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The Idea of Nonlinearity

What is Nonlinearity?

A nonlinear system is a system in which a change of the output is
not proportional to a change of the input.

Nonlinearity is rooted in feedback loops that, (in business) amplify or
diminish (market) signals yielding growth or decline.

Linear systems where changes in output are proportional to changes in
the input are often used as a simplification of nonlinear systems.

Nonlinear systems are so-called because they are not linear, linear

thinking being the dominant, 'natural' mode of thought in the West.

We Live in a World of Feedback Loops

When a current decision takes into account prior events and the
results of the current decision in turn influence future decisions
then we have a feedback loop.

Technically there are two classes of feedback loop:

● Positive Feedback: Amplifies a change in the same direction

e.g., toward more growth or toward greater decline in say a
market

● Negative Feedback: Stabilizes a phenomenon around an

equilibrium point or path by reversing the current direction of
change. E.g., if a thermostat senses that a house is too warm it
shuts off the heating so induces a cooling. In business, if firm A
invests to shift market sentiment toward their offering,

competitors may invest time and effort to reverse that flow. This
form of feedback is known technically as homeostasis.

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