TBLI Talk: What the hell is ergodicity and why is it relevant for investors?

Because it’s something that most investors don’t know that they don’t know; but that often changes everything once you know about it.

The essence of investing, and business, is growing your capital. At the very least preserving it. And for impact investing, to have the biggest possible impact as well as preserving or growing your capital.

You’re able to do the best job—reach the highest potential impact and capital growth—only if your strategy is based on how capital actually grows in a business, not on a convenient but flawed simplification.

Despite the fact that almost all of the capital growth dynamics are in the “non-ergodic” class, investment theory makes the convenient simplification that capital always grows ergodically. It’s such a convenient simplification that very few people have ever heard the word, let alone recognised that different investment strategies are needed for the two classes of capital growth.

This convenient simplification is a root cause of much that we wrestle with:

-only one in 12 startups really succeeds,

-only 5% of VC funds deliver more than 3X,

-our extractive economy,

-and causes impact, triple bottom line, regenerative, circular, and doughnut investments to often fall short of their potential.

Investing according to the actual non-ergodic dynamics of capital growth is at the heart of the systemic changes we need for impact, regenerative, etc. investing to work; in fact, for any investing to work!

This means using strategies that plug the leaks non-ergodic dynamics causes, taking you towards the ergodic limit.

Bio of Speaker:

Graham is the founder of Evolutesix, a venture studio and investor specializing in building ecosystems of future-fit businesses according to Evolutesix's ergodic investment strategy. Future fit means that they are fit to be valuable parts of regenerative, circular, doughnut, etc. business ecosystems.