Feedback loops
A affects B affects A. Negative loops stabilise. Positive loops amplify.
A feedback loop is when an output of a system becomes one of its inputs. Negative feedback (the thermostat) stabilises: the system corrects deviations and stays near a setpoint. Positive feedback (the microphone howl, the bank run) amplifies: small deviations get bigger.
Almost every important business dynamic involves feedback loops. Customer satisfaction → referrals → more customers → more attention → better product → satisfaction. Or: high stock price → cheap acquisitions → better fundamentals → higher stock price.
For operators, finding the feedback loops is half the work of understanding any business. Once you know the loops, you know how to push the system, and you also know how it can run away in either direction.
Examples in the wild
Most flywheels (see [the-flywheel]) are explicit positive feedback loops. Most operational stability comes from explicit negative feedback loops (margin tracking, customer satisfaction metrics, capacity utilisation).
Most bubbles are positive feedback loops gone too far. Most market crashes are the same loop in reverse. Reflexivity (see [reflexivity]) is the financial version of the principle.
Negative self-talk creates a feedback loop where bad thoughts produce bad mood which produces more bad thoughts. The intervention is breaking the loop, not arguing with each thought individually.
Feedback loops is one of the mental models we apply through real cases inside the Pareto MBA — a part-time program for professionals who want to think clearly about business.