The Art of Comparison 4: Climate
Next, you have the climate.
It can be sunny or overcast.
It can be hot or cold.
It includes the timing of the seasons.
Sun Tzu’s The Art of War, Chapter 1, Section 1:19-22
What changes commands our attention. Our eyes are drawn to what moves. Climate describes what changes in our environment in contrast to the ground, which is what is relatively stable. Even when we stay in the same position, we are moving through time. We move through different climates, and different climates move through our positions.
Climate and Ground
Different grounds are associated with different climates. Climate is both physical and psychological. The climate in the tropics is physically different than the climate in the artic. The psychological climate of the stock market is different than the climate of the wheat market. The climate in Texas is different than the climate in California, both physically and psychologically. Climate cannot be separated from the ground of a position any more than time can be separated from space.
The job of any practical strategy is quickly adapting to change. The only way we can do that is to know how we must respond to specific types of changes. The Chinese character that we translate as “climate” in Sun Tzu means both “sky” and “heaven.” These two ideas capture two aspects of climate. The “sky” has weather, the natural world’s most demanding form of change. We are shaped mentally and physically over millennia to adapt to the changes of weather. “Heaven” is the realm of powers greater than ourselves. It determines all the changes that arise out of the complex and chaotic nature of our world that is beyond our control.
Sunny and Overcast
We first must recognize the differences between “sunny,” that which is easily seen, and “overcast,” that which is hazy and unclear. Obvious changes are easier for us to adapt to, but, too often, we must respond to more subtle changes. Personal relationships are often hazy at the beginning. Over time, this haze clears, but, when people start becoming more secretive, they are hiding in the fog. Hazy becomes sunny. Sunny changes to hazy.
We can only make decisions in the now, but those decisions are shaped by what we expect in the future. Human psychological causality works in the reverse of physical causality. In the physical world, past events trigger current ones. In human action, expected or desired future events trigger current ones. We try to make decisions about the expected events based upon what we see developing, but we can never see enough. Desired events are pointed at by the goals of our mission, but we do not know their outcome. Climate is inherently uncertain. Every path forward goes on further than we can see. The distant is always hazy.
How do we respond to hazy situations? We go forward faster when the future is clear, but more slowly when it is uncertain. The response is the same for both physical and psychological uncertainty. We move with caution, as we make our way through the fog. Even when things appear clear, we must worry about what we are missing. Nothing can be as misleading as what appears certain.
The classic example is a trend line. If the trend has been going up for a long period of time, people assume that it will continue. However, Sun Tzu warns that everything in climate seeks a balance. Something that changes in one direction for a long time seems more certain, but it is always approaching a tipping point. When everyone is certain that no investment is as safe as putting our money into our houses, the price of houses moves closer to a crash.
Our certainty prevents us from seeing when the cracks in the system appear. The cracks are there, but they are not clear because we cannot see what we do not believe. Seeing does not lead to believing. Believing too often controls our seeing. We no longer look closely enough at what we think we know, what we have seen a thousand times. We must constantly look for what we are taking for granted.
Hot and Cold
As a basis of comparison, these opposite characteristics work extremely well on both a physical and psychological level. In investing, a market can be hot or cold. A sandwich can also be hot or cold. Someone of the opposite sex can be hot or cold too. All of these things can change over time. Hot markets cool. Hot sandwiches turn cold. Hot relationships can grow icy.
It is a mistake to think of hot as good and cold as bad. Cool people might seem better than hot-headed ones, but a hot head tends toward action. Heat tends to motivate movement. In periods of heat, we have to be careful to avoid hasty decisions, but speed is the essence of competition. In cold periods, we must worry about stagnation and becoming lazy.
Our choices in competition cannot be separated from our emotions. Emotions trigger action. The stronger our emotions, the more likely we are to act, but the “heat” of our emotions can arise from two very different sources. The useful one are our gut instincts that analyze signals that are too complex and subtle for our conscious minds. The less useful ones arise from our fear of the future, which is always a fear of change. So, we must cooly and consciously analyze our “hot emotions” to know if they come from our trained subconscious or our unwarranted fears.
The Timing
The timing of climate refers to the predictable cycles of change. Sun Tzu calls these “the seasons,” but there are more seasons than those of the year. The timing in strategy is knowing when to make a move and when to stay put. These are the seasons of advancing and defending. Only the changes of climate create the opportunities we need to advance our positions. Without change, all positions are frozen in time. The timing of defense and advance often follow a pattern. The interval between defending and advancing is the time it takes us to solidify a new position to win the excess resources we need to advance again, exploring new territory.
Keep reading with a 7-day free trial
Subscribe to Practical Strategy Based on Sun Tzu's Art of War to keep reading this post and get 7 days of free access to the full post archives.