow.” You also have to second-guess all the people who make vague predictions like ”It may rain tomorrow” or ”The unemployment rate may be less than 5% in the next two years.” You cannot know whether these people have made the right predictions because their predictions can mean anything. If you want to make better predictions, you have to commit to making probability estimations.

The starting point for making a probability estimation is to find a base rate for the thing you are predicting. For example, if you have to predict what is the probability that your football team will win the next home game, you have to start by looking at how many wins they have won in their home games this season. Your sample size should be enough. If the season has just started, you have to look for last season´s statistics, too. Let´s say they won 7 out of their last 10 home games, then the base rate is 70%. This is your starting point. Then you have to use other data to adjust your probability estimate. Why should you start with a base rate? Because your first estimation is just your hunch and the probability of it being right is smaller than using the base rate. The figure you find first will be the most available for your brains. It will be your anchor during your prediction process. Do not forget to define the time frame for your prediction if necessary.

After you have figured out the base rate, you can start forming your view. Break your question to smaller questions like ”What would have to be true for this not to happen?”, ”What kind of information helps me to answer this question?” or ”What I do not know about this question?” You have to figure out what you don´t know and what you do know. After many questions, you should make your probability estimate and write it down and the reasons behind it.

Then, it is time to find out some outsider view about the same question. Consult people who have made predictions about the same question. Find out what the experts think and their reasons. Focus on the differences in reasons between your view and other people. Consult prediction markets, like stock markets, or betting offices that give odds to a thing you predict. You can use polls if you predict the elections, etc. After you have found out the base rate, made your probability estimate, and found out about the outside views, you have to synthesize and make another probability estimate.

Let the time pass and then you can scrutinize your own prediction and make another estimation. You can do it by assuming your first estimate is wrong. Consider why it is wrong and write down the second estimate and reasons for it. And then find out about other outside views again. Then, synthesize again and update your prediction when new important information arrives. This process ends when the time frame closes. This process can feel frustrating. If you want to predict better, you have to update your estimates often and make gradual adjustments to your predictions.

Prepare to be wrong. Even the best predicting professionals are occasionally wrong. Do not mix up the outcome of the prediction and the quality of the process. When you have 80/20 predictions, you are rt only 4 out of 5 predictions when your probability estimates have good accuracy. No matter whether you are right or wrong, have a postmortem. Think about the process and the reasons behind your estimate. Did your process have high quality? Did you find out the right base rate? Did you update your estimate often enough? Did you find out the outside views of the best professionals and prediction markets? How many times you synthesized these views? All these questions help you to predict better next time.

Sources:

Superforecasting, Philip Tetlock

The Signal and the Noise, Nate Silver

-TT

About me

Before I start with the introduction, I would like to tell you that I will get back to publishing texts next week. This text is about introducing myself to the readers.

I am Tommi Taavila. I am an independent thinker, a lifelong learner, A son, a brother, an author, and Finnish. I stumbled upon the latticework of mental models by accident. I was searching for answers about what makes the best investors better than others about five years ago and I found Poor Charlie´s Almanack and Charlie Munger´s latticework of mental models system. I realized that it is not only good for investing, but it is probably the best way of understanding the world. When I learned more, I figured out that everybody has their mental models and latticeworks. Most people just haven´t registered that the way they think and act is through their mental models. The quality of the models and latticeworks people have could be much better.

What are my qualifications?

I have no diploma for creating a latticework of mental models. Nobody does. You can have a few diplomas in a few disciplines. But you cannot have diplomas for all the most important disciplines. And you do not need to have them. You just have to understand the big ideas of the most important disciplines and how they intertwine. The former is easy, but the latter is hard. You can learn all the big ideas in all the most important scientific disciplines in a few thousand hours or even less if you know what they are before you start learning. I have monitored my hours for the last two years and I have spent about 2,000 hours learning the models better. This is the best-measured qualification I have for understanding the models. These 2,000 hours consist of reading, writing, and taking notes. These hours measure the direct work about the models in the last two years. Then there are the things I learned before doing this systematic work for finding out and understanding the models in the last two years.

