Changing markets

Everybody seems to accept that we’re in a period of change.  Nobody knows what the housing market will do, what the stock market will do, how the economy as a whole will react to “necessary cuts” – but everybody seems to agree that we are in for change and the “old truths” aren’t necessarily going to work.

I’ve said before that those who make predictions and ignore the implications of living in a “complex adaptive system” (like an economy – or like a human being, as we are all complex adaptive systems) on the edge of chaos, are going to look foolish.  In hindsight, people think they can see “the truth“.  But of course, they can’t.

Ask yourself – if I’m faced with change, with a new environment, with new challenges that I haven’t faced before, do I want to:

a) think creatively, innovate, deal with the new situation in new ways?

b) stick to what I did before that I know didn’t work?

c) take what I know didn’t work, but do it better, by being more regimented, more strict about following the processes that didn’t work before, much more uptight and avoid anything new? 

a) which is what I do with my clients, seems sensible.  But most people do b) and the regulators of the finance industry and the Government  do c). 

If you doubt it, think about people who lose money in markets.  Do they think – “maybe obsessing about making ‘loadsamoney’ is a losing proposition.  Perhaps I need to think about my values, and what money actually means for me, then think about what I want to do with it.”  Probably not – they think “I need to learn about money, and understand what is going on”.  They don’t reason that if the people who work in the markets full-time (like bankers and regulators) didn’t know what was going on well enough to avoid disaster, what chance has the individual who is doing it part-time with no education in finance and no experience?

Or finance industry regulators.  Do they think, “this obsession with hedge funds and technicalities hasn’t actually worked, maybe we need to change our thinking in order to avoid problems”?  Probably not – they think, “we need to have more regulation, more controls, more paperwork, more computer power, more analysis”.  They don’t reason that they are stifling any chance of innovation, they are gambling that they can predict what will go wrong next time and legislate against it, when they don’t have the faintest idea what will go wrong, when it will go wrong or why it will go wrong and in fact don’t even know what happened already, let alone what is going to happen.

I’d got some intuitive ideas why people do such crazy things; they want to predict the future, which they know is impossible, and they want to control that future so that they can remove the uncertainty.  I could see it, but I didn’t have a good scientific reason for it, it just seems stupid to me.

But I’ve been looking at the brain (in abstract, I haven’t cut anybody open) particularly an area called Neuroleadership.  One of the models they use to look at human motivation (based on scans of the brain) is the sCARF model.  I won’t try to steal David Rock’s thunder, but the C and A are interesting to me.  They mean that people want Certainty – they want to predict the future.  And they want Autonomy – to have control over the future.

If those scans are meaningful, I was right, there is evidence from brain activity that we have a desire to predict and to control our future.  But in a chaotic system, we can’t do either unless we do something different to what we did before that didn’t work, and that doesn’t depend on doing things that are impossible.

So what do you want to do?  Do you want to think about something different, like your values, the way you think about money and to loosen up your thinking to be more creative?  Or do you want to tighten up, stifle creativity, and learn more and more about things that you know won’t help?

It’s your money. 

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