17 August 2010
Part of my long summer break was spent writing a new talk, Winner Takes All , and thinking further about the role feedback loops and network effects played in the rapid rises of Microsoft and Google to market domination. For relaxation, and entirely by chance, I read Malcolm Gladwell’s Outliers and Ian Kershaw’s biography of Hitler. This unlikely assortment of topics set me thinking about the part that feedback loops play whenever things change suddenly. Yet most of us are only dimly aware of them: neither Gladwell nor Kershaw mention them explicitly, yet they both show brilliantly how they work.
Gladwell’s thesis is that people who become outstandingly successful do so because of the interaction of many social factors, notably when and where they are born, and through achieving mastery of their core skills by repeated practice. Great composers, from Mozart to Lennon and McCartney, got to be so accomplished, not because of innate genius but because they spent enormous amounts of time in their youth practising their art, something like 10,000 hours each. Exactly the same pattern can be seen in the formation of computing prodigies like Bill Joy and Bill Gates, who had exceptional opportunities as teenagers to spend hours every day, programming obsessively.
We may quibble about how complete an explanation this is for genius, but the underlying argument is sound and applies to how any of us acquire a skill: we learn how to drive a car, play football or speak a foreign language mainly by repeated practice. The more we do, the better we get, and the younger we start, the faster we learn, which encourages us to keep going. Feedback loops play a crucial reinforcing role in this kind of continuous learning: initial progress boosts confidence, and the will to aim higher; further improvement brings intrinsic satisfaction and raises motivation further in a continuous virtuous circle. The encouragement and praise of others provides another boost. For less talented and determined youngsters, without good support networks, feedback loops can also feed a vicious circle of giving up trying if they don’t seem to be making progress. Nothing succeeds like success.
That pattern – though not the early dedication – played a big part in the growing self-confidence of Adolf Hitler in the 1920s. After a youth spent drifting aimlessly, never applying himself to anything, he discovered after the war that he had a talent for public speaking – he could mesmerise an audience. (Maybe in those years spent tramping the streets of Vienna he was muttering speeches to himself.) After a series of rhetorical triumphs and the growing adulation of his supporters, his self-belief reached megalomaniacal proportions long before he was anything more than a marginal figure in German politics. In 1928 the Nazis won a mere 2.6 % of the vote in national elections and most people dismissed Hitler as a vulgar demagogue.
What happened next was the most extraordinary, and disastrous, rise to power in history. In 1930, the Nazis won 18.3 % of the vote and became the leading voice of the nationalistic Right; in 1932, they took 37.4 % of the vote, which made them the largest party in the Reichstag. In January 1933, following the machinations of reactionary politicians advising President Hindenburg, all of them intent on dismantling the democratic republic, and deluding themselves that they could easily control the former corporal, Hitler was appointed Chancellor of Germany. Within months he had gone much of the way to establishing a personal dictatorship and had set Germany on the path to rearmament and war.
Many factors contributed to this revolution, but the most dramatic was a cascade of economic catastrophes: the collapse of food prices and exports and the impoverishment of millions of farmers; the Wall Street crash, the failure of banks and businesses, and the start of the Great Depression; by January 1933 six million German workers were unemployed. Coming after a gruelling war, a bitter and deeply shocking defeat, humiliating peace terms and an inflation that had wiped out the savings of anyone who had any, despair, panic and anger were almost universal. To more and more people, Hitler seemed like the man with answers to their problems. His early successes in putting men back to work through a massive rearmament programme and his defiance of foreign governments led most Germans to believe for a while that this man was their saviour. Hitler himself had no doubts about his own infallibility, but hubris led inevitably to the most appalling nemesis, particularly for the German people.
Whenever events seem to speed up and spiral out of control in a way that nobody had anticipated, several interlocking feedback loops are at work. One trend reinforces another, particularly moods of mass panic. (Euphoria can have a similar effect in, for example, stock market booms.) A similar pattern to the German crisis leading up to 1933 applied to the development of the Great Depression across the world, but particularly in the US. One bank failure led to another, mortgages were foreclosed, farms and businesses sold at knock-down prices; unemployment rose to record levels; government after government slashed spending and imposed tariffs on imports; even those people who had jobs tightened their belts in anticipation of worse to come. The inevitable result was a massive contraction of the global economy: between 1929 and 1933 world trade shrunk by two thirds. We have all recently lived through a financial/economic crisis that threatened to have similar consequences, but fortunately this time governments took steps to expand rather than contract the money supply.
(Continued in next post.)