Swarm Intelligence and Capitalism

Recently I revisited an article that I posted once upon a time on Swarm Theory (Decentralized Problem-Solving). This is the notion that a self-governed network of entities operating on simple heuristics (e.g. bees in a hive, ants in a colony) can solve certain problems more effectively than central authority. I received a comment from the CEO of a software company in Finland that harnesses Swarm Theory within specially designed social networks to solve problems.

As I was searching around for more information on Swarm Theory, I came across this quote on a blog: “SWARM OR HIVE INTELLIGENCE: Communism Without The Corruption! […] Individual Capitalism Vs. The Collective! One Thing Is Certain: Capitalism Cannot Be The End Result For Humanity Or We And Very Likely Earth Itself Are Doomed!”

Interesting perspective.

But at the same time, there’s an interesting point to be made: this quote has its logic exactly backwards. Sure, a leaderless structure like an ant colony brings to mind the visual idea of a commune. But Communism as we’ve experienced it (and Socialism for that matter) are associated with central planning, which is the opposite of Swarm Theory. If you want to look at the economic system that bears the closest resemblance to Swarm Theory, you’ll be looking at good old Capitalism.

The Invisible Hand = Early Crowdsourcing


Since Adam Smith described the “Invisible Hand” in 1776, arch-capitalists have ascribed a magic, almost religious quality to the economic distributions within a free market. As supply lowers, prices rise. How does the system know? How does wealth accumulate with those who are meeting a strong demand? How is investment capital finding its way to the most promising opportunities? Is it God’s will that it be so?

The “invisible hand” is an instance of Swarm Theory, nothing more. The motivation to provide value in exchange for monetary reward is a simple heuristic and economic participants (workers, owners, investors, etc) are the automatons who follow it. Therefore the strengths and weaknesses of the various Capitalist systems of the world can be understood by how effectively they replicate a basic swarm system.

In his book Business Stripped Bare, Richard Branson coins the term Gaia Capitalism to describe the more environmentally and globally aware form of Capitalism to which he subscribes. This promotes the idea that there are many manifestations of Capitalism that have varying degrees of concern for long-term thinking or preservation of common goods. Should a Capitalist system have rules? Should it be transparent? Should it reward individual actors? Do regulations always make it less efficient? We can understand these questions by understanding how they apply to swarm systems.

So let’s revisit the characteristics of an effective swarm system:

  1. It is self-organized
  2. Its actors follow simple heuristics, though different classes of actors may follow different instruction sets (foragers vs patrollers, etc.)
  3. Actors must act in a diverse fashion (i.e. bees don’t search for a new home be all flying in the same direction)
  4. There is a communication mechanism by which information is shared with all actors
  5. Actions must be self determined, without imitation, cohesion or fad-following

It also must be understood that the collective result will not be perfect, but it will be ever-improving. Just because bees agree on a location for a new hive doesn’t mean that the resulting location is perfect. The quality of the new location depends on the terrain that was explored (i.e. luck), and the system that has evolved to determine consensus. Notice that it does depend on the outsized reconnaissance skills of any one super-star bee.

Notice also that Swarm Theory works to solve the problems of the collective, e.g. how to propagate and defend an ant colony, or how to allocate wealth to the providers of value and quality investment. They do not exist for the purpose of enriching individual actors at the expense of others. To be sure, there are often status hierarchies within swarm systems, and individual actors are motivated to act by their own survival, but the nature and essence of the system is to propagate the entire community.

Answering Hard Questions on Capitalism


Now, assuming the analogy between a swarm system and a Capitalist one, and also that our goal is to make the most productive system that we can, lets draw some conclusions.

Should Capitalist systems have anti-trust laws, and how vehemently should those laws be enforced? Well, are swarms more effective when actors are acting diversely or in concert? Diversely. Acting in concert through collusion or anti-competitive measures weakens the system by limiting the diversity of opportunity. The dynamic becomes indistinguishable from central planning.

In healthy Capitalist systems, should all trades take place on transparent exchanges (i.e. removing the dark pools of investment banks). Well, are swarms more effective or less effective with transparent communication? They’re more effective. In fact, they depend on the systemic aggregation of collective information so all actors can make informed decisions. Keeping information secret for private advantage weakens the system by disallowing all the actors from making effective decisions.

