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Author: Ted

Why are the leaves falling?

Hieronimus Bosch – The Garden of Earthly Delights, 1490-1500 [detail]

I’ve been meaning to write about the events in Ukraine for a while now, but discovered that what I wanted to say can be broken into at least three different posts. This is the first post in that series.


Allen Dulles, one of the founders of the CIA and the gray cardinal of the US establishment for decades, once said that people can be confused with facts, but it’s very difficult to confuse them if they know the trends.

What does it mean to know the trends?

In simple terms, it means that if you, dear reader, find yourself on a ship that has suddenly come to a jarring stop in the middle of the North Atlantic, and there are rumors [fake news!] of flooding on the lower decks, it is highly likely that there will be a very high premium indeed for each seat in those life rafts everyone ignored during the first day’s safety instruction by the guy in the dashing uniform. Maybe you should be heading for the life rafts, like, immediately.

Fine, you say, I get the trend stuff. But then, you ask, what does it mean to be confused with facts? A great question! In the simple terms outlined above, it means having your mental bandwidth jammed by the sudden avalanche of facts such as:

– The captain said everything is under control, just a little maneuver.

– The orchestra keeps playing.

– Everyone in first class is joking about some puny thug of an iceberg that dared come in our path and we easily avoided thanks to our democracy the great skill of the guy in the dashing uniform.

– The orchestra keeps playing, and they are pouring free champagne in the club room.

– Apparently the iceberg has the GDP of a Manhattan street corner and no chance at all against us. Ha!

– Those rumors of flooding in the lower decks are fake news!

– Apparently a Chef’s apprentice went to the lower decks with an ice pick and single-handedly broke the iceberg into 100 harmless pieces. Everyone in first class calls him the Ghost of the Engine Room.

– The orchestra has composed a little ditty for the Ghost of the Engine Room and plays it on a loop.

– We have closed all hatches to the lower decks in order to prevent the spread of fake news.

– The guy in the dashing uniform said we may have hit a small iceberg but the Ghost of the Engine Room is taking care of it as we speak. The iceberg has a laughably low GDP and no chance!

– Apparently some irresponsible passengers have started lowering the life rafts on their own and one or two have already left the ship. The captain has put armed guards around the remaining life rafts.

You get the picture.


Trends are built out of events locked in a causal chain. Events are built out of other events that we call facts out of convenience. Facts are built out of other facts. Yes, it’s turtles all the way down. To understand a trend and spot it in the wild, you need deep knowledge of past events, broad knowledge of related facts, and the ability to evaluate their second order implications without emotional attachment. Let’s break this down.

Knowing past events means understanding their causes, the events themselves, and their effects. Wikipedia tells us that WWII, or at least it’s European front, started with the German attack on Poland on 1 September 1939. That’s one isolated fact we can designate as the start of the event. We could choose another fact as the start, but in either case it would be only a very small part of the event.

Other elements of the event might include the history of Polish-German relations in Pomerania and East Prussia, the history of the city of Gdansk [or Danzig], the events of WWI, the ethnic geography of the region, the Ribbentrop-Molotov pact, the British security guarantees to Poland, and many many more. Events, even the most mundane ones, are complex phenomena resulting from the tangling agencies of multiple little factoids arranged in a causal chain.

Everything might matter, and nothing should be forgotten or ignored.

On top of that, we have the broad pool of related facts that might not be in a direct causal relationship with an event, but are of indirect importance due to their second order effects. The collapse of the Russian and Austro-Hungarian Empires, the discovery of oil in the Caspian basin, the Wall Street collapse in 1929, and so on and so forth. Not directly related to the chain of events we are focused on, but good to know about them as their second order effects influence our chain of events.

Finally, there’s the problem of evaluating facts and second order implications without emotional attachment. Most people are usually fond of themselves. Most people have opinions about reality that they take very seriously, and more often than not associate with their identity and sense of self-worth. This means that most people are emotionally attached to their opinions.

If you’ve been paying attention you might see why that is a very serious problem. You cannot be expected to accurately evaluate a fact or its second order implications if you are emotionally invested in a specific alignment of that fact in the causal chain.

