This document discusses moving beyond neoliberalism and addresses some of its limitations. It provides heuristics for transitioning to a new system. Some key points: 1. Neoliberalism has reached most economic aspects of society and assumes rational individuals seeking to maximize utility. However, this reductionist view ignores other important factors. 2. Relying solely on competition and GDP growth is unsustainable given environmental limits. Transitioning the system requires avoiding irreversible changes and "stranded assets" from overreliance on certain industries. 3. Systems should aim for "antifragility" and be able to benefit from small shocks rather than being harmed by them. This requires diversification,

1. Beyond Neoliberalism
A heuristical approach to resolving the
growth-sustainability dilemma
Dr. Johannes Meier

2. Starting point: orthodoxy of neoliberalism
Source: Cambridge Dictionary

3. Core beliefs of Neoliberalism
• Society of rational individuals seeking to maximize
their own utility (homo economicus)
• Competition primary driver in human affairs
• Success of a nation = ∑ individual’s utility (GDP)
• Proper role of government:
establish and protect free markets

4. Reach of Neoliberalism
Market-based philosophy of neoliberalism has reached most economic aspects of our lives reaching
beyond industrial and trade policy to labor policy, fiscal policy, and welfare policy.
Looking at conventional progress indicators like GDP neoliberalism seems to have worked.
Scope of this market-based thinking has gone far beyond economics:
• Most corporate strategies assume the continuing existence of free markets and global trade.
• Neoliberalism drive models of corporate governance and the success logic of the financial
sector.
• All major strategy consultancies rely on neoliberal orthodoxy as the hammer that turns the
world into a nail.
• Since the 1980’s most political parties in Western societies have come to agree on the
primacy of markets and the need to rely on them first whenever possible.
• The education and health care systems have been largely colonized by market-based
thinking.
• More recently there has even been intense debate whether modern philanthropy is
implicitly stabilizing the neoliberal orthodoxy in spite of all the rhetoric of changing the
world.
4
References: Hans Rosling, Factfulness, 2018; Anand Giradharadas, Winner Takes All: The Elite Charade of Changing the World, 2018

5. 1. Emperor of the
rising tide and
justice
Three emperors without clothes

6. Emperor of the rising tide and justice
Income and wealth distributions
6

7. Emperor of the rising tide and justice
Consumption and footprint distributions
7
First World
Rest of
World
7,5 bn Consumption/Footprint
x 32 per-capita average
~80% of total footprint
Can the planet support
7,5 bn people with the
consumption patterns
and footprint of the
First World?
X
“We promise developing countries that, if they will only adopt good policies, like honest
government and free market economies, they too can become like the First World today.
That promise is utterly impossible, a cruel hoax.” Jared Diamond

8. 1. Emperor of the
rising tide and
justice
2. Emperor of the
commons
Three emperors without clothes

9. Emperor of the commons
9
Tragedy of the
commons
• Accelerated growth
in many dimensions
• Accelerated “use”
of atmosphere,
oceans, rare metals,
etc.
Tragedy of the
horizons
• Old Sales wisdom:
”The fast $ beats
the slow $”

11. 11

12. Additional complexities of global warming
Source: IPCC AR4 5.2.2.3. 12

13. Average hides huge and dangerous variance

14. Carbon budget concept

15. Mark Carney, Chairman of BOE: Financial stability at risk
Since the 1980s the number of registered weather-related loss events has
tripled; and inflation-adjusted insurance losses from these events have
increased from an annual average of around $10bn in the 1980s to
around $50bn over the past decade.
The horizon for monetary policy extends out to 2-3 years. For financial
stability it is a bit longer, but typically only to the outer boundaries of the
credit cycle – about a decade. Once climate change becomes a defining
issue for financial stability, it may already be too late.
Three types of risk for financial system due to climate change:
• Physical risks: the impacts today on insurance liabilities and the value
of financial assets that arise from climate- and weather-related events
• Liability risks: the impacts that could arise tomorrow if parties who
have suffered loss or damage from the effects of climate change seek
compensation from those they hold responsible
• Transition risks: the financial risks which could result from the process
of adjustment towards a lower-carbon economy (e.g. stranded assets)
15
Source: Speech by Mr Mark Carney, Governor of the Bank of England and Chairman of the Financial Stability Board, at Lloyd’s of
London, London, 29 September 2015

