You often look at the experts with admiration. They stay so cool & calm under pressure. They get things done so simply. When you ask how, they say, “Keep it Simple!”
Go to any expert in any field, and you often get to hear this.
In Cricket, on a nippy December morning, the ball is swinging and seaming. You’re an opening batsman. The words of Ravi Shastri about Virendra Sehwag are reverberating between your years. “He likes to keep it simple. If it’s there to be hit, he”ll have a go at it, no matter what is the situation, no matter who is the bowler in front of him.” And yet, here you are struggling to do the simple – put bat to ball!
In Investing, you observe these seasoned investors keeping it so simple. They are amazingly at peace. They have seen the 2001 dot com bubble, 2008 Global Financial Crisis, 2020 Covid Crisis. It’s not just that they have emerged stronger out of each of these crises, but the manner in which they have done that – with complete composure, knowing exactly what they are doing. They are not jumping up & down with every good or bad news. There is a saintly equanimity with the way they deal with the vagaries of the stock market. And here you are trying to buy the same stocks as they have and yet uncertainty is unnerving.
In health & fitness, you are bombarded with nutrition & diet plans (mediterranean, keto, palio, vegan, gluten free, low carb, high carb, fat free, meat, veg), fitness regimes (aerobics & resistance), calorie counting, magic foods, supplements, yoga, meditation, stress busters, weight loss programs, fitness trackers & gadgets…just look at the noise that you have to endure. There is all sorts of advice coming from all sorts of corners.
How is it that some of these experts manage to keep it so simple? Why does a lay person struggle to keep things simple? Why is a lay person’s simplicity not as effective as these experts’? Are the two working on different “simplicities”? What is the missing link?
Yes. The simplicity that an average person works with is different from the simplicity that the experts work with. I am now referring to what I want to call as the Simplicity Continuum.
The Simplicity Continuum
There is a Big Black Box of Complexity, with Simplicity on both sides.
The Rudimentary Simplicity
Lay people reside on the left side of Continuum. They are simple, simply because they don’t know enough! A lay batsman doesn’t know how to deal with tough batting conditions. He just tries to protect his body from getting blows or at best swings his bat wildly. A lay investor doesn’t know enough about investing. He looks for tips, insider news, experts in media, get in at peak, get out at bottom; basically he’ll be like a dog trying to catch its tail. A common person grappling with health problems looks at this whole noise around health with utter confusion, not knowing what is right, what is not.
He gets so befuddled that he really gives up and makes no progress. He makes some half hearted attempts, but doesn’t get it right. The reason is because his solution is too ‘Simple’…well Simple to the left of the Complexity!
“For every complex problem there is an answer that is clear, simple, and wrong.”
— H. L. Mencken
The Bg Black Box of Complexity
To the ‘Simple’ on the left, the challenge in front of him is like a Big Black Box. He can see all sorts of noise – like the moving parts of a gigantic puzzle.
He stares at the challenge as one big complex problem – the swinging conditions, variable bounce, fast pace, nippy weather in Cricket or the Stock Market, filled with tremendous noise, enough to complicate matters for an investor, or the world of health filled with all sorts of advice.
To the other side of this Black Box of Complexity lies..’Simplicity’ on the right. Let’s call it..
The Evolved Simplicity
This is a state of mind in which a person is able to wade through all the complexity, cut out the noise, find patterns amongst the chaos and Voila…find a simple solution! Those who manage to do this are able to play cricket in tough conditions, make decisive investments and reach a pinnacle of health…and they make it look so simple.
‘Simplicity’ on the left side of the Black Box is very different from the ‘Simplicity’ on the right side. The former is rudimentary, the latter is evolved.
“I do not give a fig for the simplicity on this side of complexity, but I would give my life for the simplicity on the other side of complexity.”
– O. W. Homes
The Simplicity Continuum in short..
Most of the challenges in life are complex. With a rudimentary set of skill sets, the challenges look daunting, with all their moving parts. It needs a lot of rigour to find patterns in all the chaos & commotion. This helps us travel to the right side of the Continuum and reach an evolved state where we deal with the complex problem in a very simple, calm and graceful manner.
Albert Einstein probably referred to this evolved state of Simplicity when he said,
“The five ascending levels of intellect: Smart, Intelligent, Brilliant, Genius, Simple.”
The Big Question – How do you move to the other end of the Continuum?
Moving to the other end of the Continuum needs a lot of rigour. I discussed some of this in my previous post – New & Improved You!
Additionally, I would also mention two approaches to ride over complexity.
Approach 1: Reductionism
Some complex skills can be broken into smaller, simpler & fundamental constituents and tackled separately. I did this when I learned Swimming.
Freestyle swimming is a complex activity and can be very daunting for a newbie. This is the way I cracked it on my own. I broke the activity into its constituents
- Letting go of all supports or things to hold
- Leg movements – brisk pedalling of legs
- Hand movements – one at a time
- Breathing – breathing out through nose when subcutaneous, breathing in through a skewed mouth when partially out of water.
