The complex systems investing principles I developed did not happen overnight. It was actually a long, difficult, and, at times, breathtaking journey to get where I am right now. I have discussed some of my experiences in other blogs.
My investment background is a mixture of research and portfolio management. I have a passion and skill for diamond in the rough investing. In an environment where the big companies get bigger and dominate everything else, it is a dying art to excel at something the financial world seems to undervalue. The incoherence of this current system is hard to miss, but if you do not chase the Nvidias of the world, people lose interest quickly. Even if you feel that Nvidia is overvalued, it still dominates most conversations about the market.
However, even years ago, before the market was so out of balance, it was already obvious there were big problems. I spent many years studying healthcare and life science businesses. The companies that got most of the funding were rarely the businesses that improved healthcare the most. They were the businesses that made investors the most money. The system itself incentivizes this reality, so just calling investors greedy does not change anything. Most investors care about the world and their families as much as anyone else. People are much more awake to the current reality and how perverse the incentives are, especially since the last election with the MAHA movement.
However, did you ever wonder how it got so bad that we just ignored basic common sense things like making sure the water is clean and the food not poisonous? People get fatter, so we give them fancy biotech diet drugs that make investors and company executives a fortune. People get more cancer in all age groups with all the environmental toxins, so we make more cancer drugs with fancy new genetic technologies. Though I discuss the need for systemic problem analyses in my investment process, do you really need super computers to connect the dots here?
Even most environmentalists were preoccupied by climate change to a fault. In recent years, how many conversations about healthy food and agriculture did not start with a conversation about climate change? Somehow, to get the money to address the issues with toxic food and water, entrepreneurs had to fold the story into the climate change narrative or you would get no money and no fancy tax benefits. Government kept feeding these narratives in the bills and regulations they passed. The incentives were so distorted, even if you wanted to do something different, it was a big uphill battle whether you were an innovator, a scientist at a university, or an investor motivated by systemic value.
I spoke to gifted entrepreneurs that were well intentioned and authentically motivated to tackle hard problems like pollution and ecocide, but just could not find a way to make their models work in the current paradigm without chasing the big narratives. Somehow, carbon credits were going to fix everything. Well, the bills created money out of the air, put our government in more debt, but fixed nothing. We have a special kind of economic system that creates 7 new problems for every 1 problem we theoretically fix.
Lately, the zero sum game economic system has been falling apart very quickly. In the current liminal space, you do not have years to get lost in a money making narrative the way you once could. The mighty can fall hard very quickly and the small can rise up just as fast. As chaotic as all this sounds, there is a necessary unwinding of old toxic incentives and siloes, as commons sense starts to take over by necessity. “Wax off” Mr. Miyagi reminds us. Natural cycles will eventually have their way whether we like it or not. Things have just gone too far. Emulating Nature’s complex adaptive systems starts by following basic principles and a large dose of common sense. So, wait, is complex really simple in disguise?….yup, it can be, but going from complex to simple still needs to follow certain circular and nonlinear processes to re-establish coherence. It is also no small thing to unwind systems and processes that have made billions for incumbent groups regardless of how unbalanced things are.
“Complexity is nature’s way of hiding simplicity in plain sight. Look closer” Professor Richard Feynman.
I met so many special interdisciplinary entrepreneurs over the years that got little attention by investors for some of the reasons discussed above. I used to doodle for hours how to fix things and how to steer more support and resources to these renaissance engineers. I mean, what kind of economic system ignores the most creative and resourceful people in the room by design?
My particular ideas do not involve changing accounting practices or re-architecting the money system from the top down. My ideas are practical, bottoms up, and seemingly simple. However, there is no reason why they can’t start to improve things, make investors fair returns and start to address these large systemic issues, one step at a time. There are already structures and processes used in other areas that you apply right away. I did not realize until I stumbled across permaculture and other ecosystem based design principles that my ideas were really not mine. I started to realize that the predominant economic paradigm follows principles that are completely disconnected from ecological realities. Extreme incoherence is the only result possible in such a system, and so is corruption and extreme disequilibriums of power and money. Most importantly, ecosystem based design principles are so grounded and authentic that they have the power to bring fractured groups back together again.
“Nothing is invented, for it’s written in nature first.” Antoni Gaudi
In the following case study, I discuss how to apply a simple hub and spoke model to re-architect the entrepreneurial and financial model in the medical technology area. This same model can apply in many other vital areas.
To learn more about Pythia Capital’s Hub&Spoke Direct Private Investing Service, click here. We are not launched yet, but we are speaking to entrepreneurs and investors.
Our first service to launch is The Pythia System, our foundational complex systems investing trends service. The Pythia System is highly synergistic with Hub&Spoke Investing. To learn more about The Pythia System, click here.