Adapted from Chapter 1 of my Wealth Creation book

To a large extent, life consists of overcoming problems we encounter in our attempts to achieve our purposes. Along with the easy problems in life, say, fixing a flashlight that no longer works by replacing the batteries, are the enormously complex and difficult problems such as developing and sustaining the social attitudes and institutions that promote individual freedom and the general welfare.

What makes the flashlight problem so easy is our reliable knowledge about the straightforward, linear cause and effect relationship involved. But, approaching complex problems with an overly simplistic linear mindset will often make matters worse instead of better. Complex problems would be considerably less difficult if our notions about how the world works were more reliable.

Based on an analysis of the work of people, especially scientists, who have been extremely successful in solving complex problems, I have found three concepts that are important to a better understanding of knowledge building:

(1) Reality as we know it is just our perception of it—our individual map of reality, not the true territory of reality (see my paper, “A Transactional Approach to Economic Research”).

(2) The actions we take are an integral part of cause and effect loops, with purpose playing a critical and often overlooked role.

(3) Identifying our strongly held assumptions (beliefs) that influence what we perceive and how we determine our actions in the world is vitally important. This helps us in perceiving new feedback information and to achieving faster knowledge improvement .

Putting these concepts into practice takes conscious effort, because much of our life experience has been spent dealing with the outside world as independent components of reality for which one-way, or linear, cause and effect thinking is sufficient.

The perceiving-acting-knowing system, or PAK Loop (illustrated at the bottom of the home page on this website), stresses that knowledge building is a unified transaction. The researcher is as much a part of whatever is being investigated as the other aspects chosen for attention.

The researcher's complex web of experiences has formed an assumptive world (a mindset) that is an unavoidable part of inquiry and can cause biased thinking of which the researcher is not at all aware. A researcher's biases affect what is perceived as the problem, the initial selection of which variables are important, the first hunch about how the variables might be related, and the feedback mechanisms to be used for evaluating the hypotheses.