I focused on the first activity to start with, by eliminating the last three. I stretched my hands outwards, held my breath and with my legs, pushed against the pool wall and straightened them and floated in 3 feet of water for as long as I could. This helped me get rid of the need to hold onto something or look for some support. Once, comfortable with floating freely, I shifted my attention to legs, still keeping breathing & hand movements out of the equations. I did the same exercise – held my breath, stretched my hands and with the legs pushed against the pool wall, but only this time focussed my attention on paddling my feet. I floated farther! I could swim across the breadth of the pool like this. Next, I added hand movements, still keeping my breathing out of the way. I could swim across 3/4th of the length of the pool like this. It was time to introduce the final frontier – the breathing. This was the most difficult part, but with loads of practice and enduring the embarrassment of standing abruptly in the middle of the pool in front of other club members, I finally learnt to get all four constituents to work together like one single unit. While doing all of this I faced a lot of small challenges. For instance, there was a stage when I used to have pain in my right shoulder. I had to use my deductive logic to figure out that I was breathing once in three strokes alternately pulling my face above water to either side. I used to run out of my breath by the time I reached the third stroke. In order to finish the third stroke quickly, my right hand was stretching out diagonally towards the left side. As I turned the other side, to take a quick breath, I was twisting my shoulder, causing a lot of stress. I risked causing a serious injury to my right shoulder. I immediately cut down my breathing cycle from once every three strokes to every stroke and did some deliberate practice on getting my right hand straight while stretching out. In the process, I lost my pace and grace. However, I soon got rid of the shoulder problem and emerged as a faster and more graceful swimmer. I had several such challenges and each time I went about correcting them, I seemed to go back a couple of notches in my overall swimming skill. But I persevered.
Today, I can swim all four strokes of swimming with reasonable grace and speed. I don’t think I can compete with someone in their 20s, but I’ll be a leading swimmer in my club in my age group.
The reason I mentioned this example in such detail is not only to explain the reductionist approach to problem solving, but also to highlight the rigour one has to go through to reach the right side of the simplicity continuum.
Approach 2 – Holism
While reductionism works well in physical skill realms like sports, some other complex problems like investing can’t be dealt that way. It is rather dealt in the opposite way – holism.
The world of investing is so complex. So many things affect stock price behaviour – Company fundamentals, technicals, sentiments, competition, regulations, management quality, M&A activity, disruption from new technology, natural disasters, political changes, CNBC Expert’s opinions, Large Investors demand & supply, bull markets, bear markets, wars, elections, inflation, deflation, monetary policies, fiscal policies…the list goes on. It is futile to attempt breaking the whole into its parts and trying to work out a solution. This is a classic case of causal opacity, where you face counter directional forces and it is very difficult (and wrong) to put a finger on one or a few factors ex-ante.
It is rather advisable to let the forces play, while you look at only the outcome & the whole. For instance, if the economy is in doldrums and the industry is struggling, it makes sense to let the forces play out and see which companies survive the mess (Mind you, the survival can be on the basis of strength or luck). This typically happens in only two ways, in my humble opinion – you either focus on the company fundamentals or the price. These two are the sum total of all the forces that can affect your investments. While there is a divided house on the supremacy of these two factors, anything else is pure noise, and there is no division of opinion on that. The ‘Simple’ on the left end of the continuum gets caught in everything else. Those who manage to go through the rigour, excel in either of the two simplifications – fundamentals or price. They are at the right side of the continuum and are able to find money making opportunities in the market.
When to use Reductionism & when to use Holism?
Reductionism – In simple linear domains. The constituents of the whole is more or less equal to the sum of the parts and can be easily broken down into its constituents. The constituents do not interact with each other too much. My swimming description is a good example of this domain. Most sports learning fit into this domain.
Holism – In complex non-linear domains. The whole is made of innumerable constituents. The constituents interact with each other dynamically & unpredictably and evolve into a whole such that the whole is greater than the sum of the parts. For example risk management is one such domain. Risk is the chances of your investments going kaput. This can be caused by so many factors & their confluence that the cause cannot be predetermined. It makes sense to deal with the risk holistically, rather than trying to watching out for some predetermined causes. Similarly, in the domain of driving, risk of accident needs to be death with at a holistic level, rather than ex ante identifying a few causes of accidents and be on the guard only for them.
This is what Paul Davies said, in his book, The Mind of God
“The greater part of the western science has been founded on the method of reductionism, whereby properties of a complicddying the behaviour ated system are understood by studying the behaviour of its component parts.”
“In the recent years scientists have come to recognise more and more systems that must be understood holistically. These systems are described mathematically by equations known as “nonlinear”.”
“We now appreciate that scientific progress requires both reductionistic and holistic approaches. It is not a question of one being right and the other worng, but the need for two complementary ways of studying physical phenomena.”
Summing up the Simplicity Continuum
The contrast in the behaviour of rudimentary simple and the evolved simple is easy to notice. The former is jumping up & down. He’s edgy, panicky, not in any kind of control of his actions or emotions. He gets out of good stocks too early and stays invested in bad ones to their grave! The latter on the other hand are calm & composed. They know exactly what they are doing. They have their risks covered, and are now always looking for opportunities. They don’t fret over news. They are independent in their thought process and do not look for anyone else’s views & opinions. They can tell signals from noise. They are very consistent in their behaviour and the consistency translates into their results. As Alan Perils said,
“Fools ignore complexity. Geniuses remove it”
The rigour of achieving Evolved Simplicity involves knowing what not to do, more than what to do. This is called Subtractive Epistemology. The gist of this concept is that knowledge is additive, wisdom is subtractive. You solve a challenge by Trial & Error. You start with gaining as much knowledge about the problem as possible. In due course of time, you start connecting the dots. It is then that you start culling out what is useless; what’s left in the end is a simple & elegant solution.
You crack the challenge with style & suave. When people look at you with admiration & wonder, You claim…”Keep it Simple”! And add to their wonder & exasperation!