# Activation Energies and Uncertainty

From "An Equilibrium of No Free Energy"

> We can see the notion of an inexploitable market as generalizing the notion of an efficient market as follows: in both cases, _there’s no free energy inside the system_. In both markets, there’s a horde of hungry organisms moving around trying to eat up all the free energy. In the efficient market, _every predictable price change corresponds to free energy_ (easy money) and so the equilibrium where hungry organisms have eaten all the free energy corresponds to an equilibrium of no predictable price changes.

This idea resonates with me and I have been thinking about a related concept for a while now. If you should't expect to get easy money, what then is hard money and can you get that?

Obligatory: Not an economist, lapsed chemist.

Chemistry has a handy concept called the [activation energy](https://en.wikipedia.org/wiki/Activation_energy), which I shall lean on as an intuition pump. This is the amount of energy you need to start a reaction going. One salient example is a spark landing on some gunpowder, you need the small amount of energy from the spark to start the reaction, but once it is started it is self-sufficient. The energy from the initial decomposition of the fragment of gunpowder in to gases is enough to kick the other fragments over the activation energies and decompose them etc.

There are handy energy diagrams that chemists use. The below represents an energy releasing (or Exothermic) reaction:

  

![](https://i.imgur.com/WQCnFM8.png)

It is exothermic because the net energy of the end constituents is less than energy of the starting constituents.

The net energy released is the Freed Energy- Activation Energy. This is your payoff, your hard money.

So hard money, in this analogy, is money trapped behind a large activation energy. Things like spinning up new rocket companies fall under this.

For actually real world economies it is worse, because we have large amounts of uncertainty in the system. When trying to do something hard and new you do not know the activation energy or the freed energy. The more these levels are known or can be reasoned about, the more you should expect investors or other economic actors to have put up the money to get over the activation energy. You might be able to exploit the fact knowledge is not spread equally through economic actors, normal rich people do not have the background knowledge to be able to evaluate rocket engineering ideas.

So if you think you see lots of easy unexploited energy somewhere you should maybe expect that the activation energy is higher than you think or there to be more uncertainty in the pay off than you think.

On the other hand, if what you are doing is very uncertain and has a large activation energy, things are different. You might be on a path to some money, but then again it is not an easy path and you might end up chasing a mirage.

There are other paths you can take to try and get society to get the hard money. One is make catalysts, that is something that reduces the activation energy by its existence. Examples of economic catalysts are computers or the banking system. Although those have their own equilibria, they are somewhat improving over time, so it might make your hard money easier to get (you may not get it, if someone else has more energy to get over the activation energy hurdle). The other is to try and reduce the uncertainty of the activation energy or the freed energy so that you might better convince big economic actors of the opportunity.