16. 1. Emperor of the
rising tide and
justice
2. Emperor of the
commons
3. Emperor of
transactional
efficiency
Three emperors without clothes

17. Emperor of transactional efficiency
17
• With homo economicus comes a tendency to ignore elements of
relations that cannot be measured easily; complex relationships
between individuals are reduced to transactions.
• Ambivalence of “You get what you measure.”
• Relations get measured in transactions, likes, clicks
• Friendship and love get reduced in transactional templates on
Facebook and Tinder
“The gross national product … measures everything … except that
which makes life worthwhile.” Robert F. Kennedy

18. Counterintuitive observations about the collective
• The average behavior of the market participants will not allow us
to understand the general behavior of the market
• The psychological experiments on individuals showing „biases“
do not allow us to automatically understand aggregates or
collective
• The higher the dimension, i.e. the number of possible
interactions, the more disproportionally difficult it is to
understand the macro from the micro, the general from the
simple units
Fundamental limitation of behavioral economics on how to play
the market or generate policy
Mathematically speaking, the mean-field approach, where one
generalizes from the average interaction to the group is only
possible if there are no asymmetries
18Source: Taleb, Skin in the game, appendix to book 3

19. Homo sapiens vs. Homo economicus
Most social processes are not neatly decomposable into separate
subprocesses – economic, demographic, cultural spatial.
Yet, this compartmentalization in insular departments and journals
is how we tend to organize the study of social systems (e.g., finance
vs. strategy vs. marketing departments in B-schools)
In order to develop realistic and relevant models it is essential to
begin with solid foundations regarding individual behavior and
spatial structures. Current laboratory social science (e.g. Tversky
and Kahneman) are giving us an ever-clearer picture how homo
sapiens – as against homo economicus – actually makes decisions.
Agent-based modeling offers an integrative, inherently multi-
dimensional alternative.
19Joshua M. Epstein (2006). Generative Social Science: Studies in Agent-based Computational Modeling. Princeton UP

20. 20
Heuristics for the transition
beyond neoliberalism

21. 21
Heuristics for the transition
beyond neoliberalism
1. Listen to diverse voices and
beware of reductionisms
2. Avoid risks of irreversible
system change and stranded
assets
3. Aim for antifragility
4. Reduce polarization and look
for new balances

22. 22
Heuristics for the transition
beyond neoliberalism
1. Listen to diverse voices and
beware of reductionisms
2. Avoid risks of irreversible
system change and stranded
assets
3. Aim for antifragility
4. Reduce polarization and look
for new balances

23. Listen to diverse voices and beware of reductionism
23Source: Real World vs. Science according to N. Taleb, Skin in the game
Consultants
Consultants often reduce a
complex reality to a problem that
can be solved with a given
methodology.
Powerpoints are not very precise
forms of communication when it
comes to qualifying solution
claims.
In a complex system this often
leads to unforeseen higher-order
effects and non-sustainable
impacts.

24. Listen to diverse voices and beware of reductionism
24
John Browne, ex-CEO BP

25. 25
Heuristics for the transition
beyond neoliberalism
1. Listen to diverse voices and
beware of reductionisms
2. Avoid risks of irreversible
system change and stranded
assets
3. Aim for antifragility
4. Reduce polarization and look
for new balances

26. Different types of risk
• Manageable Risks vs. Unmanageable Risks
(W. Nordhaus – 2018 Nobel laureate)
• Problem of long tails and discounting of long-term uncertainty
(N. Taleb)
• Relevance and the law of declining love
(D. Kahneman, O. Hondrich) 26

27. Risk domains
Interesting,
normal life
Black Swan
Domain
Classical
management
domain
Insurance
and Casino
domain
High exposure to
rare, tail events
Low exposure to
rare, tail events
Incomputable
events
Computable
events
„Robustification“
27

28. Risks are interconnected and impacts non-linear
28Source: http://reports.weforum.org/global-risks-2018/global-risks-landscape-2018/

29. Worth noting that climate change risks are on top of list
29Source: WEF, 2019

30. Learning from tipping points in nature
• All ecosystems are exposed to gradual changes in climate,
nutrient loading, habitat fragmentation or biotic exploitation.
• Nature is usually assumed to respond to gradual change in a
smooth way. However, studies on lakes, coral reefs, oceans,
forests and arid lands have shown that smooth change can be
interrupted by sudden drastic switches to a contrasting state.
• Although diverse events can trigger such shifts, recent studies
show that a loss of resilience usually paves the way for a switch to
an alternative state.
• This suggests that strategies for sustainable management of such
ecosystems should focus on maintaining resilience.
30
Source: Marten Scheffer, Steve Carpenter, Jonathan A. Foley, Carl Folkes & Brian Walkerk, Catastrophic shifts in ecosystems, NATURE, VOL 413, 11
OCTOBER 2001, p. 591-596

