What is Chaos Theory?

James Gleick wrote a best-selling book in 1987, Chaos: Making A New Science, and chaos theory has become an increasingly popular metaphor in management literature, regarded as the "new science" of administration !"erman, 199#$ %"ans, 199#$ &orcol, 199#'( )hile Gleick did not in"ent the idea of chaos, nor did he contribute to its scientific principles, he did help lift it from obscurity in the pages of scientific *ournals and put it into the mainstream( +here are many books, articles, *ournals, consultants, institutes, and centers that employ chaos theory as the new "paradigm" for the application of comple,ity theory to business management(

James Gleick )hat is -haos +heory. -haos theory began as a field of physics and mathematics dealing with the structures of turbulence and the selfsimilar forms of fractal geometry( +his is not "ery descripti"e( /s it is popularly understood, chaos deals with unpredictable comple, systems( -haos theory stems, in part, from the work of %dward 0oren1 of &2+, a meteorologist, who simulated weather patterns on a computer( )orking with a computer ha"ing limited memory, after "iewing a particular pattern, he wanted to reco"er the data and started the program again, e,cept he put in the "alues rounded off to 3 places instead of the original #( 4e was surprised to find a completely different result on his computer than he had before, and it looked like this when printed out5

6ecause of its resemblance to a butterfly, this has become known as the "6utterfly %ffect" and is often used in the literature to refer to comple,ity and unpredictability( 4ere is a good link if you want more detail about this story( 2n chaos theory, "+he 6utterfly %ffect" refers to the disco"ery that in a chaotic system such as the global weather, tiny perturbations in the system may sometimes lead to ma*or changes in the o"erall system( 2t is theoretically possible that a slight rise in temperature in the ocean off the cost of 7eru will create tiny changes in the air flow that would e"entually lead to different weather in 8orth /merica and %urope( 2n most cases the slight change would make no difference whatsoe"er, but when the system is unpredictable at a certain stage, the future may unfold 9uite differently, depending upon what little difference occurred( -haos theory is reminiscent of Gestalt theory$ a whole is greater than the sum of its parts( 2t is also similar to systems theory, for chaos theory is only concerned with systems( +he application of chaos theory to management depicts organi1ations as comple, and unpredictable because of the relations among constituents of a system( &any writers seem to regard chaos as disorder( 7erhaps it is a bad name, because chaos makes you think of anarchy, mobs, randomness, a mess and out of control( :o what is the real meaning of chaos theory.

