Fourfold Problem Solving

You’ve probably seen this symbol somewhere. It’s commonly  called the Yin/Yang symbol. Its name is “Taijitu,” or “diagram of ultimate power”. The Taijitu is the symbol that also expresses the logic of the ancient Chinese Book of Changes – the I Ching.

The logic of the I Ching includes fourfold problem solving, a method for solving problems by using two pairs of opposite ideas to analyze a situation.

Taijitu, diagram of ultimate power

This circle above contains two pairs of opposite concepts that you can easily spot: (1) big and small, and (2) black and white.

The small black and white circles are said to represent the sun and the moon, in the context of night and day. They are part of the eternal cycles of being.

The small black and white circles also are said to be “seeds” of the “other” within the larger black and white halves of the Taijitu. The smaller circles show how all things are interconnected.

They also depict how things change, with each thing ultimately turning into its opposite, say the white dot expanding to turn the black space white, while the black dot expands and turns the white space into black. These kinds of changes are the subject of the I Ching or Book of Changes.

An I Ching example of fourfold thinking

So let’s look at the following two pairs of opposites:

Spending  vs. Saving

Debt vs. Surplus

We tend to think of Spending and Saving as opposite things. We do the same with Debt and Surplus.

In our simplistic, binary, Western way of thinking, we also tend to pair Spending with Debt. We see this as having a direct relationship, almost a causal relationship. We also pair Surplus with Saving. And that too seems almost like a cause and effect. That’s how we come to think of Spending as bad and Saving as good.

Polarization, along with judgments of “inferior” and “superior,” often result from binary Western-style thinking about contradictions.

In contrast, the Taoist way of thinking is to look at each of these four concepts (or in economics, “variables”)  in light of each of the the other three.

Spending

As I pointed out two posts on this site, “Don’t just Save for an Emergency, Spend for an Emergency,” and “Spend for an Emergency, Don’t Just Save for an Emergency,” even though we think of them as opposites, Saving and Spending can be paired simultaneously in a strategy to protect yourself before a financial crisis hits the markets and/or the economy.

Likewise, our tendency to pair Spending with Debt, and only with Debt, leads us straight into to “fear mentality”. If you can see that Spending can sometimes also lead to a Surplus, and Spending can also lead to Saving(s), you are no longer tied to a “knee-jerk’ adverse reaction to a suggestion of “Spending” in hard times.

If you can afford to buy something for half price that you use quite a lot of — wouldn’t you go ahead and Spend on stocking up on that something in order to Save money and build a Surplus?

Saving

Likewise, we pair Saving with Surplus. We believe Saving is always a good thing to do. But now many people find themselves frustrated enough to hit the streets. They’ve “followed the rules,” worked hard and saved, and yet they have little or nothing to show for it and/or they see no future Surplus coming for them. They even stand to lose what they’ve collectively saved.

Saving does not always lead to Surplus. Saving can actually get us further into Debt. This is called this being “penny wise, pound foolish.” When you understand that Saving can sometimes be foolish, you no longer are tied to a “knee-jerk” positive reaction to the suggestion that “Saving” is a good thing.

Debt

Many wealthy people live good lives while they are in Debt. This is because they own or control assets which bring them an income. That income covers the carrying costs of their Debt, i.e, the interest they owe each month on their Debt. That’s what is called being in “Good Debt“.

The more money you have, the easier it becomes to buy these kinds of assets. And some of these assets are available only to the very wealthy. That is the eye-opening message of Robert Kiyosaki’s Rich Dad Poor Dad books and games. Understand this and you aren’t tied to a knee-jerk bad reaction to being in Debt.

Surplus

Saving doesn’t always lead to Surplus. Saving in the face of taxes that rise even faster won’t create a Surplus for you. Saving in the face of a falling value of the dollar (i.e., inflation) will create a loss, not a Surplus. Nor can Saving in the face of declining real wages create a Surplus for you.

Surplus is the result of growth, not decline. Look where the economy is growing and then you may understand better why it is declining elsewhere.

Moreover, Surplus and Debt can coexist in a tight relationship. For example, if you own a hula hoop factory and demand for your hoops declines, you will have a Surplus of hoops along with Debt just as soon as your costs to produce too many hula hoops begin to exceed your revenues.

On the other hand, laying in a Surplus of emergency supplies will mean Saving big time when a natural or man-made disaster actually arrives on your doorstep.

The moral of this Taijitu tale:

As Ecclesiastics so eloquently puts it, there’s a right time and place for everything under the sun (or moon). That applies to Saving, Spending, Being in Debt, and Building a Surplus!

Next time: Practical Examples of Fourfold Problem-Solving: How Buyout Funds Work and Citizens Concerned About Sovereign Debt Crises

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