Feedback in systems can be positive or negative

One of the concepts that came out of systems thinking is feedback.  Feedback in the systems view is very similar to the feedback you hear when on stage and the microphone and speakers work together to create that loud, annoying, piercing sound we have all heard at one point or another.

In a very basic sense, the microphone picking up the sound output from the speaker causes the feedback from the PA system.  This tends to happen to frequencies that get accentuated through the system and are boosted slightly above the rest of the sound spectrum.

The microphone then picks up those frequencies that are slightly boosted.  They can be from the electronics of the system, the characteristics or dimensions in the room, the movement of the microphone, the sound waves bouncing off close objects etc.  Then they are sent through the electronics system to the speaker and are boosted again and picked up again by the microphone. 

This produces a loop where the sound continues to get magnified at each pass through the system.  Over and over the sound gets louder and louder until it is addressed by changing the position of the microphone in the room, cutting the offending frequency in an equalizer or any number of other techniques. 

In systems thinking, we see the same structure.  It might be a negative habit that has consequences that keep adding to the cause of the habit.  It might be a positive behavior that is leveraged in order to get the most success from that behavior.

Robert Kiyosaki is an author that writes about finances.  He uses this feedback structure to explain how wealthy individuals continue to build wealth exponentially while the rest of us seem to live in the rat race and live paycheck to paycheck.

He says that the wealthy take the their money and buy assets.  Assets in his model are revenue producing (unlike the accounting definition of assets, which is a little different).   Then they take the revenue (money) they get from the assets and buy more assets.  This allows them to keep buying more and better assets over time.  At each pass through the loop they improve their financial position in life.

Conversely, those who live paycheck to paycheck never take advantage of that feedback loop.  Instead of buying something that produces money and grows (an asset) he argues that they buy doodads.  Doodads are all of the things in life that don’t give back any income (he calls these liabilities).  Buying liabilities means that money is being spent on something that won’t produce any revenue and is therefore wasted. 

So buying a house and renting it out produces a profit after a short time, which can then be reinvested in another rental house.  After another year or so, the revenue from both houses can then be used to buy two more houses.  After another year, the revenue from the four houses can then be used to buy four additional houses.  Then the revenue from the eight houses can buy sixteen total houses.  This continues on and on in a feedback loop to produce great wealth.  In this example a house can be substituted for any asset that produces revenue and also maintains its value and ability to generate money. 

Note - One criticism that he often faces is the fact that he oversimplifies the process and ignores the true risks.  This article isn’t a look at the realistic nature of his writing, just simply looking at the feedback loop in his system.  In reality it isn’t nearly as simple as I present but this is the easiest way to explain the feedback loop aspect of building wealth. 

The same type of structure can be found in systems but produce exponentially negative responses.  If one’s reaction to stress is to over eat, they likely will find themselves gaining weight.  This often adds to the one’s stress, which would then cause them to over eat, which would then cause even more stress and so on. 

Instead of truly alleviating the stress, they are ultimately adding to it.  In this situation (as in the other example) small behaviors are producing significant results because of the feedback loop aspect in the system. 

Hopefully, you now have a general sense of the feedback loop in a system and how it works.  Once you understand that, you can better address the systems in your life and the structures that you have created.  This will likely point to areas where you might now see how you are ultimately responsible for where you are in life because you ultimately controlled the feedback loop structure. 

A word of caution… being able to manipulate systems and systems structures is much easier said then done.  It is much easier to explain the feedback loop in investing than to invest successfully.  There are many more factors at play.

It is also much easier to explain what a habit is doing in the long term than it is to change that habit.  Habits are solidified over time because of the feedback loop so changing them is much more difficult than simply understanding why the habit is bad.

This is where the systems and habits approach to personal improvement has an advantage.  It addresses those things in a very specific way.  It uses the principles of systems and habits in a way that allows us to slowly make progress towards our goals.  We don’t expect overnight results because that isn’t likely.  What we expect is that we slowly improve over time and then work to increase the rate of improvement. 

The methodology of the systems and habits approach to improvement does this in a way that is quite a bit different than most of the get rich quick methods used today.  But used correctly it can produce great results that aren’t possible using any quick fix or short-term option.  Instead the systems and habits approach looks at the long road ahead and works to improve leverage points in the system along the way.