This problem is made even more serious by the upstream problem of the language we use to describe facts, events, and other people. The facts we think about are downstream from the language we use to do the thinking with. If the narrative tools you use to build your reality frame with are hopelessly damaged by emotional and totalizing language [see my post on cognitive mercantilism], the rest of your analysis is useless white noise. How does this problem look like in practice?

Here’s a scenario. All legacy and social media suddenly fill up with serious analysts discussing whether this month’s Enemy of the West is an irrational lunatic, a desperate thug, an evil autocrat, or all of the above. After a few days of intense pontificating a consensus emerges that this month’s Enemy of the West is in fact an evil thug made irrational by his desperate situation. Following that, the fine analysts – with backgrounds as disparate as politics, finance, sport and cryptocurrency – proceed to deliberate on the possible future strategies of mitigating the inevitable demise of the Enemy. Two weeks into this uplifting discussion, a veritable genius among the analysts discovers the evil thug made irrational by his desperate situation controls the largest nuclear triad on the planet. All intricate calculations have to be discarded. Back to the drawing block! How do we stop this guy?!

You see the problem here. The base assumptions of the narrative are built on a frame hopelessly polluted by emotive language and cognitive mercantilism. Everything downstream of that frame is so much hot air and should make you immediately question all other opinions of the serious analysts. Clearly, they either don’t know how to, or don’t want to, pick the right tools to think with.

To make this even simpler, if you are basing your analysis of the ship’s situation on a frame populated by the exploits of the valiant Ghost of the Engine Room your chances of getting on that life raft are infinitesimally small. Unless. Unless you are in fact already on one of those life rafts that made it out, and are singing praises to the valiant kitchen hand with an ice pick simply to buy more time for your boat as it moves away from the sinking ship. In that case, nothing I’ve written here is new to you.


As we proceed with our analysis of trends, we have to operate based on one or several assumptions. These are tricky to do properly, for all the cognition and language related reasons outlined above. Let’s say you have done your framing properly and are looking at events as they unfold. You are trying to understand how they fit in a trend, but the problem is you cannot make any sense of the enemy’s moves. Why are they doing that, it doesn’t make any sense? We wouldn’t do that in the same situation, no rational actor would!

The fact you do not understand the enemy’s rationale does not mean that the enemy is not a rational actor. It means that you a] have insufficient data, and/or b] your data is no good, and/or c] you do not want to acknowledge the existence of the enemy’s rationale. The last possibility would suggest that you are, in fact, the irrational actor in this sordid little tale.

So far so good – facts, trends, assumptions – but right about now you might be wondering which facts to focus on and build assumptions about in our search for the elusive trend.

There is an apocryphal saying attributed to a KGB colonel, which goes more or less like this:

If the leaves are falling, someone with a name and address has ordered them to.

What is the mysterious colonel actually telling us? It’s about assumptions. Assume even the most mundane phenomena are part of causal chains. Why? Because they usually are. Asking why something is happening is not enough though. You have to follow through upstream the causal chain to the name and address of the originator of the event chain. No matter how mundane the chain. The trick is to do this long enough so it becomes a habit, while ignoring the white noise which will invariably fill the space you are trying to analyze. Then, maybe, you get to pick an empty life raft.


I’ve started a substack. It’s called Turbulence.


Do you have the persistent sense that we’ve hit unexpected turbulence and you should return to your seat and fasten your seatbelt? Me too.

It’s only going to get bumpier, as we hit multiple paradigm shifts across technology, economics, politics and culture simultaneously.


Apparently a newsletter, part thesis-driven, part speculative, part poetic. Likely will challenge your thinking. Hopefully worth reading.


Allen Dulles once said that people can be confused with facts, but it’s very difficult to confuse them if they know the trends.

This newsletter is where I take the long view on navigating complexity, systemic transformation, paradigm shifts and the utter mess awaiting us in the near future.

If this sounds interesting to you, I am very grateful for your subscription!


New paradigms are discovered by asking questions that can’t be answered.

Old paradigms are kept in place by insisting on answers that can’t be questioned.