Do central regulations always make a Capitalist system less efficient? This one is harder to demonstrate with analogy, and it also depends on the time frame that one is talking about. I interpret “regulations” as rules and safeguards. As part of its heuristic logic, a forager ant will not leave the colony to forage for food unless it come into contact with at least four patroller ants within the space of ten seconds. This lets the ant know that it’s safe to forage. It might be more efficient for the colony in the short term if the forager ant would search for food immediately, without this safety procedure. In the short term, the chances of running into food might be higher then the chances of running into an anteater. But the colony will pay a heavier cost (population count) every time this gamble doesn’t work out.

Yet, this procedure evolved organically. It was not enforced from a central authority. It’s hard to find analogies to central rule enforcement within natural swarm systems. These systems, by definition, have no central authorities. Instead, this might be a question for digital automatons in labs.

Still, we can see from this demonstration that the strongest, most effective Capitalist systems are not necessarily the ones that provide the greatest enrichment to individual members. They will more likely be the ones to harvest most effectively the wisdom of the swarm.

The Psychology of Enron

June 29, 2014 2 comments

Cover of

“Nil sapientiae odiosius acumine nimio. (Nothing is more hateful to wisdom than excessive cleverness.)” –Petrarch

One of the most striking scenes in Bethany McLean and Peter Elkind’s Enron expose The Smartest Guys in the Room details the courtroom testimony of Kenneth Lay and Jeff Skilling during their criminal trial. You would expect that the people responsible for scandal that defrauded thousands of stockholders and pension plan investors to do their fair share of finger pointing and legalistic arguing, but Lay and Skilling went further than that.

They seemed in a different reality altogether. It was though they actually still believed, even after the bankruptcy, that Enron was a fundamentally healthy company that was the victim of bad luck, a fickle press and the vindictiveness of Wall Street analysts. Far from trying to obfuscate and spin their criminal behavior, they seemed to believe — actually believe in their hearts — that they had done nothing wrong.

Now, Skilling and Lay never raised an insanity defense; they never contested the notion that they knew exactly what they were doing. They simply never saw any wrongfulness in their actions. Those actions involved hiding billions of dollars of debt from their balance sheet (The Enron SPE’s), personally profiting ownership stakes in Enron business partner companies (Again, the SPE’s), and lying  to stockholders about the very nature of their business (maintaining a facade as a “logistics” company while making most of its profits from energy future speculation).

Much of this denial of the belief of wrongdoing is reminiscent of the banking crash of 2008. Defendants seemed to believe in their hearts not only that they were following the law, but that they were in fact innovating new financial markets. The blindness to the big picture corruption of the sub-prime mortgage market and the disguising of bad debt is eerily reminiscent. In fact, some of the very vehicles that Enron used to hide its debt from shareholders (off-balance sheet SPE’s) factored heavily into the 2008 banking crisis.

I’m not interested in the moral question of what makes us elect unethical behavior. From this writer’s perspective, men are apes with iPhones. But I am interested in what goes on in our brain to make us believe we are acting ethically when in fact we are grossly transgressing boundaries that would be clear to any reasonable man. Read more…

Do We Become Smarter? – Entity vs Incremental Intelligence

May 28, 2014 3 comments
Dr. Carol Dweck, Stanford University

Dr. Carol Dweck, Stanford University

I’d like to introduce what is probably the most important concept I’ve every learned. In a way, I’m frustrated that I didn’t latch onto this insight until I was 35 years old, but by the same token, I’m relieved that I learned this in time to make better parenting decisions when the appropriate time comes.

Does Intelligence Remain Fixed?

Dr. Carol Dweck is a psychologist from Stanford University who has spent her life studying a key difference in the way people conceive of themselves and their respective abilities. Depending on a number of environmental factors, people tend to believe one of two distinct hypotheses about their own intelligence. Some people believe that intelligence is a fixed and uncontrollable trait (entity learning hypothesis). Other people believe that intelligence is a malleable, controllable ability to be cultivated (incremental learning hypothesis). This difference in mentality creates enormous performance, motivational and cognitive contrasts between the two groups.

In her research, Dweck tests grade school and middle school age children by evaluating their performance at tasks of increasing difficulty. The test groups feature a mix of kids who subscribe to either the entity (e.g. “People don’t generally become much smarter than they already are.”) or incremental (e.g. “I can make myself as smart as I want to be.”) hypotheses.

