Inflation isn’t a short-term blip, It’s here to stay. In our latest podcast episode,
George Cooper and I discuss rising yields, 120%+ debt-to-GDP, and 1970s-style “three-wave” inflation.
https://www.equitileconversations.com/2459100/episodes/19197344-inflation-the-next-wave
Every day in business we make choices that carry real risk. The next big investment, the hiring decision, or how to navigate a supply-chain shock. Some days it feels like clockwork: gather the data, run the numbers, and the optimal path clicks into place. Other days it’s pure fog – a swirl of incomplete information, gut feelings and second-guessing.
Karl Popper, the philosopher of science, gave us a simple but powerful metaphor in his 1966 lecture Of Clouds and Clocks. Picture every system on a spectrum. At one end are clocks – precise, regular, predictable machines like the solar system or a well-engineered financial model. At the other end are clouds – irregular swarms of gnats or market sentiment where each particle seems random yet the whole somehow holds together. Popper’s punchline? All clocks are clouds. Even the most precise mechanism has tiny irregularities – friction, quantum jitter, the unexpected. The old idea that everything, including human minds, is a flawless deterministic clock is simply wrong. Reality is a mix of both. This insight matters enormously for decision making and risk.
First, the clock trap. Many risk models and strategy frameworks treat decisions as pure mechanics. Input the variables – cash flows, probabilities, discount rates – and out pops the answer. Behavioural economists call it rational choice theory. In practice it leads to paralysis. You wait for perfect data that never arrives. Or you follow the spreadsheet slavishly and miss the second-order effects that actually matter. As Arthur Compton, the physicist who inspired Popper, once asked: if our actions are just atoms following immutable laws, why bother trying? Effort and responsibility become illusions.
This is a common trap in boardrooms. A beautifully engineered DCF model convinces everyone the deal is “low risk”. Then geopolitics or a competitor’s move turns the clock into smoke. The opposite danger is the cloud trap. Here decisions become pure emotion or intuition. “Trust your gut.” “Let the market decide.” In uncertain times this feels liberating but it is no better. Pure randomness offers no explanation for purposeful choice. You end up with impulsive bets or endless procrastination dressed up as mindfulness.
Popper’s solution sits in the middle, so called plastic controls. These are flexible, hierarchical systems with soft feedback – not rigid gears, not random fog. Think of a soap bubble. The soapy film gently shapes the chaotic air inside; the air pushes back. Mutual, adaptive control. In human decision making this means treating your mind as an evolutionary problem-solving engine. You form bold conjectures – creative guesses about what to do. You criticise them hard: “What if this fails? Does it fit our risk appetite? What are we missing?” Bad ideas die in your head rather than in the P&L account Fresh evidence or reflection lets you revise.
This is trial and error with purpose. Your intentions and theories exert real downward influence on events. Purposes shape behaviour; behaviour feeds back into better purposes.
Take a real-world example. A fund manager faces a volatile energy market (sound familiar?). Clock thinking says optimise the portfolio on historical correlations. Cloud thinking says follow the latest headline. Plastic control says: generate three scenarios, test them ruthlessly against known unknowns, run small experiments or pilot trades, and let the weakest option die. The final allocation emerges – reasoned, adaptable, alive.
The beauty of this view is its practicality for risk professionals. It explains why effort in thinking actually counts. Decisions are not illusions; they are the spearheads of problem-solving. It also builds humility. Every choice carries some cloudiness. You will never have perfect information. But progress comes from surviving criticism, not from chasing certainty.
Next time you face a high-stakes call, pause and ask, am I treating this as a clock (rigid rules and models), a cloud (pure instinct), or a genuine plastic system (creative conjecture plus fierce criticism)? The third path turns decision making from a source of anxiety into a genuine source of competitive edge.
We are not passive cogs in a machine or drifting mist. We are plastic controllers – capable of shaping outcomes through reason and creativity even in the face of genuine uncertainty. This the optimistic lesson Popper left us.
More on Popper’s Lecture
In this March 29th, 2026 episode of Equitile Conversations, Gerald Ashley and George Cooper offer a downbeat assessment of the escalating US-Iran war in the Gulf and its profound impact on global supply chains and financial markets. They describe a major negative supply shock triggered by widespread destruction of energy infrastructure, with the US reportedly planning ground troops into Iran. Oil prices spiked near US$120 per barrel before moderating above US$110 despite strategic reserve releases and temporary de-sanctioning of Russian and Iranian supplies. Fuel shortages are already appearing globally. They both warn the disruption will be durable, lasting months to possibly years, affecting not only energy but also fertilizers and agriculture. Emerging second-order effects, such as diesel and fertilizer shortages for Australian farmers, are expected to drive food price inflation with a 6–12 month lag. This points to a protracted inflationary period reminiscent of the late 1970s.
