Thread by @TaylorPearsonMe

Why are there decades where nothing happen?

And why are there are weeks where decades happen?

Why does volatility cluster?

One model I've found that helps me think about this is a sand pile

Imagine a giant grid. On each square of the grid is stacked a tiny pile of sand.

We can keep track of how many grains of sand there are on each dot by writing a number on the appropriate square.

The rules for how this system works are very simple:

1. A vertical pile of sand grains can only get to three grains high without falling over.

2. Whenever four or more grains of sand are at the same dot, four grains topple off, one in each compass direction

So if you start with this

The pile topples and gives you this

If multiple tiles are overload, then you can have a cascade effect. Let’s say you start with 4 grains of sand in one tile and three grains of sand in adjacent tile.

The first pile collapses, spilling over into the adjacent squares.

This pushes the square that previously held only three grains of sand to collapse, cascading into the adjacent squares.

At that point the sandpile is stable. No location has more than four grains, and the process stops.

What’s interesting about this is how a very small change, the addition of a single grain of sand, led to a radical reconfiguration of the board - a "week in which a decade happened"

Though this is obviously a overly simplified model any complex system, I think it's helpful for intuiting how volatility can happen.

You can have a long period of calm where the board slowly fills up until it looks like this.

To the outside observer, there is no noticeable difference between having two and three grains of sand on a single square.

Sure, things are changing, but the system remains stable.

Everything is fine, right? This is the decades in which nothing happens.

Now, imagine a single grain of sand added to the square in the middle.

A seemingly small change will trigger a massive cascade across the entire grid.

We observe these periods as the weeks in which decades happen.

I think it also helps to talk about complex systems and how to improve them.

In the context of a grid filled with grains of sand, it seems silly to blame the collapse on whichever grain of sand last fell on the sandpile.

What matters is the configuration of the system.

When a system is fragile, harmed by change, then it will eventually blow up.

What is important about the grid of all 3s is that it is fragile.

Any small change will result in an outsized cascading collapse.

The proximate cause of that cascade doesn't really matter

In real-world "collapses" - be they stock market crashes or political upheavals, we tend to focus on the proximate cause - which sell order set off the collapse - but what's probably more important is the underlying structure of fragility.

When a grain of sand falls, people become obsessed with the moralizing the grain of sand (a strictly futile effort)

It’s like throwing gas on a fire and then saying the fire was wrong to be there. It’s asinine.

Pointing fingers over the grain of sand and arrogantly proclaiming they saw the grain of sand coming are all responses motivated by a speaker trying to feel self-important and lacking any sense of proportion.

The real work is not so easy nor self-satisfying. It is the messy, complex work of understanding not what happened with the grain of sand but the underlying conditions that made the cascade possible in the first place