Before significant obstacles are introduced, both sets of children tend to perform equally well at tasks. In the face of obstacles, however, we start to see distinct behavioral changes. The entity hypothesis children (the ones who view intelligence as a fixed trait) will tend to back down from challenges. They tend to view task failures as personal limitations, and so running into an obstacle denotes a limit in their personal abilities. Faced with failure, the children adopt negative conditions, and blame their own personal inadequacy for the failure.

Interestingly, may of them take to diversionary and compensatory verbalizations about how much better they are in other areas, or the interesting things their family owns. Most notably, their problem-solving skills and strategies tend to crumble under initial failure. Future attempts to solve the difficult task regress to the strategies of younger age groups. Dweck calls this the “helpless” behavior pattern.

The incremental hypothesis children, on the other hand, (the ones who view intelligence as something they can improve) confront these same challenges head on and have a much higher success rate. They tend to attribute their success not to themselves but to their effort (e.g. “I will get this.” or “If you can do it once you can do it again.”). They have much more positive self-cognitions and their problem-solving abilities stay strong in the face of obstacles. Dweck calls this the “mastery-oriented” behavior pattern.

Intelligence Conception is Destiny

Helpless and mastery-oriented children develop different overarching goals that shape their development. Mastery-oriented children, who believe that their realm of mastery is expanded and improved through effort and stretching, develop learning-related goals. They seek to improve their competence. The children who exhibit helpless behaviors, on the other hand, develop validation-oriented goals. They would like to show their trait competence in its best light and receive a favorable judgement for it. One group becomes accomplishment-oriented, the other group becomes validation-oriented.

I remember reading about this research a year or two ago but it didn’t hit home until I read Josh Waitzkin‘s book The Art of Learning. Waitzkin is the chess prodigy on whom the book and movie Searching for Bobby Fischer is based. He talks about competing against grade school chess champions when he was starting out, and sensing an incredible difference between the kids who were praised for their effort and accomplishment and those who were praised for their innate talent and abilities. Those kids who felt like chess talent was a fixed, innate trait would buckle much more easily under pressure. When they encountered challenge, they perceived that challenge as a statement of their own personal deficiency, and would crumble.

Believing that intelligence is malleable, in addition to unlocking performance potential, might also actually be closer to the truth. We’ve all grown up believing that IQ tests measure our innate intelligence, but in fact the inventor of the IQ test, Alfred Binet, was an incremental theorist. He believed that an IQ measurement was a present snapshot of an evolving trait. It was society that then turned the instrument into a measurement of status and destiny.

Other Domains Beyond IQ

This insight couldn’t be more important to motivation, outlook, self-confidence, achievement, social intelligence, mentoring and parenting. Understanding the world in terms of growth as opposed to innate talent is like flipping an internal switch for achievement. The problem is that this hypothesis is so fundamental and developed so early in our childhood that it’s difficult to adjust when one becomes an adult.

Those of us who’ve learned incorrect theories of growth and achievement have to spend a lot of time rewiring out beliefs. We have to let go of the desire to show ourselves off and be recognized for our talent. We have to instead start with the assumption that accomplishment in anything is the fundamental result of massive, focused acquisition of skill. We then see that the chief virtues of success are discipline, persistence, objective evaluation, efficiency, deliberate goal-setting, and a fundamental understanding that obstacles are the gateway to mastery.

In the seventies, psychologists took notice of a correlation between self-esteem and achievement. Without understanding the causal relationship, they started encouraging parents to boost self-esteem however possible, believing that would lead to greater achievement in children. They invented the infamous “A for effort.” Everyone started receiving participation awards. Parents stopped keeping score at little league games. Kids were taught that they were special by virtue of their innate identity, and developed massive notions of entitlement as a result.

Dweck’s research helps us understand what we did wrong, and how to do better. Instead of self-esteem leading to accomplishment, it’s actually accomplishment that leads to self-esteem. Kids need to achieve. So it is harmful to remove the competition (the obstacles) and announce that “everyone is a winner.” We must instill competition, but we must attribute success and failure to the right things. When a child experiences an accomplishment, do we tell them how smart they are? How talented they are? How good-looking, charming, or funny they are?

Or rather, do we acknowledge how their hard work is paying off? How they worked effectively and grew as a result?

This is number one on my list of things that I wish I “would have known then.” I would have spent much less time asking whether or not I was talented enough to make my goals and pursuits worthwhile. I would have spent much more time asking myself how to most efficiently and effectively develop the skills and traits I needed in order to overcome the inevitable obstacles that came along. That seemingly slight change in mentality creates a night-and-day difference.