Then, there come the qualifications for understanding how these models intertwine which is much harder. It is more about thinking habits. You have to like thinking. You have to have intellectual curiosity and stretch your mental muscles in multiple directions and want to do it. You need to have a talent in seeing the connections between two completely different phenomena. You have to be able to find real causes behind events. You have to be able to see that some events are just higher-order effects from underlying causes, not events that are caused by the most obvious explanations. Most people do not have all these intellectual traits.

Then there are the traits you can´t have. You cannot suffer from any strong ideologies. For example, you cannot think that capitalism gives you all the answers and socialism is a completely bad ideology. You have to think that both of them have their bad and good characteristics. You can´t have an IQ that is too low. A little bit better than average is enough. You cannot believe that all the answers to the problems of your discipline can be found from the big ideas of your discipline. For example, economics without understanding psychology is pretty much useless. And still, most economists ignore psychology by focusing on the myth of economically rational humans.

A fair warning. I am 80 percent sure I have all the mentioned intellectual traits for doing this. Nobody can be 100 percent sure of most things. If they are, they do not understand the world. My biggest obstacle for doing this is an excessive self-regard. I have a big ego and I have put much effort into doing this. The latter increases the former. I am not always right and I don´t always think I am right. My probability estimate can be wrong too. You have to decide whether it is close to the truth or not. If you repeatedly read my texts, you have probably made some kind of estimation already.

Other information

I am sure you have noticed that my English is far from perfect. I hope you can still understand my texts. I have no business around mental models. I plan to publish three books in the next ten years. The first one will probably be published before the end of 2020. Selling books can make some money, but I doubt it will be enough to compensate for the time I will use for my texts and books. Most of the information in the books is published on this website. You don´t have to buy books to get information. The differences between those books and the information on this website are that books have better edited and more coherent content. I am an independent thinker. I have no research grants, no foreman, no relationships with my sources, and no sponsors to produce this content. I prefer it that way because the only person who can distort my content is me. I also write for a financial online publication Piksu.net and have published three books in Finnish.

Until next week!

-TT

Your mental models tell you what to think and how to act

All of your thoughts and actions are the results of your mental models

You can´t function without mental models. When you start growing as a child, you do not have many models. The amount of them starts to grow. And finally, you have hundreds or even thousands of mental models as an adult. Your thinking becomes more complex and you see the world differently compared to your childhood. Your models are always updated. Most of your mental models affect your unconscious mind. This is why most people cannot figure out that all of their physical actions are based on their mental models too. If you want to throw a ball, your brain needs to have a chain of mental models to move all the necessary parts of your body to achieve your goal of throwing the ball.

Your view of the world is based on your mental models

You have your view of the world. This view is your latticework of mental models of the world. It consists of your mental models that are the results of your learned facts, previous stimuli, experiences, and current situation. Your response to different stimuli produces different actions or thoughts. They are both context-dependent. It means that your responses vary depending on the current stimuli and previous choices and experiences. For example, if you have made a decision month ago, it could be different today in the same stimuli and in the same location because you have had different experiences between these two decisions. There is a possibility that your mental models today are different than a month ago. There might be only a slight change or a big one.

Your view of the world is never complete

Your view of the world is imperfect. You cannot have a complete picture of the world, because it is too complicated. You can have a close to perfect view of your surroundings if you are isolated, but the world out there is always incomplete. You have at least hundreds of different mental models in your head. You might not describe them as models but they are models in their imperfect sense. Some models are closer to the truth than others. Different people have different models that are closer to reality than other people. For example, my mental model about the latticework of mental models is closer to reality than yours and your mental model about how well I can write is probably closer to the truth than mine because I suffer more from overblown ego than you do.

Your life is a result of your mental models and randomness

You can have close to perfect mental models and the result of your life can be an absolute tragedy. Your outcomes always have an element of randomness. Your life can end by standing in the wrong place at the wrong time. For example, you can do everything right and meet a stranger accidentally that is a terrorist or another kind of nutcase and he will shoot you to death. Some randomness can always change your life completely. I am not saying that it is the most likely outcome, but it can happen. You can only raise your odds to get the outcomes you want. Nothing is ever certain. You have to always think about the odds that your mental models are the best possible ones in the context you are using them. And you have to remember that your odds are never a hundred percent. The best odds of being right you get from the best principles of the most important intellectual disciplines like physics, biology, mathematics, etc. These models are universal and withstood the test of time even though they have been proven right only in the last centuries. If you need to improve your models and you probably do, these models should be first in your list. Most of them you can find here.

