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Positive Feedback Loops

Why It Matters

Positive feedback explains explosions - viral growth, bank runs, arms races, compound interest. It also explains why small differences can lead to massive divergence.

The Key Move

Ask: does more output lead to more input, which leads to more output? If yes, you have positive feedback. Expect exponential behavior until some external constraint binds.

Classic Application

Bank runs. Withdrawals reduce bank reserves -> other depositors worry -> more withdrawals -> reserves fall further -> more worry. Self-amplifying until external intervention or collapse.

Surprising Application

Learning and skill acquisition. Success -> confidence -> more practice -> more success. Also works in reverse: failure -> reduced confidence -> less practice -> more failure.

Failure Modes

  • Expecting positive feedback to continue indefinitely (limits always exist)
  • Confusing positive feedback with positivity (it can amplify bad things)
  • Missing that positive feedback can reverse direction (growth can become collapse)

Go Deeper

Soros on reflexivity in markets. System dynamics literature.