The media bargaining code and the future of the internet

Limbourg Brothers, Les Très Riches Heures du duc de Berry: Mars (fragment), 1412-1416, Musée Condé, Chantilly, France

The Australian government’s recently introduced News Media and Digital Platforms Mandatory Bargaining Code is not an isolated phenomenon. I believe it sets a firm precedent for other countries and trading blocs to introduce similar legislation in the near future. This is part of a complex process of an evolutionary realignment of the internet with long-reaching consequences. To simplify, we can look at this realignment at three scales, let’s call them tactical, operational, and strategic.

On a tactical scale, media bargaining codes of the type recently negotiated between the Australian government and Google and Facebook give established legacy media companies a stable income from their content circulating within the Google and Facebook walled gardens. This is represented by these same legacy media as a victory against the social media giants but is in fact a victory against smaller media competitors who would find it much harder to negotiate similar payouts. The income stability gives legacy media companies in the newspaper, TV and radio sectors a brief life extension in the face of collapsing audience numbers and advertising revenue. However, the respite will be brief because Millenials and Gen Z consume their news and media entertainment in completely different formats, and from platforms outside of legacy media control. In the short term, the media bargaining codes do not affect the social media giants in any meaningful way because their revenue does not come from content but from leveraging the behavioral data of their users.

There is an argument that tech giants can retaliate against this type of legislation by scaling back their operations in a given country. I think this is a possibility in a few isolated cases where the loss of users does not seriously affect advertising revenue. However, tech giants are far more dependent on their users than their users are on them. Of course, they do not like their users to know that, but the logic of revenue generation is simple. The business model of social media giants is built around content delivery and advertising based on user behavioral preferences. When users start migrating to other platforms advertising revenue starts falling and the entire model is in crisis. Facebook made an important mistake in closing news channels in the Australian market as this only managed to generate bad optics with the public and more support for the government to call Facebook’s bluff. Which it did, and Facebook folded immediately.

On an operational scale, media bargaining codes set a precedent for direct government interference in the revenue streams of internet and social media companies. From now on this interference will only intensify, with governments around the globe pushing the envelope on what is possible. If content qualifying as news can be legislated in this way, then so can all other content. For example, governments can start legislating different monetary values for different content, based on content types or the semantics of the information being displayed. Or, they can start imposing penalties for censorship, as the legislation currently being discussed in Poland, or for its absence. In other words, what is at stake is the entire modus operandi of social media, built around content delivery and advertising based on user behavioral preferences. Break content delivery, or make it too expensive, and you break the entire model.

Fundamentally, the tech giants have no effective retaliatory measures against these types of legislation, short of lobbying against them with legislators. After years of creeping selective censorship, they have long lost whatever good will they had with users. Remember Google’s “don’t be evil”? After the spectacle of US social media giants coordinating to shut down and censor the voices of a sitting US president and his supporters in an election year, no sane government will stop to consider the ethics of legislating against these companies. Their time is up.

On a strategic scale, this realignment is part of a tectonic process of clusterization of the internet. The network was built to be information-agnostic, that is, data was to be able to travel freely across the network regardless of the semantic value it carried. The internet was, and to an extent still is, a “river of copies” as Kevin Kelly put it. With the selective legislation of content, we are seeing the appearance of dammed lakes on the river of copies. The long-term effects of this process lead to the emergence of different sovereign internet clusters with their own legislative frameworks around content, and a highly filtered information flow between them.

I don’t think it will be a full fragmentation, because the network is far too valuable to break it completely. Instead, I believe we will witness the emergence of sovereign internet clusters organized around national and supranational borders. The Chinese internet is an obvious example, and I think Russia will soon close off its own fully sovereign internet as well, to be joined by an EU internet, possibly a Commonwealth internet, and so on. Information flow between clusters will still be possible, just like it is possible to access the open internet from within the great Chinese firewall by using a VPN. However, I think clusters will try to keep content within the cluster as much as possible. There would also probably emerge a fully distributed internet 2.0 which would act as a wild west periphery to the sovereign clusters.

Horizon loss

Yesterday the NYT published this piece, describing what appears to be a veritable mental health pandemic among Gen Z and late millenials in the developed world, ostensibly resulting from the COVID-19 social distancing measures.

The article reports that youth psychiatry wards in many European countries appear to be filled to record capacity, while in the US a quarter of 18- to 24-year-olds have seriously considered suicide.