This is all for a while. I wish you a great summer. I will back at some point in time.

-TT

Are emotions simulations?

The title has a question mark because scientists are not unanimous about what emotions really are. This text is based on the assumption that a theory of constructed emotion is right. A classical view says that emotions are constant biological components that have grown in millennia and they have been developed by the survival instincts needed a long time ago. A theory of constructed emotion sees things differently. It sees emotions as learned and created social agreements based on your experiences, immediate stimuli, and culture. This theory makes you more responsible for your own behavior.

Neurons and emotions

A classical view talks about emotion fingerprints. According to it, you have the same facial and bodily expressions about emotions. This means that your muscle movement tells others everything they need to know about your emotions. A theory of constructed emotion disagrees with a classical view about this. According to it, emotions don´t have any physical fingerprints. For example, anger doesn´t look the same in the facial muscles all the time. The classical view believes that the same neurons and their synapses in the brain create the same facial expressions that express anger or other emotions. According to a new theory, different neurons and their synapses can create the same emotions, and varying facial movements can express the same emotions like anger in different contexts after different experiences and social agreements. Different neurons have different purposes according to this new theory.

Context, experiences, and social agreements

According to this new theory, your immediate surroundings, previous agreements, and social agreements construct emotions together. Your emotions depend on your environment. You can show your anger or feel it differently depending on where you are. You can express your anger differently at home and at work. Emotional expressions are tied to specific environments. You can express your anger to someone else differently depending on your immediate surroundings. Another person can show their anger to you differently at home than at your office. You give different meanings to different occurrences based on your previous experiences. When you have experienced anger on the bus, you can expect that you will experience it again on the same bus, even though your other surroundings are different. Different cultures can have different expressions for different emotions. For example, Asians have different facial expressions of anger than people who live in Western countries. They have learned to express their emotions differently. One of the most important things to understand is that people construct their emotions differently and it is very hard to know what others are feeling all the time.

Simulations

All your senses provide you with stimuli all the time. Your brain uses your past and present stimuli and compares them to construct simulations. Then your brain chooses stimuli that are relevant to your current situation and throws other stimuli away. Your senses do not provide reactions, they provide simulations based on current stimuli through your senses and some previous simulations that have created different neural patterns in your brain. Then it chooses the most probable simulation that is the sensory input you react to. It adjusts you to the current situation. The primary tools for your brain to understand current situations are your previous experiences. Cultural differences are based on different previous experiences. And these culture-dependent experiences have created different social agreements based on different cultures.

Your simulations are your neural patterns. They guide your actions and produce meaning for the stimuli you experience through your senses. When your neural patterns describe emotion simulations, your brain constructs emotions. Your brain actively constructs emotions based on your sensory inputs. It doesn´t just react to inputs. Without previous experiences and simulations based on them, you couldn´t make any sense from your current sensory inputs. They would just be meaningless noise. Sometimes your sensory inputs help you to have a meaning for your current stimuli and your brain constructs an emotion. Sometimes it does something else like produce an action.

This is an interesting theory. It makes sense, but I have no idea if it is a fact or not. If you are interested in learning more, you can read Lisa Feldmann Barrett´s book: How Emotions Are Made or watch her TED talk about the theory.

Until next time,

TT

4 hours of work per day and recovery, a recipe for creativity?

You might expect that most creative geniuses are workaholics and they work relentlessly from day to another. The surprising truth about them is that many of them spend their days working for approximately four hours. The rest of the day is for the ”recovery”. In this text, I will tell you about the working hours of some of the greatest creative minds, about the four factors that contribute to recovery and the concept of deep play which relates to how you can get your mind off work efficiently.

