Dynamic equilibrium describes the balancing cycle that occurs between two phases coexisting on the edge of a phase transition (in so-called “phase separation”), such that neither phase overwhelms the other. Dynamic equilibrium is the goal-state of balancing (negative) feedback loops, which counteract change in an effort to maintain stability.
Consider how a thermostat maintains the temperature of a room at a desired level, constantly rebalancing as the room conditions change.
Dynamic equilibrium exists not when the system is at rest, but rather when its inflows and outflows roughly offset each another, causing the level or size of some stock (such as the room temperature) to remain within a tolerable target value or range.1 Despite constant change, the system maintains a tentative balance.
This model has broad applications for systems across disciplines, including in biology, economics, physics, and business. Because most of what we do takes place in complex systems, we can improve our decision making by understanding the forces determining whether a system is in equilibrium, and how small changes in those forces could create enormous changes in system behavior.
Perfectly balanced, as all things should be
Imagine a bathtub in three different stages:
- “Static equilibrium” — There is some water in the tub, but the faucet is OFF and the drain is CLOSED. There is stability only because nothing happens.
- Not in equilibrium — If we leave the drain CLOSED but turn the faucet ON, the water level will begin to rise. We are now in a phase of growth, not equilibrium, since inflows exceed outflows. Without intervention, the tub will eventually overflow (another phase transition).
- “Dynamic equilibrium” — If we leave the faucet ON and OPEN the drain such that water is draining out at the same rate as it is flowing in, the water level will not change. The tub is now in a “dynamic equilibrium;” despite the inflows and outflows, the tub will neither empty nor overflow.
We observe these dynamics in all types of complex systems, such as natural ecosystems, economies, businesses, or the human body—any system maintaining a general balance between its inflows and outflows.
In biology, balancing feedback manifests in all life forms through homeostatic behaviors, which counteract any change that moves us away from optimal functioning. For instance, our bodies induce specific, automatic responses to regulate our body temperature, blood sugar levels, and fluid balances.
Humans seeking to create or preserve balance have invented remarkable dynamic equilibrium-maintaining technologies, such as thermostats, autopilot, cruise control, and process control systems in manufacturing.
Delicate balance, at best
Because complex systems (companies, forests, economies, etc.) often involve several simultaneous and competing feedback loops, system behavior will be determined by the loops that dominate. In a dynamic equilibrium, these loops are equally matched. However, systems can experience disruptive and unpredictable shifting dominance if the relative strengths of these loops change (e.g., if we turn the faucet up even higher on a tub that was in equilibrium).2
Near equilibrium, systems generally respond in a more predictable, linear fashion to changes in their environment. But when systems deviate from equilibrium, small shifts in the environment can produce large, nonlinear changes in the system—changes which commonly follow a power-law distribution.3
Consider the field of economics, where periods of apparent stability can quickly transition to unstable “boom” or “bust” cycles if various reinforcing feedback loops start amplifying one another. Bubbles may emerge from a mash-up of high consumer and business confidence, greed and speculation, low interest rates, and increasing asset prices. Similarly, bubbles can “pop” if, for example, an external shock (such as a pandemic or a war) triggers fear, reducing confidence and leading to business contraction, sparking market sell-offs, leading to more fear, and so on.
It is up to a portfolio of negative feedback loops to help reestablish economic equilibrium over the long-term. The free movement of prices is a negative feedback loop that helps constantly rebalance supply and demand. The Federal Reserve possesses tools of negative feedback, such as manipulating interest rates or the money supply, in order to tame business cycles. The government could also change tax rates or implement relief packages.
The key lesson is that we cannot become complacent just because the economy, our relationships, or an organization is stable at the moment. Slight shifts in the forces at play can tip the scales toward drastic change!
A recipe for innovation
In his fantastic book on nurturing innovation, Loonshots, physicist Safi Bahcall argues that dynamic equilibrium is one of the critical factors needed to enable technological breakthroughs.
While our “artists” (who work on research and development) are obviously critical to innovation, so too are our “soldiers” (who work on franchises and help bring those breakthroughs to market). In order for organizations to nurture new bets, they must:
- Separate artists and soldiers to give raw ideas the breathing room they need to evolve and improve (phase separation); and,
- Enable seamless exchange between the two groups to bring innovations to life (dynamic equilibrium).4
Bahcall gives the incredible example of military engineer Vannevar Bush. During World War I, Bush observed that poor cooperation between the scientific community and the culturally tight military was putting the US military prowess at risk of falling behind. He introduced a novel structure by proposing a new organization called the Office of Scientific Research and Development (OSRD), which enabled the military’s research and development efforts to be separate, but simultaneously to stay connected with the military through a seamless interchange.
The OSRD system was able to generate incredible breakthroughs with remarkable efficiency. Its achievements include radar (which helped win the war); work on penicillin, malaria, and tetanus (which helped reduce infectious deaths among soldiers by 20x); plasma transfusion (which saved thousands of lives on the battlefield); and—above all—nuclear fission (which laid the groundwork for the development of nuclear weapons).5
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Dynamic equilibrium offers an explanation for why complex systems can exist in periods of relative stability, despite being in constant flux. It also explains why these periods of balance are always vulnerable. We cannot afford to assume that stable things will remain so. Subtle oscillations between the feedback loops can cascade into major system changes—whether in our company, our marriage, the economy, or our bath tub.