0et;s consider the disco"ery of %dward 0oren1 in more detail( )hat 0oren1 was trying to do, as a meteorologist, was to predict weather patterns by simulating them in a computer( 4e put in some e9uations but his computer was slow and klunky, because this was 19#1 before <ell was manufacturing slick, powerful cheap computers( 4e kept a continuous simulation running on his simple computer that would output => hours worth of his simulation for e"ery minute as a line of te,t on a roll of paper( (((0ine by line, the winds and temperatures in 0oren1;s printouts seemed to beha"e in a recogni1able earthly way( +hey matched his cherished intuition about the weather, his sense that it repeated itself, displaying familiar patterns o"er time, pressure rising and falling, the airstream swinging north and south( James Gleick' )hen 0oren1 put it the different numbers, rounding off in order to sa"e time and space on his slow computer, he disco"ered chaos( 4ere is how it was described in James Gleick;s book on -haos5 !ne day in the winter of 19#1, wanting to e,amine one se9uence at greater length, 0oren1 took a shortcut( 2nstead of starting the whole run o"er, he started midway through( +o gi"e the machine its initial conditions, he typed the numbers straight from the earlier printout( +hen he walked down the hall to get away from the noise and drink a cup of coffee( )hen he returned an hour later, he saw something une,pected, something that planted a seed for a new science( +his new computer run should ha"e been e,actly like the one he had before, but as he e,amined the new printout, he noticed that weather simulation was so different from the pre"ious run that, within *ust a few months of simulation, all resemblance to the first print out had "anished( +here was a totally new and une,pected pattern( /s one writer described it, 4e looked at one set of numbers, then back at the other( 4e might as well ha"e chosen two random weathers out of a hat( 4is first thought was that another "acuum tube had gone bad /ndrews, 199#'( ?or those who do not know, the original computers, which are much less powerful than a laptop, did not ha"e chips but used "acuum tubes( )hat was the difference. /ccording to /ndrews, in the computer;s memory, si, decimal places were stored5 ( @A#1=7( !n the printout to sa"e space, *ust three appeared5 (@A#( 0oren1 had entered the shorter, rounded-off numbers, assuming that the difference-one part in a thousand-was unimportant( /s /ndrews put it, / small numerical error was like a small puff of wind - surely the small puffs faded or canceled each other out before they could change important, large-scale features of the weather( Bet in 0oren1;s particular system of e9uations, small errors pro"ed catastrophic( 0oren1 printed a paper about this sub*ect called, "Predictability: Does the Flap of a B tterfly!s "ings in Bra#il Set $ff a %ornado in %e&as." and the title of the 6utterfly %ffect has remained( +oday, sensiti"e dependence on initial conditions is referred to as CC+he 6utterfly %ffect;; and it has spawned research o"er the last se"eral decades know "ariously as chaos theory, comple,ity theory, stochastic processes, and other names( +he theory is concerned with natural processes e,pressed in terms of mathematical formulas, calculations that were "irtually impossible without computers( 2n differential calculus, chaotic systems are represented by nonlinear differential e9uations, which deal with natural phenomena such as water turbulence, friction, or financial markets( Dnlike linear e9uations which beha"e predictably, chaotic systems are represented by nonlinear differential e9uations that change abruptly or discontinuously( 2n a nonlinear e9uation, a small change in one variable can ha"e a disproportional, sometimes catastrophic effect on other "ariables( +he nonlinear e9uations re"eal breaks, loops, recursions and all kinds of turbulence 6riggs E 7eat, 199A'( -haracteristics of a chaotic system are as follows5 :ensiti"ity to 2nitial -onditions( /s in the case of 0oren1;s work, a comple, system reacts to different "ariables at the outset in unpredictable ways( %"en starting with the same, e,act or slightly different "ariables in a model will not result in the same outcomes, if the system is comple,( +ime 2rre"ersibility( 2n a comple, system, there is ne"er the same conte,t twice( +hus, a college, business, or team with essentially identical personnel and similar characteristics will ne"er perform e,actly the same as another or itself'( /n analogy often used to e,plain this is, "Bou ne"er step in the same ri"er twice," meaning the

system is ne"er e,actly the same( +he water you cross is different than a moment ago or a few moments later( 2n fact, with time the ri"er may meander, dry up, or become a flood( /s applied to management, a strategy or decision will ne"er be made twice with the same conte,t( :trange /ttractors( /ttractors in chaos theory are like the influence of gra"ity, sets of "alues in the "phase space" to which a system migrates o"er time, also called islands of stability possible states of a dynamical system'( 2n a formula an attractor can be a single fi,ed point, a collection of points, a comple, orbit, or an infinite number of points( )hile it is less clear how these are represented in a social organi1ation, there is the belief that any organi1ation has "attractors" that cause the beha"ior of the organi1ation to alter o"er time, depending upon which social, economical, or other forces dri"e the system at a gi"en point and how they interact( ?ractal ?orms( / fractal is any cur"e or surface that is independent of scale( /ny segment, if magnified in scale, appears identical to the whole cur"e( 2n the management analogy, it is assumed that different le"els of organi1ation resemble others, like a fractal in the managerial hierarchy( / form of social structures can be e,amined in relation to characteristics of the whole system at the macro and micro le"els( 6ifurcation( 6ifurcation is the sudden appearance of 9ualitati"ely different solutions to the e9uations for a nonlinear system as a parameter is "aried( 2n an organi1ation, two different patterns groups' can emerge to address an issue differently, as comple,ity increases( +his is often recommended as a source of creati"ity( +he appeal of chaos theory is the "iew that organi1ations are comple, adapti"e systems that ha"e beha"iors similar to those found in nature--different stages of stability and chaos( Father than control an organi1ation, a manager is prompted to take ad"antage of its comple,ity( +heorists in management and social organi1ation now belie"e that organi1ations are also non-linear dynamic systems, ha"ing the same characteristics as natural phenomena :tacey, 199#'( +he organi1ation is often seen as comple, adapti"e system comprised of the formal and shadow systems, and in this way the analogy is made between chaos in natural systems and the social organi1ation( :imilarly, the long-term beha"ior of the organi1ation is unpredictable, akin to the inability to predict hurricanes far into the future( :tacey addresses this issue by stating that managers much learn how to manage the an,iety that accompanies being on the edge of chaos, employing a nearly mystical concept of "creati"e destruction(" :tacey ends with optimism, belie"ing that although long term outcomes are impossible to predict, dealing effecti"ely with change and challenge on a daily basis will ultimately result in success( 2t is ob"ious from mathematicians and scientists who study natural phenomena, such as hurricanes, cardiac patterns, or friction, the mathematics on a computer can show a chaotic pattern( /s <ennard 199#' said5 ")hat good is a science of chaos, if it doesn;t tell us how to o"ercome chaos and comple,ity.; 2sn;t that what management is about.; p( >9@'( 2n the final analysis, this is precisely the most important 9uestion( 2f a manager cannot control anything or force a system into some form of order, is management possible. 2s a manager necessary. %,cept in specific cases, such as world monetary flows and heart arrhythmia that can be easily represented numerically, it is difficult to pro"e that social systems ha"e the same traits( 8onetheless, as a metaphor or an analogy, chaos theory is often used as a way to conceptuali1e management theory and other social systems( +herefore, the efficient manager will plan for and e,pect constant change in the en"ironment( 4is or her goals become not a set of results but a series of contingency scenarios to which he or she can react in the short term at some later date in the future( +he same principle applies to human society( +iny changes in one person;s state of mind can, on occasions, lead to ma*or changes in society as a whole( !r simple acts can lead to unintended conse9uences( %,ample 15 6ack in the early 198As, 26& was the dominant company in the world and mainly concerned with mainframe computers( 2t decided that there might be a market for personal computers, since there were good sales of /pple, /tari, -ommodore, and other small companies( 6efore they could produce their own 7-, they needed a new disk

