# The Path of Least Reistance, from Gary Rogan

May 11, 2011 |

The path of least resistance is the path of the loser.

-H. G. Wells

There are two distinct uses of the phrase "path of least resistance": the physical and the metaphoric. In the physical world it invariably involves conversion of potential energy to some other form of energy. The most common use is for water flowing downstream. Water will flow down the steepest gradient from one point to the next. Excluding second-order effects like turbulence and friction losses, there doesn't seem to be ANY resistance no matter how the water flows because by the time it reaches the bottom of a hill it will have converted exactly the same amount of potential energy to kinetic energy.

So why is this path called the path of least resistance? That's not clear, it's generally the shortest path as computed point by point because water isn't "smart" enough to bypass potential energy traps and flow upwards or sideways temporarily to gain overall. What it seems to signify is just the "natural" path which is a somewhat tautological definition. Water always does that and this seems noteworthy because water seems to possess some sort of intelligence to just do the obvious.

So here's the first clue: going down the path of least resistance is something so lacking in intellectual effort as to be obvious to an inanimate object. This is perhaps also noteworthy because while this would be completely obvious to a human being trying to analyze a well-diagrammed picture of a hill, it's not so clear when you are standing on the actual hill and you may get surprised if there is a flood or a mud slide of some sort. This provides the second clue: the path of least resistance is only obvious if you see the whole picture. There is a third clue from the downhill flowing water situation: if there is a lake (a potential energy trap) at the top of the hill, water will be perfectly content to just stay there and not follow any path of least resistance down. The clue is: there has to be the possibility of motion for the path of least resistance to show up.

The second most common example in the physical world involves electrical current flows in electrical circuits consisting of multiple branches, or something very similar from the world of water: flowing into multiple pipes at once. Here we often have actual resistance (or impedance for variable currents). In the world of DC currents this simply converts potential energy into heat. The actual action is again tautological: when a voltage source is presented with paths of multiple resistance to complete a circuit, wherever the currents will flow that's what has the least resistance. Of course if you know the resistance in advance than you could make it slightly less tautological by computing that the currents will distribute in the inverse proportion to the resistance when multiple branches are involved, and thus it could be claimed that the currents will flow down the path of least resistance. Of course it's not quite that because they flow everywhere, just less so down the more resistive paths. This provides the fourth clue: sometimes the path of least resistance isn't the only path, just the main one.

In the metaphoric sense, the path of least resistance generally applies to human behavior. You could just say that that's what people do when left to their own devices but that clearly doesn't illuminate anything at all and is often not even true as many people do not take that path. To borrow from the water flowing down hill analysis, there has to be a force of some sort involved to see this path, as let's say an attempt to change people's behavior. Let's imagine for a moment that you are in charge of a large company and you want to modify how your employees behave. You have to make sure that the path of least resistance is for your employees to follow your dictates or rely on unrelated incentives or punishments.

A trivial, but illustrative example would be to get your employees to use an electronic badge to get into the building. If your doors are open during business hours clearly nobody will use the badge because that's the path that requires the least effort. If you install an electronic lock that only opens when you insert a badge the path of least resistance will suddenly coincide with your desired behavior. This provides the fifth clue: to get a meaningful path of least resistance when people are involved you have to combine either force or motion with an identifiable obstacle.

When purely mental exercises are involved, the path of least resistance is even simpler but it involves an evolved behavior of trying to conserve energy. It so happens that higher-level thinking involves a lot of energy, much more so than following instinct or emotions. Thus the path of least resistance where thinking is involved is to minimize it. The role of instinct and emotions is to substitute for thinking in most situations but especially where either speed or danger are involved, because they work quicker. This provides the sixths clue: when strong emotions are involved the path of least resistance will be to quickly follow the emotions.

Let's summarize the clues:

-going down the path of least resistance is something so lacking in intellectual effort as to be obvious to an inanimate object
-the path of least resistance is only obvious if you see the whole picture
-there has to be the possibility of motion for the path of least resistance to show up
-sometimes the path of least resistance isn't the only path, just the main one
-to get a meaningful path of least resistance when people are involved you have to combine either force or motion with an identifiable obstacle
-when strong emotions are involved the path of least resistance will be to quickly follow the emotions

What does that have to do with stocks? In my opinion it only makes sense to talk about the path of least resistance when there is a lot of "energy" in the markets and a lot of emotion. To really predict what will happen you need to know a lot about a lot of the participants. The path of least resistance will not be the only path but the dominant one. People will overcome their initial resistance towards buying or selling due to either some event or the increase in energy. Whatever the path of least resistance is, it will be followed quickly and then the concept will stop being applicable. The path will always seem obvious in retrospect even if you didn't know the whole picture in advance.

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