W. Brian Arthur: I grew up in Northern Ireland in Belfast. I went to university there, and grew up as a Catholic in a Protestant place. Being in the minority gives you a couple of things: one is the sense of being outside and the other is that it makes you an observer…

I learned more with McKinsey & Company than I did in graduate school… They went into large companies like Deutsche Bank, or BASF, and they just sat and sat. They didn’t do anything. They just sat and observed and interviewed and observed and thought and went back and observed. It cost plenty to do this, but they were quite patient. This would go on for months until they had what I would now call a complex picture of what was going on. The opposite of that would be to come in with some cognitive picture saying, "You need to be reorganized this or that way." They actually let a picture emerge, and this wasn’t lost on me… Bangladesh… doing the McKinsey…

In 1979 I started to read a lot of molecular biology… I began to realize that the counterpart in economics to positive feedback was increasing returns. I started reading the physics of positive feedback, and particularly the work of Hermann Haken at Stuttgart and the Belgian Ilya Prigogine, a man I am very fond of…

I’d taken a two-month leave to be in Hawaii… I was reading a great deal of molecular biology. If there was a moment of epiphany, it was in June 1979 when I read a little essay that Prigogine had written. I forget what he called it, … but it was about positive feedback, and instantaneously I realized I had something that was important in economics. All I needed to do was figure out how positive feedbacks worked in economics, and it took another ten years to do that. But suddenly, within about two or three weeks, everything in economics fell into place for me. It was a period of very, very intense intellectual excitement. ..

I was saying that small events can lock the economy into different structures and that it’s fractal – that there are structures within structures, that the entire economy isn’t the best of all possible worlds. Capitalism does not lead you to the best of all possible worlds. This was regarded as a supreme threat…

Arrow brought me to the Santa Fe Institute in 1987. And Philip Anderson, who is a physics Nobel Prize winner, said, "I thought economics was dull and boring, but this stuff speaks to us." So after that I was brought back to the Santa Fe Institute in 1988 to start their first research program. I was backed by John Reed from Citibank, who gave us a lot of money. John Reed was saying, "Do anything you want, just don’t be conservative." Arrow and Anderson also said do anything you want. I said "What precisely do you mean?" "Go deep into the foundations and change anything you want."

If you ask Taoists how they see the world, the first thing they’ll tell you is that the world is changing. Everything is always changing, and it is our job as human beings to allow things to unfold. ... The world is seen organically as a collection of unfolding patterns. When I worked on my economic increasing returns theories, before I studied Taoism, I gave a talk at the University of Hawaii in 1985 and a student from the Chinese mainland came up to me and said, "All that you say has been said before." And I said, "All right, give me a citation." He said, "It was all said by Lao Tzu." I said, "In that case, I’m honored" …

We have a nice saying in Belfast, "If you are not confused, you don’t understand anything." … So what is facing management in high tech is confusion…

You observe and observe… and you are conforming to what’s arising, but not in a passive way. You are pre-positioning yourself. So in that sense it’s all about the position. … You’re acting out of an inner feel, making sense as you go. You’re not even thinking. You’re at one with the situation. …It’s the same with martial arts: If you have to think in martial arts, you’re dead…

This has a lot of implications for management because it’s saying that what counts is where you’re coming from in your inner self… Gates and Jobs are good at very different things, but they both know how to distance themselves from the "problem" and expose themselves to something different. You wait and wait and let this experience well up into something appropriate. In a sense, there is no decision-making. What to do just becomes obvious. You can’t rush it. Much of it depends on where you’re coming from and who you are as a person…

Suppose I was parachuted into some situation in Silicon Valley. It’s not a problem, it’s just a situation that is complicated and changing and unfolding. I’m trying to figure things out. I would observe and observe and observe and then just retreat. If I’m lucky, I would get in touch with some deep inner place and then allow that knowing to emerge…

I think in some strange sense the absolute key to living a very active life is to surrender; and what Buber says there is that it is not your own will, it’s a higher, deeper will. In some sense I think that one has to say, "Look, I’m here. I’m willing to do whatever is necessary for whatever reason. I’m here and give me the chance to do it and the means and I’m willing…

It’s not what people know that counts; it’s what they take for granted...