How understanding fractals can help us decide

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A fractal is a curious thing.

It is most commonly shown as a pattern, often mathematical, that is similar at different scales.

The Koch snowflake, for instance, is drawn by starting with a line and creating an equilateral triangle by splitting it into three parts.

Then, each segment of the triangle – a line – is turned into another triangle. Then that is repeated again.

What we end up with is similarity at different levels – as we zoom in we see the same pattern repeating itself.

Another fractal that is easier to visualize is a fern, or a lighting bolt.

A mountain is a fractal.

Seen from a distance it has a certain shape. Zoom in and the bumps and ridges are replicated on the surface all the way down to individual rocks and pebbles that show similar shapes under a magnifying glass.

So, what does a fractal have to do with decisions?

There are two ways we often approach decision problems.

One is through fundamental analysis – we look at the long term features of the problem or situation and come up with an approach to deal with it.

In investing, for example, this may involve looking at the stock price, earnings, assets, market sector, historical performance, management team and so on.

Or, in a business, it might involve looking at the accounts or the number of billable hours and making choices on where to invest or how to spend time.

A different approach might be to learn how to recognize patterns.

A price chart often shows similariy at different levels.

Performance during the year, during a month and during a day all show signs of the continuing battle between supply and demand.

Understanding these patterns and working out a logical approach to dealing with them can make the difference between good investment decisions and shooting in the dark.

It might also help us with managing people.

For example, an individuals career often follows a series of ups and downs – starting, learning, growing, plateauing and ending.

A company does the same thing – following a lifecycle.

Whether you look at it over the 40 year life of a company or the 40 year career of an individual, we’ll see similar patterns emerging.

And the way to deal with patterns is to recognize that things happen again and again.

From a decision making point of view, it means that there are very rarely crucial decision points.

We can take it easy – if we miss one opportunity, another will come along in a while.

It’s that whole thing about another door opening when one closes.

The best time to start a new project, for example, is 10 years ago.

The second best time is now.

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