For evolution to function, knowledge must be transmittable (and therefore able to be codified in some form). If Larry has some tacit knowledge about how to make particularly beautifully formed hand axes, but he cannot encode or transmit the knowledge in any way, then that knowledge will, sadly, die with Larry and not be a part of future hand ax PT evolution.

It was she who said, “In this place it takes all the running you can do, to keep in the same place.” There is no such thing as winning a Red Queen race; the best you can ever do is run faster than the competition. ... In evolutionary systems, sustainable competitive advantage does not exist; there is only a never-ending race to create new sources of temporary advantage.

The economy is, after all, chock full of supply chains, inventories, and time delays. The actual causes of macroeconomic oscillations are no doubt multifarious, but the lesson of the Beer Game is that the causes of the cycles may ultimately lie in the way in which the inductive rules people use in their decision making interact with the dynamic structure of the economic system.

The presence of free energy is what enables a complex adaptive system such as an ant colony to stay away from equilibrium, create order, and be dynamic over time. If you remove that energy, then entropy takes over and the system decays and eventually reaches a state of stasis or equilibrium. As one of the participants at the SFI meeting, University of Michigan theorist John Holland, once put it, “in fact, if the system ever does reach equilibrium, it isn’t just stable. It’s dead.”

Complexity catastrophes help explain why bureaucracy seems to grow with the tenacity of weeds. Many companies go through bureaucracy-clearing exercises only to find it has sprung back a few years later. No one ever sits down to deliberately design a bureaucratic muddle. Instead, bureaucracy springs up as people just try to optimize their local patch of the network: finance is just trying to ensure that the numbers add up, legal wants to keep us out of jail, and marketing is trying to promote the brand. The problem isn’t dumb people or evil intentions. Rather, network growth creates interdependencies, interdependencies create conflicting constraints, and conflicting constraints create slow decision making and, ultimately, bureaucratic gridlock. ... How could one of the world’s greatest corporations, a company with billions of dollars in assets, with hundreds of thousands of talented employees around the world, and with Nobel Prize–winning technical research, lose out to a teenager with pocket money from his stamp collection? We can speculate that as Dell began eating into IBM’s PC market share in the early 1990s, some smart person in IBM must have said, “Customers seem to like buying computers through the mail and Dell is growing fast—why don’t we sell computers through the mail?” Selling computers through the mail was certainly not beyond the capabilities of IBM; it could buy boxes and bubble wrap and put things in the mail as well as anyone else. So why did the company wait until several years after Dell had passed it in market share to begin selling computers directly to its customers? The reason is that IBM fell prey to a complexity catastrophe.

The physicists were shocked at the assumptions the economists were making—that the test was not a match against reality, but whether the assumptions were the common currency of the field.