George argues that central banks should avoid hiking interest rates, as this is an exogenous shock; tightening policy risks compounding the damage by discouraging necessary investment. Despite this, the ECB is considering rate rises and the Bank of England appears uncertain. The discussion also covers ballooning US debt (now US$39 trillion), strained fiscal positions in the West, questions over AI investment viability, and geopolitical shifts. Using the physics concept of the “elastic limit,” they suggest the global order may not return to its previous state, potentially weakening US dominance and accelerating de-dollarisation.
https://www.equitileconversations.com/2459100/episodes/18924343-chokepoint-charlie
This Episodes Recommendations
Gerald
The Beer Game
A free easy to play simulation here:
https://beergame.transentis.com/
In this latest episode of Equitile Conversations I interview Nic Rogers, Head of Research at Equitile, about the prospects for the major energy markets
https://www.equitileconversations.com/2459100/episodes/18720603-energetic-times
A couple weeks back I joined my colleague George Cooper for dinner at The Savoy Grill. We also invited along macro economist Doug McWilliams, and explained to him why this fancy upmarket venue (A Gordon Ramsey badged place) was “critical research” regarding the price (or perhaps more accurately) the value of gold.
Investment in gold and more particularly gold miners has been a very favourable element in the spectacular success of two funds run by George at http://www.equitile.com
Last December I recalled the now largely forgotten metric, the Savory Dinner/ Gold ratio, coined by the well known 1990s stockbroker Julian Baring. So we thought we would do a new “fixing” at a dinner.
The story of this dinner and the background to Julian Baring and his ratio, was picked up by The Times, and below is a great article about it.
An ounce of gold now buys dinner for 14 at the Savoy
New Equitile Conversations Podcast Now Out
George Cooper & I chat with Doug McWilliams about what needs to change to improve Growth. We discuss improving incentives, look at taxation, over bearing regulation & just have time to discuss our favourite cars.
https://www.equitileconversations.com/2459100/episodes/18312924-taxing-growth
This year we launched the Equitile Conversations Podcast. A feature of the podcast is that each episode ends with a book recommendation from myself, George Cooper, and, special guests when the show features them.
https://www.equitile.com/our-thoughts/the-2025-reading-list-from-equitile/
The latest Equitile Podcast looks at Benchmarks and their effects in the investment world
https://www.equitileconversations.com/2459100/episodes/18083165-never-mind-the-benchmarks
In this edition George Cooper and Gerald Ashley are joined by Helen Thomas of Blonde Money.
Are many governments in the developed world facing a fiscal Mission Impossible?
They looked at current financial risks, global fiscal challenges, and central bank independence, focusing on the political implications.
The conversation highlighted how political systems and electoral dynamics are shaping economic policies in the post-COVID era, with concerns about rising government debt, market volatility, and the IMF’s limited bailout capacity.
They discussed central bank independence, suggesting it may align with government needs rather than being truly autonomous, and also explored potential political and economic shifts over the next decade, including inflation’s role in addressing debt.
https://www.equitileconversations.com/2459100/episodes/17840466-mission-impossible
At the end of each episode we recommend interesting books. Here is a summary of the recommended books from our first episode in February up to the latest in July
Episode One – The Demographic Transition https://www.equitileconversations.com/2459100/episodes/16771145-the-demographic-transition
Material World: A Substantial Story of Our Past and Future
by Ed Conway
Gambling Man: The Wild Ride of Japan’s Masayoshi Son
by Lionel Barber
Episode Two – The Investor’s Mind: Behavioural Bias Revealed https://www.equitileconversations.com/2459100/episodes/16777961-the-investor-s-mind-behavioural-bias-revealed
Why Most Things Fail
by Paul Ormerod
Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance
by James Montier
Episode Three – The Dollar & Trump’s Tariff Tantrum https://www.equitileconversations.com/2459100/episodes/16971058-the-dollar-trump-s-tariff-tantrum
Money & Promises
by Paolo Zannoni
Deceit and Self-Deception: Fooling Yourself the Better to Fool Others
by Robert Trivers
Episode Four – The Pension Problem https://www.equitileconversations.com/2459100/episodes/17231799-the-pension-problem
Odds n Sods – My Life in The Betting Business
by Ron Pollard
Riches Among the Ruins: Adventures in the Dark Corners of the Global Economy
by Robert P Smith
Episode Five – Global Energy – Drivers and Disruptors https://www.equitileconversations.com/2459100/episodes/17416662-global-energy-drivers-and-disruptors
Kings of Shanghai by Jonathan Kaufman
The World for Sale: Money, Power and the Traders Who Barter the Earth’s Resources by Javier Blas and Jack Farchy
Episode Six – Time to Retire the Term Emerging Markets? https://www.equitileconversations.com/2459100/episodes/17577861-time-to-retire-the-term-emerging-markets
The Railway King by Robert Beaumont
The Mandibles by Lionel Shriver
and our guest’s recommendation
Gerald Ashley 
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