In physics, a phase transition is when a system either absorbs or emits energy, resulting in its transition from one state to another. An example of a phase transition is when ice turns into water. This transition requires energy in the form of heat.
The exact moment when water is ready to turn into a frozen ice cube is known as a critical state.
Borrowing from Cesar Hidalgo, author of Why Information Grows: “The dynamics of criticality, however, are not very intuitive. Consider the abruptness of freezing water. For an outside observer, there is no difference between cold water and water that is just about to freeze. This is because water that is just about to freeze is still liquid. Yet, microscopically, cold water and water that is about to freeze are not the same. When close to freezing, water is populated by gazillions of tiny ice crystals, crystals that are so small that water remains liquid. But this is water in a critical state, a state in which any additional freezing will result in these crystals touching each other, generating the solid mesh we know as ice. Yet, the ice crystals that formed during the transition are infinitesimal. They are just the last straw. So, freezing cannot be considered the result of these last crystals. They only represent the instability needed to trigger the transition; the real cause of the transition is the criticality of the state.”
Humans have a natural proclivity for both spinning and subscribing to narratives. Narratives make history cohesive and provide us with an explanation of why things happen. They provide us with a spoken or written account of connected events. Narratives simplify abstract complexity.
Religion, money, corporations, human rights — all of these ideas are narratives. Countries, even, are narratives, told to unite people that would not otherwise trust one another, or be able effectively cooperate.
Humans love stories and depend on them for communication, meaning and cooperation. The success and advancement of Homo sapiens is the direct byproduct of our uncanny ability to unify and adapt through narratives. Large numbers of people would not be able to cooperate without shared common myths and beliefs. Narratives have the power to shape our values and determine our worldview.
And yet, our love for narratives has a dark side, which Nassim Taleb warns us of in his book, The Black Swan. Taleb asserts that humans have a limited ability to look at a sequence of facts without forcing a relationship among them. Narratives can bind unrelated facts together and blind us from reality. Narratives can create false simplification. They can provide a false sense of connection between a sequence of events.
Economist Tyler Cowen warns us of the dangers of stories in a TED Talk called Be Suspicious of Stories. Cowen warns that humans tend to gravitate towards overly-simplified storylines, especially good versus evil. The most popular stories are easily grasped, easily told, and easily remembered. Due to their simplicity, they can cloud complexity. Like a game of telephone, narratives tend to warp through truth by omitting details.
Our comfort with narratives can also inhibit our ability to grasp the true and critical nature of complexity. Narratives can push us to see the world as a matter of black and white. They can leave no room for the critical but subtle states of transition, and the many shades of gray that characterize reality. Searching for these micro nuances helps us comprehend the critical states of progress.
Richard Feynman said, “The imagination of nature is often larger than that of man.” Narratives can cloud our ability to understand complexity, to think objectively, to overcome assumptions, and to identify the immense learnings gained from understanding the critical states.
Instead of looking at narratives, we should look at critical phenomena.
Did Rosa Parks start the civil rights movement? Or was the movement already running in the minds of those who had been promised equality and were instead handed discrimination?
Did World War I start with Franz Ferdinand’s assassination? Or should we blame escalating tension in the Balkans? How about the then recently formed German-Austro-Hungarian alliance?
Did Donald Trump’s election jump-start America’s populist movement? Or was the populist movement a byproduct of the growing ubiquity of social media and the collapse of the Overton Window — defined as the range of ideas and policies the public was willing to accept? Was immigration the culprit? Wage stagnation?
Was the introduction of the iPhone the critical state of the mobile era? Or did it occur with the innovation of web views on mobile devices, and the emergence of fast connection speeds, GPS turn-by-turn navigation, and a critical mass of apps which could be functional on an entirely new operating system?
Ernest Hemingway exemplifies the notion of criticality in his 1926 novel The Sun Also Rises, Bill asks Mike “How did you go bankrupt?” Mike responds, “Two ways. Gradually, and then suddenly.”
Major shifts are not usually caused by one event. Instead, significant events often jumpstart major shifts. These critical events resemble the point when water turns to ice.
Why should we care about criticality and phase transitions?
Professional success often requires identifying and investing in opportunities before their phase transitions. These investments are often made 5–10 years before the phase transitions that end up in overly simplified historical narratives.
Today’s prominent social media advertising agencies were established 5–10 years ago. BuzzFeed started as a viral content lab in 2006, more than a decade before the majority of content consumption shifted to social media. Those who purchased apartments in New York City’s Meatpacking District before the completion of the High Line profited tremendously. Fashion-forward clothing is trendy because it has not reached a critical state of mass adoption.
oday, Amazon is positioning itself for a voice-first future with Alexa and a phase transition from retail to e-commerce. CEO Jeff Bezos operates on 5–7 year time horizons in order to submerge the company within a new market before that market reaches its critical state.
The time scales at which we look at the world matter when making business decisions. The time scale on which a business operates determines its vision of what it aims to accomplish.
Social media managers tend to operate within short time frames. What is happening today? Are there any prominent cultural events next week?
Most companies operate on multi-year time horizons. A struggling retailer like Sears or RadioShack will likely operate on a shorter time-scale than a growing, digitally-native vertical brand like Warby Parker or Bonobos.
Venture capitalists operate on time scales that can span more than a decade. They invest in both emerging technologies and the second-order implications of those technologies.
The shifts we look for reflect our operating time horizons. Consider Donald Trump’s presidency. On a short time horizon, White House beat reporters are likely to cover day-to-day shifts within the Trump administration. On a medium time horizon, journalists are likely to comment on public policy. On a longer time horizon, book authors are likely to consider multi-year trends such as the state of democracy, America’s position as a global superpower, and other geopolitical shifts.
The most successful entrepreneurs usually enter a space before it becomes common practice, and because of this, many entrepreneurs operate on extremely long time horizons. This is what we mean when we say entrepreneurs have “vision.” This is why many good ideas and breakthrough innovations start off looking like bad ideas. They depend on the open-mindedness of innovators and early adopters. Entrepreneurs must be willing to be misunderstood for long periods of time.
The best entrepreneurs understand the natural progression of their space at multiple scales. They observe the nuances closely. They witness the microscopic formation of the “ice crystals” before an innovation reaches its tipping point. They notice market dynamics that others miss. By operating with a unique perspective, they can observe the nuances of transition.
Entrepreneurs understand the niceties of gradual changes in their domain. Through relentless commitment and attention to detail, they see beyond mainstream consensus. These insights are why many of the best ideas defy consensus and counter mainstream narratives.
Instead of waiting for the moment when water becomes ice, we should shift our attention to the cold rooms where the infinitesimal ice crystals are forming.
Find cold water that is getting colder. Watch the ice crystals formulate. Build for the critical state.
- Sapiens, Yuval Noah Harari
- Why Complexity is Different, Yaneer Bar-Yam
- Timing and Infrastructure
- What Scientific Term or Concept Ought to Be More Widely Known?