Jul 21 2020

The World In A Phase Transition

We are in the midst of the most dramatic phrase transition I’ve experienced so far in my 54 years on this particular planet.

Ian Hathaway and I talk about phase transitions (also known as a phase shift) in several parts of The Startup Community Way.

Progress is uneven, slow, and surprising. Complex systems exhibit nonlinear behavior, phase transitions (large shifts that materialize quickly), and fat-tailed distributions, where extremely high-impact events are more common than a normal statistical distribution would predict. Seemingly small actions can produce massive changes that happen suddenly. There is little ability to link cause and effect, or to credibly predict the outcomes of various programs or policies.

The Covid crisis is the trigger of this phase transaction. And, if you are a regular reader of this blog, you know that I view the Covid crisis as the collision of four complex systems – health, economic, mental health, and racial inequity. Each of these complex systems has been evolving for a long time, are never “solved”, and come in and out of focus.

The collision of all four of them simply cannot be understood from a macro perspective or addressed incrementally, and is transformative in an unpredictable way.

Easy examples of specific phase transitions include telemedicine, video conferencing, remote work, remote learning, and retail distribution. As this has been happening over the past four months, the entire US macro model around government debt was thrown out the window, resulting in a massive economic value shift (both positive and negative) across our entire economy. At the same time that unemployment is high, but the macro numbers show it “bad, but not awful”, income inequity has soared.

But this isn’t the story of the phase transition. Rather, it’s just the beginning. There are many people on our planet that are hoping things are going to “go back to normal.” The phrase “the new normal” is a hint at that, reinforcing that there is some type of “normal” to expect.

There is no normal, just like there is no spoon.

If you think it’s going to get weird, well, it’s too late. That already happened.

Since March 11th, when I realized the Covid crisis was going to generate a massive phase transition throughout society, I’ve been rethinking everything. Complexity theory teaches us that in complex systems, there is no playbook, just like there is no spoon.

Yet, in our world, we try to apply playbooks to many of the things we do. Many of the things we believe exist run off of playbooks. Take K-12 education. As our society anxiously awaits the opening of K-12 schools in the fall, educators, administrators, teachers, and governments everywhere scramble to “rewrite the playbook” for K-12 in the time of Covid.

But what if the playbook for K-12 is obsolete. Or flawed. Or unnecessary. What if it structurally reinforces undesirable things, like racism or economic inequality?

Observers of the health care system would comment that the health care system in the US has been messed up for a long time. My dad has been writing a blog on Repairing the Healthcare System for a decade. While there is plenty that he writes that I disagree with, I do agree that the healthcare system in the US is structurally broken. And, now with some hospitals in Florida being out of ICU beds, well, hold on to your masks …

We haven’t even begun talking about commercial real estate. My friends in the restaurant industry are suggesting that unless the government sends them a lot of “free money” soon, the restaurant industry as we know it will completely collapse.

Do we need more commercial real estate? Does the restaurant industry, as currently configured, really work?

Regardless of the answers, it’s impossible to predict what things will look like on the other side of this phase transition.