Self-Deception, with Dr. Cortney Warren

April 6, 2014 2 comments

Dr. Cortney Warren

The Eagan High School class of ’96 has produced its share of accomplished and articulate alumni, one pride-inspiring example of which is Dr. Cortney Warren. Warren is a clinical psychologist and researcher in the field of eating disorders and body image. She has recently published her first book, Lies We Tell Ourselves: The Psychology of Self-Deception. She will shortly be giving a TEDx talk on the subject.

[Classic] self-deception is a belief that we maintain, usually unconsciously, despite logical reasoning and/or a wealth of evidence to the contrary. We’ve spoken on this topic in a previous article on “Shadow Beliefs.”

These beliefs tend to result in irrational behavior. This can be as benign as a research subject performing better on endurance test because he was told that he had a “medically superior class of heart.” Or it can be as destructive as staying in an abusive relationship because we have secretly convinced ourselves that the abuser is “not really a bad person.” It is the culprit behind a lot of destructiveness in relationships and in self-image.

Warren bravely begins her narrative by speaking openly and honestly about the ways in which she has exhibited self-deceptive traits in the past. She has made dramatic changes to her lifestyle and career as a result of her reflections on personal honesty. One gets the sense that the very writing of this book may have been an important part of the author’s own development. It’s a hard topic to write about without immediately reflecting on one’s own self-deceptive habits. I can’t help but admit that I have my own checkered history with acting out based on beliefs like these. I get the sense that many people might.

Self-deception is a psychological topic that attracts a lot of interest, but about which there is surprisingly little new research done. Many of the ideas on self-deception still come from the ego-defense ideas of Freud. Much of the current literature on the topic comes either from philosophy (e.g. Alfred Mele, Florida State University), or self-help (e.g. Daniel Goleman, Tony Robbins, etc.).

One of the great outstanding questions about self-deception is why we do it, or why we keep doing it once we become aware of the underlying belief. Not just the immediate contextual goal (e.g. upholding social appropriateness, allowing ourselves to indulge when we know we shouldn’t, etc.), but the evolutionary source of the tendency. Warren seems to indicate that the need springs from false beliefs that we learned in childhood that may have helped us avoid certain emotional outcomes. She gives examples like:

  • Editing yourself from talking about your step-family in front of your birth parent
  • Presenting a Stepford-like family image to the public
  • Learned self-devaluing thinking based on physical appearance
  • Glossing-over others’ bad behavior to avoid confrontation

Our brains value precedent, so we tend to squeeze observed evidence into our preexisting models rather than challenging our models in the face of compelling new evidence. This is called Confirmation Bias. the effects of this bias would be even strong if we have created concrete emotion-laden beliefs about the world in our childhood or adolescence.

Warren goes on to discuss the consequences of self-deception. One of her most jarring quotes from the book reads, “Never forget that there are people in the world trying to get over what you did to them, just as you are trying to get over what they did to you.” That’s a splash of ice-water to the face. She’s not saying that there’s someone out there who took your break-up too hard and can’t get over it. She’s saying that we need to wake up to the damage we are constantly causing, no matter how inadvertently, by lack of cognizance and/or maturity in this area.

How do we start achieving clarity about beliefs that we may not even know exist? Warren encourages us to ask questions of ourselves, particularly in areas of our lives where we feel frustrated or disjointed. The process begins with increased awareness of our own emotions, behaviors and thoughts. If we act towards others irrationally or without integrity, we have to be very honest with ourselves about what that kind of reaction says about us. Finally, as our beliefs evolve and we see where we have placed ourselves in damaging or frustrating situations, we must resolve either to change the situation or accept it without negativity.

Dr. Warren’s book is available from iTunes, or from Amazon in paperback and Kindle editions. Her TEDx Talk will be on April 11, 2014 from UNLV. Link to the live stream of TEDx UNLV here. If you enjoy TED talks, please share Ms. Warren’s link with your friends.