It is not only the loneliness associated with social distancing, but also the loss of purpose caused by economic collapse and gigantic youth unemployment. There is a massive spike in anxiety, depression, and a sense of guilt from ‘missing out’ on the bright future of carefree consumption promised by the global media-entertainment complex.

Someone in their early twenties describes how they are struggling to envision a future after a year of social distancing and massive job losses. The NYT aptly frames this as “a world with a foreshortened sense of the future.”

I would describe this as a catastrophic horizon loss.

The future is not ‘foreshortened’, it is completely absent. The horizon has been disappeared. Where? Perhaps somewhere between planned obsolescence, environmental collapse, a parasitic global financial system, forced isolation, economic collapse, deliberate social atomization, a global ersatz-culture celebrating hyper-consumption, and a gerontocratic global elite completely out of ideas and utterly divorced from the everyday reality of the 99%.

This horizon loss has nothing to do with the Gen Z and late millenials who are on the receiving end of its arrival. I also don’t think it is caused by the global reaction to COVID-19. The pandemic only sped up and made it visible earlier than it probably would have been otherwise. The disappearance of the future was baked in the paradigm whose death spasms we are living through now. After all, when Fukuyama celebrated the ‘victory’ of global liberal democracy as the death of history, he also inadvertently announced the death of the future and the arrival of an eternal present.

The good news is that this brief and terribly destructive 30 year paradigm has come to an end. There are no more horizons left within it, and many possible futures outside of it.

On energy loss in a system

Every system is in its essence a network of actors that perform it from moment to moment into existence. The participants in the system, or actors in the network, enact and perform it through their daily routine operations.

Some of these routine operations are beneficial to the system being performed, and some are not. Some add to the energy of the system and therefore reduce entropy, while others take away from that energy and increase entropy. If the former outweigh the latter, we can say the system is net positive in its energy balance because it generates more energy than it wastes. If the latter outweigh the former, we can say the system is net negative in its energy balance as it wastes more energy than it generates. How to distinguish between the two in practice?

The rule of thumb is that any action that increases complexity in a system is long term entropic for that system. In other words, it increases disorder and the energy costs needed to maintain the internal coherence of the system and is therefore irrational from the system’s perspective. For example, this includes all actions and system routines that increase friction within the system, such as adding steps needed to complete a task, adding reporting paperwork, adding bureaucratic levels a message must go through, etc. Every operation a piece of information needs to go through in order to travel between the periphery, where contact with external reality happens, and the center, where decision making occurs, comes at an energy cost and generates friction. Over time and at scale these stack up and increase entropy within the system.

Needless to say, the more hierarchical and centralized an organization is, the more entropy it generates internally.

In addition, what appears as a rational action at a certain level is irrational from the perspective of the system as a whole. For example, if a layer of management increases paperwork this is a perfectly rational action for that management layer, because it makes it more needed and important within the system’s internal information flow; however, this is a totally irrational action from the point of view of the system because it increases its internal operational costs.

Put differently, from the point of view of a system such as a large hierarchical organization or a  corporation, the only actions of the agents comprising it that can be considered rational are the ones that increase the net positive energy balance of the system – i.e. reduce internal friction and/or increase external energy intake.

Importantly, this should be viewed across a time axis.

For example, when it comes to a complex operation such as a merger between two departments, or two companies, it might be a good idea to compare the before and after energy net balance for the two systems and the new system that has emerged as a result of their merger. It is also important to look in high enough granularity in order to understand the specifics of each network within the system, and its operations in time.

Say you had two admin structures servicing two different departments, and, now that the departments have merged, senior management optimizes the two admin structures into one, and cuts 50% of the stuff due to ‘overlapping roles’. On the face of it this is logical and should reduce internal energy drag, as admin structures are net negative – they don’t bring in new energy and have no contact with external reality.

However, the new merged admin structure now must service a twice larger part of the system than before, and as a result ends up delegating 30% of that new work back to the front line staff it is nominally servicing. As a result, the front line staff now have to perform 30% more reporting paperwork, which is net energy negative, and that much less time to bring in new energy into the system. In effect, the long-term effects of this ‘optimization’ are net energy negative and result in increased friction within the entire system that was supposed to be ‘optimized’.