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Every now and then something good is happening to us. Other days, we got hit by some bad experience.

That is true for a person, a business, a country or ideological system, and any System in general.

It happens at random. But let me use a simplified model where bad and good things are taking turns.

On this chart, horizontal axis is time, and vertical axis is - how the reality impacts the system (like, us)

Now, let's imagine a perfectly reasonable System- for example, a wise man or reinforcement learning artificial intelligence software. How would it behave?

The System would analyze the positive and try to get more of it. It would also analyze negative and take measures to avoid it in the future.

(For simplicity, I will only analyze the reaction to negative. It is usually significantly stronger than reaction to positive).

This "wise" approach has one shortcoming: the System has to recognize losses, recognize its limitations, recognize that it is not perfect and omnipotent. That's the price you pay for optimal decision making.

But there is a tempting alternative. The System can avoid all those negative feelings by selectively ignoring the unpleasant part of Reality.

Will perceived reality match the real World once bad things are over? No, it would not. The "enhancement" of the perceived reality is achieved by altering the interpretation of the World, by changing the model of the World. And those changes become a permanent part of the model.

It looks great short-term. Perceived reality is better than the actual one!

But the downside is: the System shall make decisions. And a skewed model leads to bad decisions. And bad decisions, in turn, lead to worsening Reality. Which requires a deeper "creative interpretation of reality" to avoid the negative feelings.

The System can do it for some time. It could even experience euphoria since the perceived level of good things is growing. However, it is not going to last. In the long run, the results from bad decisions accumulate and the System will fall into a tailspin.

The larger the snowball is, the harder it is to stop. At some point, the Reality became so bad that it is no longer possible to ignore and deny it. But admitting that it is unbearable, since at that point the discrepancy between the actual and perceived reality is huge. In a way, this is a gradually developed addiction, which is very hard to quit. But just like with any other growing addiction, at some point the negative will reach the breaking point of the System.

Let's take another look. At first, System can easily pretend that things are going extremely well. But as negative results from bad decisions accumulate, it is getting harder and harder, and finally just impossible.

Even though I have mentioned similarity with an addiction, let me point out two differences from other addictions, like substance addiction.

First, the drag addict will likely have physiological, not just psychological reasons to increase the dose. A person or a country in self deception does not have that, but it does not help much.

Second, while substances are turning on some reality filters in a drug addict's head, they get turned off between doses. Drug addict knows that he is a drug addict. A person or a country deep in self deception - does not.

Let's take a look at examples:

Example 1: Rejected admirer. Let's say, Alice likes Bob (gender does not matter here) but Bob does not like Alice. Alice can either accept it and look for a partner somewhere else, or come up with some creative explanations that Bob indeed likes her, just have reasons not to show it. The first one is unpleasant but practical. The second one will make Alice feel good, but lead to a bad decision to chase after Bob. Bob will likely try to distance more. Alice will have to come up with some wilder fantasies why he is doing that while (in the growing fantasies inside Alice's head) loving her. Which will lead to even worse decisions, some unpretty and fruitless  attempts to "win" Bob, wasted resources and ruined deputation.

Alice's self-deception here might not be just in fantasy that Bob likes her. She might also fantasize that she has special power to change his mind and make him like her.

Again, this is not about gender. There are a lot of Bobs out there chasing Alice.

Example 2: Bob is denying problems in relationships with Alice. Let's say, Alice is no longer willing to talk to Bob, disappearing somewhere, and acting strange. Bob can either accept that Alice is no longer interested in him that much, and deal with it. Sometimes it is possible to repair relationships, sometimes it is not, but only if one accepts the problem. Or he can deny that he lost some value for Alice, and come up with creative explanations for all the clues. It would feel better, but what will be his next decision? If Bob will act on the assumption that he is indeed very valuable for Alice, he will insist that Alice explain why she is acting strange and tell her to be around when he needs her. After a few Bob's ultimatums (or maybe sooner), Alice will leave for good.

Example 3: A country does not do very well. It might admit problems it has, and try to solve them. It might also deny the problems or come up with some creative explanation why they live worse than the neighbors. Which leads to bad decisions in internal and foreign politics, which leads to worsening the economy, which leads to more creative explanations. Of course, this country frames itself as exceptional, and countries around it as envious enemies, which, of course, produces self-fulfilling prophecies, because neighboring countries disagree with that vision. But the country cannot stop - it tries to force the neighbors to agree that the country is truly exceptional and entitled and shall be leading and obeyed. But why would  the neighbors accept the hegemony of a messy country with a struggling economy? So, the neighbors are distancing, the country keeps pushing, which leads to conflicts and war. Which, of course, the country cannot afford, but denies that.

Summary:

1. Self-deception is when the conscious mind fools its unconscious mind to avoid experiencing unpleasant feelings.
2. Self-deception tends to snowball, which leads to catastrophe. No System can make good decisions based on a rigged model.
3. It is much easier to stop self-deception early, when they are small. Better yet is to avoid self-deception completely. That is not easy, because our brain is usually offering less scary and more convenient explanations for everything to protect us from stress. It takes effort and some stress to honestly question the questionable.
4. Conspiracy theories are a contagious form of self-deception. They are harmful and dangerous.
5. Propaganda is a way of imposing self-deception. It is harmful and dangerous.

Who will likely be the winner in competition between people, businesses, countries and alike? The one with the most adequate model has a better chance. The one who is lying to himself will likely lose. I.e., avoiding self-deception provides competitive advantage.