31. Hysteresis and path dependency
31
Path 1: Start looking at image
from the upper left corner
proceeding to the lower right
corner.
Path 2: Start looking in inverse
direction.
 Perception of image changes
at different points.
Source: H. Haken (1983), Synergetik, Springer-Verlag.

32. Greenland Ice Sheet tipping point model
32Source: Nordhaus, William (2013). The Climate Casino – Risk, Uncertainty, and Economics for a Warming World. Yale UP

33. The risk of tipping points from climate change
33Source: PIK

34. Precautionary principle in the face of tipping points
1992 United Nations‘ Rio Declaration on Environment and
Development: „Where there are threats of serious or irreversible
damage, lack of full scientific certainty shall not be used as a reason
for postponing cost-effective measures to prevent environmental
degradation.“
Game-theory minimax strategy: In the absence of scientific
certainty, society should make policies that prevent the worst
outcome.
Nordhaus‘ cost-benefit perspective: If the damages are uncertain,
highly nonlinear, and clifflike in the Climate Casino, then a cost-
benefit analysis will generally lower the optimal target to provide
insurance against the worst-case outcomes.
As complex systems do not have obvious one-dimensional cause-
and-effect mechanisms, you should not mess with such systems
under opacity.
34

35. 35
Heuristics for the transition
beyond neoliberalism
1. Listen to diverse voices and
beware of reductionisms
2. Avoid risks of irreversible
system change and stranded
assets
3. Aim for antifragility
4. Reduce polarization and look
for new balances

36. The concave nature of travel
36
• A small disturbance in a congested traffic system can lead to major disruptions/delays.
• Systems like traffic rarely experience positive disturbances.
• Traffic is a system with „one-sided disturbances“ which leads to underestimation of
randomness and harm.
• Buffers are important to avoid major failures. The average does not matter.
Foto basykes

37. Fragility – The concave
Example: Driving a car against an obstacle
37
Speed
Harm
The nature of fragility:
• For the fragile, shocks bring higher harm as their intensity increases (up to a
certain level)
• For the fragile, the cumulative effect of small shocks is smaller than the single
effect of an equivalent single large shock.
• The more concave an exposure, the more harm from the unexpected, and
disproportionately so.
Concave or negative
convex curve
For a set deviation in a variable
the concave loses more than it gains
Reference: Taleb, Antifragility

38. Case: Fannie Mae
2003 internal risk report of Fannie
Mae showed
• Move upward in an economic
variable led to massive losses
• Move downward in same variable
led to small profits
• Acceleration of harm in concave
curve visible as simple fragility
detection heuristic
High fragility indication possible
even without good model for risk
measurement
38
Fragility is quite measurable.
Risk in real life not so at all, particularly risk associated with rare events.
Reference: Taleb, Antifragility, Chapter 19

39. Antifragility – The convex
Antifragility: Some things benefit from shocks; they thrive and grow when exposed to
volatility, randomness, disorder, and stressors and love adventure, risk, and uncertainty.
Detecting antifragility:
For the antifragile, shocks bring higher benefits as their intensity increases
39
Variable
Gains
Convex curve:
For a set deviation in a variable
the convex gains more than it loses
Reference: Taleb, Antifragility

40. Life is long gamma (Anthony Glickman)
• Long – benefits from
• Short – hurt by
• Gamma – nonlinearity of options
Option = asymmetry + rationality
The fragile has no option.
The antifragile needs to select what‘s best, the best option.
40

41. Different types of exposures of systems
Fragile Robust/Resilient Antifragile
Errors Hates mistakes
Irreversible, large (but
rare) errors, blowups
Mistakes are just
information
Loves mistakes (since they are
small)
Produces reversible, small
errors
Biological &
economic systems
Efficiency, optimized Redundancy Degeneracy (functional
redundancy)
Science &
technology
Directed research Opportunistic research Stochastic tinkering, bricolage
Regulation Rules Principles Virtue
Political systems Nation-state,
centralized
Collection of city-states,
decentralized
Economic life Bureaucrats,
Agency problem
Entrepreneurs,
Principal operated
Physical training Organized sports, gym
machines
Street fights
41Reference: Taleb, Antifragility

