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