182. Get lucky at the edge of Chaos

#MakingBetterDecisions, #Goals,?#focusonwhatmatters, #Wealth, #Careers

“Amid the turmoil and tumult of battle, there may be seeming disorder and yet no real disorder at all.” —?Sun Tzu

If one were to “invest” money in fixed deposits with a reputed bank, there is no scenario where this investment will provide extraordinary returns. The returns on FDs will always be tethered to the broader inflation rate. On the other hand, if you invest willy-nilly in the stock market, your returns will end up chaotic. There is a narrow zone between these two regimes – the “ordered” and the “chaotic” – that can allow for extraordinary returns.

If one were to go about their career, taking very little risk, ensuring that one gets “good” (euphemism for “average” in corporate settings) appraisal rating or better, one can expect an ordinary career. On the other hand, if one takes on all kinds of risky projects and initiatives, career path may end up haphazard. It is generally those that take on calculated risks that end up with extraordinary career paths.

When working out in the gym, if your repetitions do not bring your muscles to a point of failure soon enough, you will not see satisfactory results (your muscles do not build up). On the other hand, if there is no method to how you work out, you may not see much growth while simultaneously running a high risk of injury. It is the right combination of structure and load that will yield the desired results.

“Skirting around the edge of chaos, but somehow holding it together.” —?Helen Mirren

In each of these examples, I implicitly refer to a continuum with “ordered” regime on the left side and “chaotic” at the right. As one moves rightwards on this continuum, on the way from “ordered” to “chaotic”, one passes over “the edge of chaos”. Interesting things tend to happen in the edge of chaos. In fact, the science of complex adaptive systems informally treats “interesting things” as a technical phrase. For our context, interesting things manifest as extraordinary results.

If your goal is an extraordinary career, you will have to risk the “meets or exceeding expectations” ratings by taking on carefully curated risky initiatives or projects. Not all such risks may pay off but if you “critically” learn from the setbacks, over a period of time (or over a number of such projects), you can expect yourself to be well on the course of an extraordinary career.

Even creating wealth in the stock market boils down to just this – if you do not participate in the markets, you may not be able to create (or multiply) wealth and if you treat equity market as a casino, leave aside wealth creation, you may even end up destroying wealth. Investments in carefully selected stocks tend to return extraordinary growth.

“You’ve got to live at the edge of your capabilities. You’ve got to live where you’re almost certain you’re going to fail. That’s the reason for practice. Practice is controlled failure.” — Will Smith

How does operating at the edge of chaos feel like? Here is what I learnt until now.

Just like walking on the edge of a wall or a ledge, life seems just about in control – alongside a palpable risk of falling over.

And sometimes, you fall over too …..and sometimes, you feel too much in control. This is because this “edge” is really a zone with no objective measurements. You should base your maneuvers on relatively ageless truths such as…. over a long run, your career progress will track the value you create for the organization – so, as long as you continue to create extraordinary value for the organization, you can expect that sooner or later, your career will grow extraordinarily too. Similarly, in the stock markets, stock performance tracks the economic performance (more specifically, earnings growth) of the underlying businesses. So, if you remain invested for the long term in a business with extraordinary economic performance, you can expect extraordinary returns from the stock performance as well. Conviction built on such long-held truths can help you tide the inevitable short-term flux of setbacks and volatility.

The challenges that you take on may, in the beginning, make you wonder how in the good world will you be able to scale them. But with conscious effort and time, you gradually develop confidence.

You may feel anxious but also excited. Weight of the nervousness gets offset by the thrill of the journey. Challenges may feel like they are beyond your reach but not too far beyond that you lose motivation to take them on. You will develop quite confidence that if you keep at it, it is just a matter for time for disproportional rewards to ensue. You will also notice that growth happens in spurts.

"Where the components of a system never quite lock into place, and yet never quite dissolve into turbulence either.... The edge of chaos is where new ideas and innovative genotypes are forever nibbling away at the edges of the status quo..." - Mitch Waldrop

Is it really worthwhile to live with this constant state of nervous excitement? I do not know.

But if you desire “interesting things” or extraordinary results, there probably is no other choice. This “nervous excitement” may not be an issue if you start liking the process and reduce pre-occupation with the end-results. From my experience. I realized that enjoying the journey requires one to develop qualities such as patience, curiosity, learning, capacity to suffer pain, growth-mindedness and detachment. This is not easy but it is simple. This means that it is accessible and achievable. You don’t need to be blessed with any great analytical or creative abilities. You instead need strong purpose and dogged determination.

Bottomline

“The truly creative changes…occur right at the edge of chaos” – Robert Bilder

If we take too little risk, we limit ourselves to ordinary results whereas if we take on too much risk, chaos ensues. It is that sweet spot of “calculated risks” that allows us the possibility of extraordinary results. When we take calculated risks, we operate at the edge of chaos….and we tend to get “lucky”.

PS

Although this article stands on its own, it also serves as a follow up to a previous article titled “Cause, effect and their mythical relationship”.

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Thanks for taking time to read this article. In this newsletter, I share my learnings that could help you improve your decisions and make meaningful progress on your goals. I try to share stuff that I have personally experienced or experimented with. If you find this newsletter worthwhile and if you do not mind it, please do consider sharing it with others.

I spend most of my time helping people make better decisions, build financial intuition and build great careers.

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