42. The mechanical vs. the organic
The mechanical, noncomplex,
nonbiological
The organic, complex, biological
Needs continuous repair and maintenance Self-healing
Hates randomness Loves small variations*
No need for recovery Needs recovery between stressors
No or little interdependence High degree of interdependence
Stressors cause material fatigue Absence of stressors cause atrophy
Age with use (wear and tear) Age with disuse
Undercompensates from shocks Overcompensates from shocks
Equilibrium in a state of inertia Equilibrium only with death
„Much of modern life is preventable chronic stress injury“ (Taleb, p. 64)
* Nature is antifragile up to a point, but that point is quite high
42

43. Organisms are populations and populations are organisms
Analysis needs to accomodate the fact that an
organism is not something isolated and stand-alone;
there are layers and hierarchies.
With evolution, something hierarchically superior to
an individual organism may benefit from the
damage to the individual organism. The surviving
cohort is stronger than the inital one – but not quite
the individuals, since the weaker ones died. There is
total tension between man and nature in the trade-
off of fragilities.
A strengthening mechanism for the species comes at
the expense of some organisms. Fragility of
individuals (particularly after reproducdtion) is
prerequisite for evolutionary selection to take place.
Similarly an organism strengthens at the expense of
some cells, all the way down and all the way up as
well. (e.g., autophagy, hormesis)
43
Black Swan Management 101:
Nature (nature-like systems) likes diversity between organisms
rather than diversity within an immortal organism.

44. Pseudo-stabilization
• James Clerk Maxwell modeled the behavior of
controlers of the speed of steam enginges by
compensating for abrupt variations. The paper
„On Governors“ (1867) proves mathematically
that tightly controlling the speed of engines leads
to instability.
• His argument can be generalized across domains
to help debunk pseudo-stabilization and hidden
long-term fragility.
• Artificially suppressing volatility not only makes
system extremely fragile, but at the same time
hides risks. Volatility is information!
• Artificially constrained systems become prone to
Black Swans.
44

45. Examples of pseudo-stabilization
• Personal doctors (Michael Jackson, Prince)
• Helicopter parents removing every random
element from children‘s lives
• Greenspan‘s ironing out the “boom-bust cycle“
• US opioid crisis (as example of concealed
iatrogenics compounded by principal-agent
problem)
• US stabilization strategies in Middle East (Egypt
before the riots of 2011, Saudi Arabia)
• Reductions of humans to what appears to be
efficient and useful
• Avoiding fluctuations in the market via price
fixing or forbidding noise traders
(George Cooper The Origin of Financial Crises)
• Micro-management of forests to avoid small
forest fires that would otherwise cleanse the
system of the most flammable material so that
it cannot accumulate
• High-frequency sterile information in media
disrupting the noise/signal filtering mechnisms
Foto: David Earle
45

46. Discussion
Antifragility implies – contrary to initial instinct – that the old is superior
to the new. Time will know about a system‘s fragilities and break it when
necessary.
If something has been around for a very, very long time, then, irrational
or not, you can expect it to stick around for much lover, and outlive those
who call for its demise.
The most fragile is the predictive – those who underestimate Black Swans
will eventually exit the population.
Crucially, if antifragility is the property of all those natural (and complex)
systems that have survived, depriving these systems of volatility,
randomness, and stressors will harm them.
In nature things break on a small scale all the time, in order to avoid
large-scale generalized catastrophes.
46

47. Solutions to antifragility
You are antifragile for a source of volatility if potential gains exceed potential losses
(and vice versa)
• Simple test: If I have „nothing to lose“ then it is all gain and I am antifragile.
• Recognize path dependence: No upside without survival
• First step towards antifragility: Decrease downside, protect yourself from
extreme harm (negative Black Swan) and let the upside (positive Black Swan)
take care of itself
Solution to antifragility is combination of aggressiveness and paranoia
Solution takes form of a barbell (bimodal strategy)
„Provide for the worst; the best can take care of itself.“ (Yiddish proverb)
Yet, there is ample evidence from insurance that people are averse to small losses,
but so much toward very large Black Swan risks (which they underestimate)
47

