In a lecture titled “System as Difference,”Luhmann said,
Spencer Brown’s mark consists of a vertical line that separates two side, and a horizontal line that points to one side and not the other, and could thus be called an indicator or pointer. The mark is consciously thought of as one sign but it consists of two components. However, if we start out in this manner, a question arises: who could designate one but not the other component without already having a sign for this particular purpose at this disposal? Thus, we must first of all simply accept the mark as a unified mark. . . .
In principle, a distinction contains two components: namely, the distinction proper, marked by the vertical line, and the indication, marked by the horizontal line. It is striking that a distinction contains both a distinction and an indication and thus distinguishes between distinction and indication. If a distinction is become operational as a unity, it always already presupposes a distinction within the distinction
Luhmann, N. (2006). System as Difference. Organization, 13(1), 37–57. https://doi.org/10.1177/1350508406059638
Drawing a distinction is an operation that takes place in time. It might help think of the vertical line being drawn first to create two sides; then the horizontal line is drawn toward the left side, which we can call the inside.
The paradox, of course, is that both components have to be assumed at once. “Thus, we must first of all simply accept the mark as a unified mark.” But we can dissolve the paradox with the help of time, or the before/after distinction. Thus distinction and indication are observed as happened sequentially rather than simultaneously. As Luhmann argues, whatever happens happens at the same time; however, we use the before/after to dissolve this paradox.
We can also draw a circle to represent inside and outside. As Spencer Brown wrote,
The theme of this book is that a universe comes into being when a space is severed or taken apart. The skin of a living organism cuts off an outside from an inside. So does the circumference of a circle in a plane.Laws of Form
The circle represents the distinction and the indication as one line.