Working hours of the creative minds

The most creative scientists, artists, authors, and many other creative types have or have had surprisingly similar working patterns. Their days are not focused only on working. Their days have long breaks and their work doesn´t take all day. Most of them keep their working hours in predetermined times of the day. And they keep on ”showing up” for work day after day at the same time. Here are some working hours of the greatest intellectual minds, world-class authors, and other famous creative types:

• Charles Darwin: 8.00 AM – 9.30 AM, 10.30 AM - 12.00 PM, and 4.00 PM. - 5.30 PM
• Henri Poincare 10.00 AM – 12.00 PM, and 5.00 PM – 7.00 PM
• Charles Dickens 9.00 AM – 02.00 PM
• Ernest Hemingway 6.00 AM – before noon
• Norman Maclean 9.00 AM – 12.00 PM
• Ingmar Bergman 9.00 AM; - 12.00 PM
• W. Somerset Maugham 9.00 AM – 1.00 PM
• Thomas Jefferson 4 hours in the morning

As you can see, most of these examples worked from three to six hours a day. Most of them worked a maximum of four hours. Hemingway´s and Dickens´ breaks during the work are not known. At least they are not mentioned in my source of information. As you can see, none of the examples worked through the whole day. At least they consciously. Truth is that when you think you stop working, your brain is using almost as much energy than during your conscious working hours. Some researchers estimate that this figure is close to 90 percent.

Four factors of recovery

Recovery is an important part of efficient work. Without proper recovery results from work are worse. There are four important factors of recovery: relaxation, control, mastery experiences, and mental detachment from work. Relaxation is the simplest form or recovery. Getting a release from tension at work helps you to recover from work. For our purposes, the control means an ability to decide how you spend your time, efforts, and energy. Free time is not optimal for recovery if somebody else like your significant other decides your schedule off the work and tells you what to do and when. Mastery experiences can be seen as being in a flow state. Flow state is rewarding, it is accomplished by doing challenging actions and doing them well. Mental detachment is the ability to forget your work in this case. Your evenings, weekends, and vacations are for mental detachment.

Deep play

All of those four factors mentioned in the last paragraph are useful for recovery. The concept of deep play is a way to combine those factors in your free time. The deep play has four characteristics: you don´t need any effort to feel engaged in it, you can use your work-related skills in a new context, its rewards are not the same as at work, and it has a connection to your past.

Effortlessness is a deep play that comes from challenges you encounter, no matter whether you have to compete with others or solve problems. You will probably learn new things about yourself or other players. Your work-related skills are put to use in a completely new environment. There are no reminders about your work. Deep play activities have clear rules like predefined durations. These clear rules give you different rewards than you get from work. Deep play can remind you of your past experiences with people you love or keep your remind you from your past successes like winning a competition when you were young. The combination of these characteristics makes you happier and better at your work.

Until next time,

-TT

Managing your nontalent weaknesses

Weakness is not the complete opposite of the edge. It is close to the opposite. Your nontalent weaknesses are closely related to your genes. There is no practice component in these weaknesses. You have weaknesses without doing anything. You can´t have any edge without practice. You have inner qualities that create your weaknesses. There are three simple and constant signs of weaknesses. All of them are not always related to your particular weakness. Weaknesses leave track records. When you poorly execute whatever you are doing, you have found a weakness. Negative emotions during and after the activity also tell you that you are dealing with a weakness. You can even be good at it, but negative emotions don´t leave. The third sign is that you don´t even want to start doing it. You prefer someone else do it for you. After identifying your weaknesses you can start managing them.

Managing weaknesses

Weaknesses that are related to your nontalents can create most of your problems. There are five ways to manage them:

1. Improve in it a bit
2. Design a support system
3. Find a partner
4. Use your edge to overcome it
5. Stop doing it or do less of it

Some people think they can improve their weaknesses so much that they become their edges. When you have no talent in something, you have to put too much effort into improving it. You have limited time for getting great at something. And this time is away from your actions that are related to your talents. The opportunity costs are too high for developing an edge in your nontalents. This doesn´t mean that you can´t put any effort into diminishing the bad effects of your weaknesses. You can have better returns for the used time by getting a little bit better in your weaknesses. You can probably improve your performance from poor to mediocre with not too much effort or time.