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Understanding and Mastering Willpower

March 30, 2014 3 comments

Willpower, by Roy Baumeister and John Tierney

There is a growing community of psychologists and neurologists who are shedding new light on the concept of willpower. If you’re interested in the topic, a great place to start is a book by Dr. Roy Baumeister, a leader in this field, called Willpower: Rediscovering the Greatest Human Strength. Baumeister’s lab at Florida State specializes in the psychology of willpower. Other prominent scientists in this community have studied or commented on this phenomenon, including Daniel Kahneman, Baba Shiv, Sasha Fedorikhin, and Dan Ariely. It was recently popularized in a TED Talk by Dr. Kelly McGonigal.

Baumeister calls it a “rediscovery” because willpower is a concept that has been understood with varying degrees of accuracy through the years. Since ancient times, it was cursorily understood as a “power” unto itself; something to be harnessed and exercised. This is called the “energy model” of willpower. The energy model was incorporated by Freud into the “superego”.

The energy model fell out of fashion when Freud did, until very recently when psychologists started comparing notes with biologists. They noticed patterns in body rhythms and nutrition that corresponded with the psychological ability to self-regulate. It turns out that our ancient understanding of willpower as an energy unto itself was closer to the truth than we thought.

Willpower 101: How It Works

Here’s a synopsis of what scientists know so far: Read more…

How to Know Your Customer’s Mind Before They Do

February 26, 2014 2 comments

A couple months ago I was at an American Marketing Association event on analytics. One of the sponsors was demonstrating the powerful capabilities of their prediction software in a creative way: the set up a fortune-telling booth. I gave them my name and zip code, and the fortune-teller accurately predicted, amongst other things, that I had just bought or was about to buy a new car.

It’s stunning the extent to which our behavior as consumers is utterly predictable, and many marketing companies and retailers are becoming much more efficient in grouping us not only by who we are and what we like, but by what we’re about to do. This is how they do it. Read more…

Should I Be Doing This? – Unraveling Passion, Talent and Practice

January 24, 2014 4 comments

TalentI show you three groups of recent college graduates. The first group has been identified as intrinsically talented at a certain discipline. The second group identifies themselves as very passionate about a certain discipline. The third group engages in tough, technique-oriented practice for an hour a day, but otherwise has no extraordinary talent or passion for any particular discipline. You are asked to bet $100 on which group will yield the highest average level of success in ten years. On which group do you bet?

When I was in drama school, I had to take some design courses. We had a particularly excellent artist named Curt who headed our design department, and the school routinely produced beautiful production sets and lighting. I remember during a fundamentals class asking if I (or anyone) could teach myself to draw like he could, given enough practice. His understandable if disappointing response was, “I could always just draw.”


I had a lot of professional doubts during that time which were never fully answered, even to this day. I liked many aspects of theatre–such as acting, lighting design, music composition and direction–none of which I executed with particular distinction back then. Advisors told me that I needed to figure out who I was, and they were glad when I told them that my strategy involved hedging an acting career with some slightly more lucrative technical disciplines. Of all those disciplines I tended to like acting the best, but I don’t think they saw in me any real signs of promise. I couldn’t “just act” the way Curt could “just draw”. Knowing how daunting it would be to try and “make it” as an actor, I spent a lot of time asking myself, “Should I be doing this?”

My father–who very graciously supported me in a theatrical education–gave me very practical career advice: “Find what you love to do, and then find a way to make money at it.” He had a very progressive attitude about professional success: that fulfillment should be the primary consideration. My roommate’s father also had some sage advice, quoting Stephen Covey: “Begin with the end in mind.” He was trying to emphasize the importance of goal orientation and focus.

What was confusing to me–and I later learned confusing to a lot of people–is that I had a very hard time at that age isolating what I loved to do, and therefore had no real vision of “the end” to keep in mind. When I was feeling good about myself, every discipline seemed exciting. When I was feeling unaccomplished or low, every discipline seemed like a different flavor of drudgery.

I developed anxiety about not following the “right” path, the path that was supposed to best leverage my talents. I didn’t really even have a sense of what those talents really might be, and personally and strength-finder testing never gave much direction. I was hungry for a concrete calling; something I could settle into with the assurance that I was mastering the best thing for me to master, and therefore I could engage it with full conviction rather than always having one foot out.

Then I read a very interesting book by Cal Newport called So Good They Can’t Ignore You. Newport turns the idea of preexisting passion on its head. Rather than trying to match a professional end goal to a preexisting passion, it’s actually the mastery of a discipline that brings about the passion. We already know that accomplishment and excellence within a discipline is intrinsically motivating. We’ve discussed this in a previous article about Daniel Pink’s book Drive. Read more…


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