Updated Election edition: excerpted and updated from Thinking, Hard and Soft
Some actions lead to amplified reactions, which are then in turn amplified. A good example of the phenomenon is audio feedback, or howlback, which is when a microphone and a speaker pick up on each other’s ins and outs in a so-called howlround.
The result doesn’t have to be ear-piercing. “I feel fine”, released by the Beatles in 1964, starts with a controlled buzz of feedback from a plucked A-string on John Lennon’s acoustic-electric guitar: not bad.
But it pales next to “Foxy Lady,” introduced by Jimi Hendrix with a vibrato feeding in on itself: a balanced wildness and a tribute to Johnny Watson’s “Space Guitar”, regarded as the first popular recording featuring guitar feedback.
For Lennon, feedback was an attractive add-on to a musical track, a bit of fun. Watson and Hendrix integrated feedback into their music more completely. But few musicians have ever integrated feedback into their art as comprehensively as hedge-fund manager George Soros.
Trump and Soros represent two opposed philosophies of life. Soros invested $25 million to stop Trump’s rise. In return, Trump campaign videos portray Soros as an establishment villain (0:20 below). What is at the root of this opposition?
Before his arrival in London, Soros experienced the Nazi and Communist occupations of Hungary. With first-hand experience of closed societies, Soros was deeply impressed by Karl Popper’s political philosophy as set forth in “The Open Society and its Enemies”. Popper argued against false certainties and for an open society that allows divergent opinions to co-exist, held together by the rule of law. Soros chose Popper as his tutor for the final year of his studies in London.
Popper stressed that certainty is illusory. There is always doubt because there is always a possibility that an empirical theory may be falsified by new evidence. The situation is inherently asymmetric: a single experiment can falsify, but no single experiment can prove a theory. Going beyond empirical theories, even if you can prove that a theory is true within a system of thought, you cannot be certain about the consistency of the system as a whole.
All our endeavours are subject to fundamental uncertainty. Mathematicians have been fascinated by this uncertainty for over a century. In a letter to Gödel in 1930, von Neumann wrote: “I think your result has solved negatively the foundational question: there is no rigorous justification for classical mathematics.”
Does it matter whether our activities can be rigorously justified? What’s the use of truth? What matters in mathematics, as in all human activity, is a commitment to open discourse. The best non-rigorous justification for mathematics is that mathematics is immune to bullshit.*
After graduating Soros worked as a salesman to seaside souvenir shops on the Welsh coast. He got his break into finance when a fellow Hungarian hired him as a trainee at the merchant bank Singer & Friedlander. Among other placements, he spent time in the arbitrage department. He later worked as an arbitrage trader in New York before starting his first hedge fund. Finding and exploiting inconsistencies in asset valuations was a way of bringing Popper’s theory to life. It is the arbitrageur who falsifies the notion of market perfection by seeking to profit consistently from its imperfections.
The financial markets became an experimental proving ground for George Soros’s theories. Experiments cannot prove a theory, only falsify them, according to Popper. Nevertheless, given that a theory seems to work successfully in practice, we are more likely to believe that it is based on a grain of truth. At the height of the financial crisis in 2008, the Quantum Endowment Fund run by Soros returned 8%, then 28% in 2009. Soros credits his success during the turmoil to his conceptual framework and writes that the success has added credibility to his ideas. “My philosophy is no longer a personal matter; it deserves to be taken seriously as a possible contribution to our understanding of reality.”
Success has given Soros a platform to explain and promote the two central pillars of his world-view. The first pillar is the principle of fallibility, which says that any situation involving “thinking participants” is pregnant with uncertainty and distortion. The second pillar is the principle of reflexivity, which says that this uncertainty and distortion can feed back to influence the situation itself.
Consider the statement, “it is raining.” That statement is true or false depending on whether it is, in fact, raining. Now consider the statement, “This is a revolutionary moment.” That statement is reflexive, and its truth value depends on the impact it makes. Reflexive statements have some affinity with the paradox of the liar, which is a self-referential statement… In the real world, the participants’ thinking finds expression not only in statements but also, of course, in various forms of action and behavior. That makes reflexivity a very broad phenomenon that typically takes the form of feedback loops. The participants’ views influence the course of events, and the course of events influences the participants’ views. The influence is continuous and circular; that is what turns it into a feedback loop. ( Source Link)
As Soros himself admits, there is nothing new or original behind the principles of fallibility and reflexivity. What is remarkable, however, is how Soros has been determined to prove the value of his conceptual framework by testing it in practice.
Feedback is everywhere. In most settings you can think of, there is a system that feeds on and amplifies its own output, like a snake eating its tail, until the system breaks or reaches an uneasy equilibrium. In our era of real-time media coverage and customised news-feeds, distortion is fed back into public life more efficiently than ever before. Confronted with accelerating spirals of self-fulfilling prophecy, an open society must have a robust immune system to cope.
Commenting on one of Donald Trump’s public performances, a pundit pointed out that the escalating loops of controversy and media-reaction, which accompany Trump’s political campaign, work in Trump’s favour: “…this is what people always do, they over-react to Donald Trump’s over-reaction and in over-reacting to Donald Trump’s over-reaction … the mainstream media … give him a kernel of truth to hold on…”
Trump knows what every good fighter knows how to do: provoke the opponent and strike on the counter. A fighter cannot rise above the fray or he’ll get a broken nose. A fighter is an opportunist.
Good investors and good boxers understand the loops of cause and effect intuitively like a predator knows how to kill its prey.
Tyson Fury, who challenged Wladimir Klitschko for the world heavyweight title, commented on fundamental boxing dynamics in a pre-match interview: “we all know if you throw 4, 5, 6 combinations you’re open to the counter, to get hit over the top again and nobody wants to get hit and hurt in heavyweights… You [Klitschko] have learned and perfected to stand tall, lean back off the jab, not leaning forward, not fighting when the other person’s trying to fight.” Fury described how he would build his win methodically. “I ain’t looking for that one punch that’s gonna knock you out, I’m looking for an accumulation of shots.” Fury won the fight.
As in a boxing match, an open society requires refereeing institutions: contests of opinion must stay within acceptable limits. How many hits can a referee take? Referees can control a game or a stage, but not an excitable mob. A certain level of civility is assumed before the performance can start.
To strengthen the fabric of our open society, we must find common ground outside the bloody arena of gladiatorial politics. The open society thrives in concert halls and in boxing rings. Here we find that sublime performance is possible only through self-regulation. It’s a short step from the theatres, concert halls, galleries and stadiums to the shared sense of fallibility and reflexivity needed to prevent our society’s body from consuming itself.
* Every mathematician believes in mathematical proof and so mathematicians are unlikely to be bullshitters in the manner described by Princeton philosopher Harry Frankfurt: Someone who ceases to believe in the possibility of identifying certain statements as true and others as false can have only two alternatives. The first is to desist both from efforts to tell the truth and from efforts to deceive. This would mean refraining from making any assertion whatever about the facts. The second alternative is to continue making assertions that purport to describe the way things are but that cannot be anything except bullshit. See Frankfurt, Harry G. On Bullshit, Princeton University Press, 2005.