You can design a support system for managing your weaknesses. Modern societies are full of support systems like Excel spreadsheets. Your imagination is a limit to creating these systems. For example, if you have a poor memory, you can use your phone calendar to remind you when you have to do something or be somewhere. If managing your weaknesses requires these systems ask your friends or colleagues about them. You must know someone who has already created something you need. You can also try using Google to find out how to get one.

You have to remember that you can´t be good at everything. Having a partner to overcome your weakness is a good idea. In the corporate world, this is possible. I am sure you have a colleague that has an edge in one of your weaknesses. If you have an edge in something your colleague is bad at, you can suggest a mutual agreement to help each other. Finding a spouse who balances your weaknesses with his/her edges can be a good way of getting a better relationship and a happier life.

Using your edge to overcome your weakness is hard. My imagination is limited, but I have found at least one way of using your edge to overcome your weakness. If you are a comedian, you can probably create a character that has a special handicap. This handicap is your weakness. As a comedian, you can become a funny character with a special handicap that makes people laugh if they have an edge in being funny.

Last but not least is stop using your weakness. Find ways to avoid it. For example, I don´t like to be in contact with people I vaguely know. I try to avoid them as well as I can. I even time my grocery shopping in a way that the probability of having contact with these people is small. You can´t always avoid using all of your weaknesses, but you can use them less in your life. Design your environment in a way that using them is least probable in your life.

Edges and weaknesses, which are more important? Should you focus on managing your weaknesses or creating edges and upkeeping them? The answers to these questions are not either/or type answers. You can do both, but creating edges is more important unless your weaknesses destroy your life. You have to do mental cost-benefit calculations about these two things and find the most useful approach to deal with edges and weaknesses. Nobody can do these calculations for you.

Until next time,

-TT

Finding your potential for an edge

This text is about finding your potential to get an edge in a competitive world. To have an edge you need many things. You need most or all the components of an edge: understanding, skills, talent, motivation, and the right environment to have one. These components are interwoven. Anyone can have understanding, skills, and the right environment. When it comes to talent and motivation, you can argue whether talent and motivation are separate entities or not. I would argue that you haven´t enough motivation unless you are blessed with talent. Talent is an essential part of getting an edge in a competitive environment. It is not always needed when the competition isn´t hard. This text focuses on talent which cuts down the hours you need to get an edge. It can also help you stay motivated to get one.

Everybody´s got talent

You have talent, even though you don´t know it. Everybody can do some things better than most other people. You don´t have to be the best in the world to have an edge. You only have to be better than the people you compete with. The best clue for edge is to perform better than most people for a long time. One-hit wonders don´t have an edge. They can just be lucky. Your talents are recurring ways of thinking, feeling, and behaving. Your recurring patterns can be divided into three groups: striving, thinking, and relating patterns. They tell you what motivates you, how you do or think something, and how you relate with other people. My weakness in life is dealing with people so I will leave this topic into your hands to learn. I will focus only on striving and thinking talents.

There are many clues to find your talents. As I mentioned, long-term success is the easiest clue to find. There are many other clues. Childhood is one of the best clues you can find. When you were young, you didn´t have to so many inhibitions. You did what came easily to your mind. You felt great after doing it. And wanted to do it again and again. Most adults can´t do it. If you don´t know now what feels great, you can try a bookstore test. Go to the nearest bookstore and let yourself flow through it. When you find yourself from some section without having a conscious thought about it, you have probably found your striving talent. Without a striving talent, you won´t probably practice enough, because you have no inner motivation to be good in what you do.

You also learn faster if you are talented. This is one of the most important reasons why being talented helps you to gain an edge over others. You can get an edge by practicing much more than your competitors, but it may not be worth it. I suggest you try something else, especially when you are trying to get an edge in a highly competitive field of expertise, such as professional sports or other popular endeavors like music. When you think these things, you should always compare yourself for people who have done the same practice with an equal or larger amount of hours in the same kind of environment. Otherwise, you just have to guess whether you are talented or not. Faster learning is really about having the potential to perform something at a higher level than your competitors. It doesn´t mean you have an edge or whether you can keep it.