48. Barbell transformation in time series
48Reference: Taleb, p. 438

49. Examples of barbell strategies
• Ray Dalio on speculative bets: „Make sure that the probability of the
unacceptable (i.e. the risk of ruin) is nil.“
• Montaigne‘s life strategy as a serial barbell: First „doer“ then „thinker“
• In social policy, protect the very weak and let the strong do their job,
rather than helping the middle class to consolidate ist privileges
• In publishing, avoid having 100% of the people finding your mission
acceptable, but instead aim for high percentage of people disliking you
and your message combined with a low percentage of extremely loyal
and enthusiastic supporters
49

50. Case: Antifragile nuclear reactors
Fragile nuclear industry
• Relying on prediction of no
catastrophic failures
• Heavily centralized and scaled
• Limited learning across major
installations (projects, not
products)
• Fukushima fundamental point
of reckoning of „Black Swan
domain“
Antifragile nuclear industry
• Minimizing exposure to failure
• Small reactors, buried
underground, with major
protection layers
• Automatic termination of
chain-reaction in case of
failure
• Economices of scale from
learning in distributed system
with many units
50

51. Fragility-Antifragility in project management
• Studies shows that increases in the size of projects maps to poor
outcomes and higher and higher costs of delays as a proportion of the
total project.
• However, it is the size of the project segments that matters, not the
entire project.
• Bridges, dams and tunnel projects involve monolithic planning as these
cannot be broken into small portions. Their percentage cost overruns
increase markedly with size.
• For roads, built by small segments, there is no serious size effect, as the
project managers incur only small errors and can adapt to them.
• Other influencing factors
• Learning curves across project also affect nature of cost/benefit curves.
• Psychological factors like overconfidence.
• Principal-agent problems and unforeseen complexity from increasing
number of actors in specialized supply chains.
• Excessive efficiency optimization with the help of IT systems at the
expense of buffers/redundancy/optionality.
51BENT FLYVBJERG, NILS BRUZELIUS, WERNER ROTHENGATTER (2003) Megaprojects and Risk An Anatomy of Ambition

52. Factors affecting the fragile-antifragile balance
Antifragility
Fragility
• Specialization
• Departmentalization
• Silo Thinking
• Bureaucracy
• Privatization of gains,
socialization of risk
• Numerical predictions
• Overconfidence of
experts
• Success and fear of loss
• Narrative knowledge
• Curiosity
• Interdisciplinarity
• Systems Thinking
• Entrepreneurialism
• Skin in the game
• Large libraries
• Wisdom in decision-
making
• Mentally adjusting to „the
worst“
• Optionality
52

53. 53
Heuristics for the transition
beyond neoliberalism
1. Listen to diverse voices and
beware of reductionisms
2. Avoid risks of irreversible
system change and stranded
assets
3. Aim for antifragility
4. Reduce polarization and look
for new balances

54. 54
Polarization in media
Source: graphika.com

55. The middle is losing
55
Source: graphika.com

56. Finding new balances and resolving dilemmas
56
“It is in vain that we search for an essential difference between
good and evil, for their constituents are the same.
The crucial distinction lies in their structure, i.e., the manner in
which the pieces are assembled.
Evil is disintegration, an angry juxtaposition of alienated opposites,
with parts always striving to repress other parts. Good is the
syntheses and reconciliation of the same pieces.”
Charles Hampden-Turner

57. Finding new balances and resolving dilemmas
57
Growth Sustainability
Quality of life
Risks of
climate
tipping points

58. Candidates for new balances
• Finding a balance between Inequality vs. Innovation calls for a dynamic
view of equality, i.e. attracting barriers need to be avoided. Note that if
we want dynamic equality upward and downward mobility in society
are inevitable. (Nicholas Taleb)
• Finding a balance between Individual unfolding vs. Solidarity needs to
rely on the recognition that humans can only flourish in community. At
a most elementary level: “The triumph of individual fulfilment through
personal achievement over meeting obligations to family” [and
community] “is beginning to look psychologically flawed.” (Paul Collier)
• Finding a balance between Competition vs. Collaboration could start
with a broader view on what should count as public goods and what
kinds of government action may be appropriate to stimulate their
production. (Larry Kramer) There is a urgent need for a deeper public-
private partnership that transcends the short-termism and shallowness
of current lobbying and industrial policy.
58

59. Thank you for your attention
johannes.meier@xigmbh.de