Every sufficiently complex system tends to exhibit ego. In an individual, ego is mostly understood to represent the Id, a sense of Identity/ Self, manifested mostly by the (rational) instinct of self-preservation/self-gratification/selfishness. But there is also a Collective Ego, which provides us a lens through which to understand crowds (groups of people, i.e., teams, companies, political parties, religions, markets, even countries), both small and large.
Disclaimer: This article was written originally in May 2018, so some data points may be outdated.
Explain the Individual Ego
For those who care to look for it, there is a lot of material on the individual ego, how to define it, locate it, and subdue/manage it. But when the individual is subsumed into a larger group (say, a company), his behavior is often driven by the Herding Instinct, and the herd has a different personality, a different Id. This Id is called the Collective Ego.
Knowledge of your ego is, of course, a must. Managing your ego is one of the critical Life Skills, but understanding the Collective Ego will also add to your Intelligence. It’ll help you to understand Group Dynamics and manage yourself and your life, through these groups. The Laws of GroupThink (which have been elucidated earlier) are embedded in the Collective Ego.
Like in the individual, the Collective Ego manifests itself in the desire for self-preservation, not just of the group itself, but also of its internal structure. That is, it tries to maintain the status quo of the inter-relationships within the group, especially concerning the leader. That is what transforms (groups/ companies) such a difficult job.
The Objective of Individual Ego
Self-preservation is the objective of the individual ego, but it is NOT the objective of Life or Nature. So while the instinct for self-preservation might seem rational from the individual’s point of view, it is not (rational) from the point of view of Nature, which does not care whether a single individual survives or not; it’s more interested in the survival of the species. Similarly, the Collective Ego develops in groups, but Evolution does not care whether a particular group survives. NOBODY wins the Ego game. If the objective of Evolution is to match the environment with the survivors, that will happen sooner or later. The Collective Ego will only delay matters, but cannot defy its destiny.
The ego is what prevents an organism from dissolving into chaos, the Id is the idea of the Self, held together in the brain as distinctive from the world around us. So also in an organization, the Id is we vs they, the insiders vs the outsiders. From this Id, like in any other organism, comes the Collective Ego, the desire/ impulse to hold together the status quo in its original form, like a CEO who needs his company intact to keep his job. Or a CXO who needs his CEO in place, to keep HIS job…..and so on, a network of relationships that seek the status quo to maintain their existence.
In companies, this may manifest itself in strange ways: like the Plant Head who shoots down the plan for a new plant, because he does not want a sibling Plant Head to compete for the affections of the boss. In religions, the priest gets his power and status in society from how religion is used to encroach into the personal affairs of men and women. In cultures, the various stakeholders benefit from the power structures that get built over time.
In the absence of ego, the object does not care whether it lives or dies, for example, a rock, or a computer. Or a temple, but religion has an ego….it fights back any attempt to wipe it out. Maintaining homeostasis becomes the biggest priority of any complex organization, from your family, club, musical band, sports team, gang, committee, Church, business, MNC, ashram/monastery, cults, religions, NGOs, political parties, labor unions, cities, grassroots campaigns, communes, online fora, vocational groups, mathematics/ economics/ sciences, universities and professional bodies (doctors, lawyers, Cas), races, nations and national alliances (like NATO), the whole species, culture, language (like the Hindi zealots or the anti-English movements), even cancers.
the characteristic of complexity
Remember, the defining characteristic of complexity comes from connectedness. The brain may be branded as a monolithic entity, but is a highly inter-connected network of zillions of neurons, some similar and many vastly different. The other characteristic of complexity comes from a multitude of objectives, with optimizing functions doing complex trade-offs. Now look back at the list of other complex entities and you will find these characteristics embedded in them too. But NOT YET in a single computer or a car (unless connected). So the internet has an ego, but a single computer does not. But an interacting robot that is meshing with society will soon develop an ego. Alexa/ Google Assistant has an ego.
So what is the point of this article? To point out that ego exists, it has both positive and negative dimensions, which must be understood to manage it. Not only in yourself but in the groups of people you deal with: companies, religions, cultures, markets, countries. That to locate it, you need to stand back and observe its influence.
And what does this consciousness do for you? It does not give the next tip for investing in markets, just like traffic rules don’t tell you where to go…..but to ensure that you reach your destination, it’s a good idea to know your Traffic Rules!
Markets are both complex and interconnected and are optimizing multiple objectives. They meet every criterion for having a Collective Ego, yet we don’t find a simple description of Mr. Market’s Collective Ego. In a different context, Carl Jung came close when he talked about the Collective Unconscious, a term which found favor with the Freudian school of psychologists.
The classical Definition of Market
So where is the connectedness of markets? Theoretically, the classical definition of markets in Classical Economics turned out to be totally out of whack: the assumption that markets were fulfilling a resource allocation function in the economy, multi-optimizing millions of diverse objectives, with the assumption being that each player had perfect information and was ‘rational’. We now know spectacularly that this is laughable.
Practically, the market is a connection of ill-informed, lazy, pleasure-seeking, and pain-averse, addictive fools, who come to exchange all their foibles (a market for exchanging one foible with another). To the somewhat rational person (who came upon his rationality through long years of training, he wasn’t born like that), the market seems like a madhouse, just lurching from one irrationality to the other. So at what level do all these establish their connectedness? This is what gives the market its single, monolithic ego, the vested interest in its self-preservation.
I have explained elsewhere, that we have 4 components of the brain: the Limbic (a.k.a. lizard/ alligator brain), the Social/ Herding (a.k.a. monkey brain), the Left (logical), and the Right (emotional). Logically, connectedness and homeostasis can only happen in those places where the underlying thoughts are unchanging and unlearning. And that, in the individual brain, is in the Limbic and Monkey brains.
So if ego is defined as the ‘rational’ instinct of self-preservation that the organism seeks to protect, then it’s clear that the market seeks to protect the limbic and monkeyness, where its ego is housed. Exactly how the market does this, will take another column to elucidate, but you must remember Adam Smith’s famous quote: “The market will so compose its affairs to dispossess the maximum number of people of the maximum amount of their wealth”. If this is true, then it means that irrationality is embedded in the maximum number of players and the maximum extent because they’re coming to the market with a profit motive, how come they are losing?
That means that the market maximizes our most basal instincts, and unites us there. We’re joined at the hip by our greed and fear, and every basal instinct that is the animals that we are. And in ways that you must spend time to understand, THAT is what the processes of the market seek to protect, NOT your intelligence and forbearance (should you ever show any)…