Living with edge

Talent doesn´t mean you can stop learning. Vice versa, many of your competitors are willing to work hard to even up the gap between you and them. If you aren´t willing to improve yourself or widening the edge, you will lose it. Most of this is about motivation. So many people and companies lose an edge because they have no motivation to cultivate or live it. Sometimes they don´t understand what is their edge. And sometimes people just change. Your recurring patterns of thinking, feeling, and behaving can change after an illness, some other dramatic life event, the new government, or through another person. These things aren´t always tragedies. They can be positive life events, in which other things become more important.

Some last thoughts: I have changed my view about whether motivation is a talent or not. When I introduced an edge, I didn´t mention anything about the right environment. It is important for gaining an edge.

-TT

3 popular delusions about compounding effect

Most people don´t understand the power of compound effect. Those who claim to understand it have some common delusions about it. I belong two a group somewhere in between these groups of people. No matter who you are, understanding the compounding effect is important. Avoiding common delusions is important, too. Three most common delusions that I have confronted are:

1. The average speed of compounding delusion
2. Exponential growth can last forever delusion
3. 1 percent each day delusion

The average speed of compounding delusion

When people talk about compounding, they usually think that parameters like the growth of investment returns, growth rates of economies, growth of infected diseases, and other social contagions compound with an average speed. Nature is more consistent with the averages. Social parameters don´t change according to the average growth rate of the compounding effect in the short run. In the long run, differences between the average growth rate and annual differences between the annual growth rate and annual growth rate in the shorter run stabilize. In the long run, we are all dead. Personal parameters and their shorter annual speeds of growth are more important for most people. Let's think about shorter time frames.

Even many professional investors or so-called ”experts” claim that annual real investment returns in stock indices will be about seven percent. What they often forget to say is that this annual compounding rate depends on the prices you pay. Assuming this seven percent without understanding how expensive stocks are right now, you are most often about to get worse annual returns. The reason for this is that most often stocks are a little bit more expensive they should be. Economic models usually expect that economies grow with more or less the same speed all the time. Economies have their cycles in which the speed of growth varies all the time. In some years growth is fast and sometimes it is even negative. Most models the direction right in most years, but the problem is that the usefulness of being right is destroyed when these models are wrong.

Social contagions have the most variation in compounding speed. What happens is that most social contagions first have a slow speed of compounding. When these contagions reach their critical mass of ”infected” people, the compounding rate starts climbing fast. It accelerates for a while until the compounding rate starts to decline. At some point, the rate can become negative. Many one-hit wonders in business, music, and writing become forgotten after their short success periods. The biggest perils usually come after experiencing these accelerating compounding rates. Egos can grow too much without understanding these things.

Compounding lasts forever delusion

I have to quote Kenneth Boulding about this delusion: ”Anyone who believes exponential growth can go forever in a finite world is either a madman or economist.” The biggest reason for this is that humans can´t overcome the fact that everything on this planet depends on energy. The processing of energy has inescapable and destructive effects on this planet. What this means is that the more energy we process the bigger the disastrous consequences like extreme natural phenomenons like storms this processing will create. Economists don´t understand these physical limits of growth. They expect everything to last forever. Humans have been great in creating new, disruptive technologies, but the world is in the point where compounding rates have to accelerate a bit all the time for a long time unless this happens, and it won´t be possible. Some or most societies will eventually collapse. I have no idea when this will happen. I am not sure if anyone has an answer to this question.

1 percent each day delusion

”Get 1 percent better each day and you will end up with results that are nearly 37 times better after one year” This quote is from James Clear´s book Atomic Habits. I like the book, but getting one percent better each day delusion is becoming more popular all the time. It is complete bullshit. Just think about it independently for a few seconds and you realize this growth rate is not even close to reality. Can you run 37 times faster or write 37 times better after a year of improving 1 percent each day? No, you won´t. Do you get better after trying to improve one percent each day? Yes, you will. If you start practicing from zero, you can probably become 1 percent better after one day. After you have practiced for a month, your compounding rate is not even close to 1 percent a day. In the first days, the improvements are probably the biggest. After a while, your compounding rate diminishes, until you reach a point where you won´t get better at all. When this happens, you have to practice for a while before getting better. After this practice, your improvement accelerates for a moment until it starts diminishing again. This cycle ends at some point and your decline will start. This happens to everyone, no matter what they do.