operating system <!:' because the one they had was designed for the large mainframe computers( 2n search of a <!: they ended up in negotiations with 6ill Gates, who had a small company claiming to ha"e a <!: system( /ctually, he did not but he knew someone who did and bought the rights immediately for a few thousand dollars( 4e made a deal with 26& to get a royalty on e"ery disk operating system <!:' sold( 6elie"ing that 7-s would not amount to much, 26& made the deal( Bou know the rest of the story, with &icrosoft becoming one of the biggest companies in the world and 26& suffering huge losses and its place in the firmament as a big, powerful company( %,ample =5 +heresa 0e7ore decided to make the typeface on ballots larger for 7alm 6each "oters in the D: 7residential election, because many of her residents were older and had difficulty seeing small print( :he did not notice that it now took two pages instead of one that could confuse "oters about which button to push when they "oted( /s a result 19,1=A "oters punched holes for both 7at 6uchanan and /l Gore, and their ballots had to be thrown out( /nother 3,>A7 people appeared to "ote for 7at 6uchanan, which he himself found most surprising , e,pecting only a couple of hundred "otes( &s( 0e7ore;s new design caused about ==,AAA "otes for /l Gore to not be counted( 2f they had, ?lorida would ha"e gone to Gore, he would ha"e been 7resident, and the D(:( :upreme -ourt would not ha"e selected 6ush( Gore would ha"e likely signed the "Gyoto 7rotocol on Global )arming," probably not declared 2ra9 part of an "a,is of e"il" and probably would ha"e not in"aded 2ra9( !f course, other things would certainly ha"e happened that we cannot imagine( %,ample 35 !n the +itanic, the crew had no binoculars, which could be used to see approaching icebergs( -aptain %dward :mith also canceled the scheduled life boat e,ercise for passengers( 2n addition to the o"erweening attitude that the ship was unsinkable, these two small factors contributed to the deaths of 1@AA people after the ship struck ice( -aptain :mith also refused to reduce his speed after there were warnings of ice in the channels( )hen it was e"ident that the ship would sink, neither the passengers nor the crew knew e,actly what to do( +hey did not know which boats to get into, and the crew did not know that it was possible to lower the boats with people already in them( 2n fact, there were not enough life boats for e"eryone on board( -aptain :mith;s decision to cancel the life boat drill caused massi"e loss of life( / little thing with big repercussions( HHHH ?rom a social perspecti"e the most important concept may be that comple, and unpredictable results can and will occur in systems that are sensiti"e to their initial conditions( +he generator of unpredictability in comple, systems is what 0oren1 calls "sensiti"ity to initial conditions" or "the butterfly effect(" +he concept means that with a comple,, nonlinear system, "ery infinitely' small changes in the starting conditions of a system may result in dramatically different outputs for that system( So What is the Point? )e know that all organi1ations of human beings are systems, that there is always change, and today there is rapid technological change and globali1ation( )e must all be fle,ible, willing to learn new things, willing to 9uestion our assumptions all the time, and to recogni1e that we are blinded by our own pre*udices and biases( +hings that worked in the past may not work in the future, so you ha"e to keep on learning and e,perimenting( %"en if you don;t change, e"erything else and most other people will, so they will change you en"ironment so much that you will be forced to react(

