Sun Tzu and Adam Smith

Over a recent vacation, I was reading about Adam Smith's The Wealth of Nations, which I hadn't read in years, and I was surprised to find a surprising convergence between Sun Tzu's ideas and Adam Smiths. The most surprising was Adam Smith's explanation of the relationship between the country and towns as what we call "complementary opposites." So much so that I did a rewrite of Book 3 of The Wealth of Nations with an introduction connecting the two sets of ideas. You can read it here.

The Economy Gap Between Perception and Reality

The New Year seems like a good time to look at the economy. Strategic positions have an objective dimension in physical world and subjective dimension in the minds of the public. These physical and mental aspects of a position are complementary opposites of a single system. One changes the other in a constant cycle. The larger the gap between any physical reality and our subjective impressions of it, the poorer job we do predicting the future and the more volatile the future becomes.

The Wealth Gap

Sun Tzu's strategy is the science of comparing relative positions. Sun Tzu's strategy offers a system for understanding the dynamics of positions. These dynamics create short-term random "jitters" in positions, but when you understand them, you can harness their power to create long-term progress in one direction or another.

The Dynamic Society

Sun Tzu's strategy is designed to deal with the unpredictable nature of a dynamic environment. The most common mistake social reformers make is viewing and analyzing highly dynamic elements of society as if they were static. As we mentioned in the last post, the common goal of both the ancient feudal lords of Sun Tzu's time and modern socialist reformers is to create a static social order for the "common good" of society. Sun Tzu taught that the real world environment is too complex and dynamic for that to work.

Revolutionary Philosophies

Sun Tzu's book was suppressed in China for two thousand years because of its revolutionary nature. However, the revolution that it taught was not a socialist revolution but an individualist revolution, which is much more dangerous to every established order. Sun Tzu's revolutionary ideas was that we are all individually responsible for our position in life, that we all can control and advance our positions using good strategy, and that we all can find our own valuable ground, which we can dominant because of our superior knowledge of that ground.

The Unseen Opportunity

Sun Tzu's strategy teaches that opportunities are both 1) right in front of you and 2) hard to see. Why is something that is right in front of you is hard to see? Because your perspective, which is subjective and not objective, blocks your view. As human beings, we get locked into certain views of our situations, which filter out information that doesn't fit our mindset. Sun Tzu's entire system for strategic analysis was developed to overcome this problem.

Value, Risk, and Reward

Sun Tzu taught that advancing in small, certain steps were always preferable to using larger, riskier steps. What science considers "illogical" choices are very logical when we factor in the difference between controlled environment, where planning works, and competitive environments, where strategy works. Good strategy seeks to exploit the mistakes people naturally make in calculating risk and reward. Planning assumes that the future is controllable and predictable.

Wars of Words

A war of words is a special type of positioning duel. It focuses only on the subjective part of a position, that is, what a position means in terms of the future. A war of words is a psychological war in which one party is trying to get someone else to physcially change their position based upon the information communicated. Generally, all wars of words can be broken down into two types: threats and promises. These are future punishments and rewards for acting or stopping acting in a certain way.

Feelings, Expectations, and Reality

Sun Tzu teaches that we cannot see our own position clearly. We need the viewpoints of others to give us perspective on our situations. But what happens when that perspective comes through an increasingly political and dishonest media? One part of the answer comes from in this article about America's general unawareness of its own material financial success:


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