I have decided to start publishing texts only once in two weeks for a while. I have a diminished motivation to write. This will probably last until my summer break.

-TT

Cities and power laws

Cities are perhaps the greatest human-made constructs. They have their good and bad characteristics. The bigger the cities, the more their good and bad characteristics strengthen their affect people. Cities have their physical lifelines. Physical flows of people, resources, and energy combined compose the metabolism of the cities. Cities look and feel different, but power laws affect them. These scaling relationships have hidden regularities. Ideas, such as patents and businesses in cities follow power laws too. If you are not familiar with power laws, you can learn about them here.

Power laws in cities are similar around the world

Power laws have the same scales around the world. For example, the amount of people living in the second biggest city in a country has about half the amount of people in the biggest city. And the third biggest city has about one-third of the people in the biggest city. Cities have national characteristics. The scale of different metrics depending on the culture, economy, and individuality of each national system. Scaling laws within the countries are similar, but the physical and mental flows differ between countries. If the biggest city in one country has 10 million people and the second biggest city has 5 million, then the biggest city in another country has 4 million people and the second biggest city has 2 million people.

15 percent rule

Cities have different power-law scales, but the most common and important exponent is 0.85 or 1.15 depending on which parameter is scaled. What 0.85 exponent means is that when the size of the city doubles you need 15 percent less of something else per capita to achieve a certain goal. 1.15 means that you will get 15 percent more of something per capita when the city size doubles. These exponents are common in the flow of resources and energy in cities. They are also common in social networks. When the city size quadruples, it needs only about 72 percent of something per capita and gets about 32 percent more of something per capita. Thus, the bigger the city the more efficient it becomes. Getting something more or less per capita isn´t always a bad or a good thing.

Bigger cities need less infrastructure per capita than smaller cities. Physical flows like roads, water and gas lines, and electrical networks all scale to 0.85. A city with 2 million people needs only 185 percent of the infrastructure compared to a city with a million people. The reason for this is that the end-users don´t have to build everything only to themselves. For example, gasoline stations need less space because the economy of scale affects it. Gasoline stations can have bigger gas supplies in a city because they have more potential customers living in the same area. Therefore, you need a smaller amount of them. Most of the physical infrastructure follows this double the size and needs 15 percent fewer resources per capita rule around the world. At least in places from where you can find official statistics about these parameters.

When the city size doubles, it produces 15 percent higher wages, more patents, more crimes, and more sexually transmitted diseases per capita. Most socioeconomic parameters follow this rule, including the speed of walking. These scaling laws make cities more efficient and people more productive in them. They also bring unwanted consequences, but most people in cities have better lives because of them. The best way to create greater nations is to enable the growth of their cities. Of course, nations should also focus on limiting the bad consequences of growing cities before they grow too big. The glorious past of the cities won´t guarantee a glorious future for them. The latter is just more probable consequence.

Some parameters don´t follow the 15 percent rule

Some parameters have a scaling exponent of close to one like the number of houses, and jobs per capita. Doubling the city size doubles the number of businesses. The diversity of the businesses stay pretty much the same. New kinds of businesses increase only by 5 percent when the city size doubles. What happens is that when some businesses become successful in a city, people living in it establishes new businesses that support the success stories. There are many other power-law exponents concerning cities. Let's forget them, at least for now.

There are limits to growth for cities. They don´t grow forever. When the maintenance costs in cities become too large, the growth stops. Maybe the biggest bottlenecks for the growth of the cities come from energy supplies. Growing cities need more energy. If the supply of energy can´t move as fast as they need for energy grows, growth will eventually stop. It also stops when the amount of people wanting to move to a city diminishes.

Understanding power laws is important if you want to understand the world. Power laws are more common than most people think. You can learn more about them from the book Scale, by Geoffrey West. I recommend you to read it.

-TT