/s you consider yourself, your life, your family and friends, and your place of work, do not fall prey to illusions and be on guard to your own biases and pre*udices( 6e aware of the impermanence of e,istence and the different interpretations of reality( Bou nor 2 can know e"erything, or e"en know most things for sure, because each mind is different, each person has different e,periences, and we are all sub*ect to false interpretations( 7eople with schi1ophrenia ha"e chemical differences in their brains that create e,traordinary delusions( +hey hear "oices, feel compelled to follow the orders of unspoken masters, and are often e,tremely paranoid( 8onetheless, what they hear, see, and feel is real to them, because reality is created by the brain( ?ree of chemical imbalances, your brain is only better by degrees because you do not always see and hear things clearly, nor always pay attention, or concentrate( Bou forget, filter, and distort data, which alters your "iew of reality( +hat finishes our tour of systems theory and Gestalt laws( )e can try to summari1e as follows5

+he parts of a system communicate with one another( +he system has an en"ironment with which at least one of its parts communicates( +he system is always changing( +he beha"ior of the system cannot be predicted from the beha"iors of its parts( /ll systems ha"e similar characteristics( &any managers still see organi1ations as "machines" that can be wound up with rules and procedures( 2t is not possible for the manager to control what happens to the system( /n organi1ation near death one traumati1ed by fear and an,iety' will be stagnate and certain sub-systems will wither( 2f there is too much top-down control, creati"ity and producti"ity will be stymied( / system as a whole works differently than its parts( 7arts alone cannot do what the system can do a motor with no truck, a mo"ie with no plot, a body without a heart, an indi"idual without a team'( %ffecti"e organi1ations indi"iduals' ha"e networks communicate with others'( %ach part does something special, and the sum of the parts make a whole( !ne of the lessons of systems theory is that there is no preferred obser"er, and a lesson from Gestalt psychology is that your perception as an obser"er may be wrong( Gestalt psychology teaches us that we cannot see reality ob*ecti"ely, and our mental models of the world are deeply ingrained with personal assumptions, e"en mental images that influence how we understand the world and how we take action---we may be wrongI )orking with others should make you aware that they ha"e different mental models and that you must build a common "ision or shared picture of the world and your goals( 8othing is stable, things are always changing( +he effects of some beha"ior on an organi1ation are not predictable( +he relationships between elements in a comple, system are short-range, but the information that passes through a system is likely to be altered or modified in some way( / small stimulus may cause a large effect, or no effect at all( %nergy and information are constant inputs and outputs of any system crossing the boundaries( +herefore, e"ery system is in a constant state of flu,, trying to achie"e e9uilibrium( 7arts cannot contain the whole( 8o element in a system can totally control a system, e,cept in the most dire circumstances( 2f it can, then, then it portends death star"ation for a human, running out of money for a business'( /ny organi1ation is comple,, and the components of the system make the system comple,( / system is adapti"e, so the organi1ation will change( +he future is unpredictable( Bou can forecast the future by erecting se"eral potential plans, or scenarios, so it is possible to plan for different possibilities but you will not know for sure which one might appear(

+o sum it all up, most of our problems are comple, because there are so many factors in"ol"ed, often because the system is structured in a certain way due to things that happened in the past( 2f we see things in terms of simple

cause and effect, we cannot recogni1e the real causes nor can we fi, the problem( Dsing systems thinking we can identify real problems and potential soltuions(