Chaos Theory’s Premature Promise

Tom Peters

I devoured James Gleick’s book, Chaos. It certifies a notion dear to my heart—that the messy aspects of phenomena are the most important. Before chaos theory, for instance, scientists taught us that big effects were generally the result of big causes. Now chaoticians suggest that “small changes in initial conditions” cause enormous consequences.

Suppose, for instance, you’re bonked on the noggin by a flower pot that falls off a third-floor window ledge. What complex chain of events in your life, the life of the third-floor tenant, the building architect, etc., led you and that flower pot to meet up? And if, say, your grandfather had altered his pattern infinitesimally 70 years ago, aren’t the odds high that today’s accident would never have happened?

Burgeoning computer power helps us create models that track Gramps and take into account long, convoluted chain reactions. As a result, chaos theory will doubtless make major contributions to the likes of weather forecasting (understanding how a tiny disturbance hither generates a monster storm yon) and medical science (getting to the bottom of the mysterious turbulence that marks the heart’s functioning).

But beware the inflated promise of chaos theory! Be warier still of adherents who propound its immediate application to business strategy. As I was talking with one colleague about some zany market phenomenon, he chimed in with, “Chaos theory will demonstrate that this isn’t chaotic at all.” He could be right in a narrow, technical sense. But I wouldn’t bet the company on it.

Consider this excerpt from A Random Walk Down Wall Street, in which Princeton Professor Burton Malkiel pokes fun at star stock-pickers:

The contest begins, and 1,000 contestants flip coins. Just as would be expected by chance, 500 of them flip heads, and these winners are allowed to advance to the second stage of the contest and flip again. As might be expected, 250 flip heads. Operating under the laws of chance, there will be 125 winners in the third round … and eight on the seventh. By this time crowds start to gather to witness the surprising ability of these expert coin-tossers. The winners are celebrated as geniuses in the art of coin tossing—their biographies are written and people urgently seek their advice. After all, there were 1,000 contestants, and only eight could consistently flip heads.

I’ve got to admit that I’ve occasionally penned similar tributes. Celebrating such “heroes” is part of our everlasting, compulsive need to explain. It’s given us cave drawings, Greek mythology, Newtonian physics, quantum mechanics, and now chaos theory. Our drive to know, of course, has been the engine of modernity.

On the other hand, consider the unshakeable belief of Nobel laureate in economics F.A. Hayek. He is adamant that economic organization, the billions of daily, arm’s-length dealings between strangers that make up the global economy, is “the most complex structure in the universe.” He adds, in his book The Fatal Conceit, that “unintended consequences are paramount” in a market economy. Fickle “subjective marginal utilities”—you dote on pink running shoes with air-bubble soles, but I find bubbles frivolous and groove on green—are the force crazily powering the entire economy, including the allocation of funds for chaos-theory research.

Hayek goes further: Policy makers’ belief that they can fully grasp their economies’ machinations is folly. Such pretensions to understanding have stymied centrally controlled economies from Havana to Moscow to Ho Chi Minh City.

Perversely, the astonishing power of America’s economy stems from having arranged things so that we don’t have a clue as to what’s up! Our numerous winning entrepreneurs, despite what passes for analysis in their autobiographies, are more or less lucky finalists in the business start-up version of Malkiel’s Wall Street coin-toss lottery. We have an “unfair share” of Rod Canions (Compaq), Michael Dells (Dell Computer), and Craig McCaws (McCaw Cellular)—because, generation after generation, we induce an inordinate number of our prodigies to “flip coins.”

Now transfer this argument inside today’s corporation—home to a scramble animated by the weekly emergence of new technologies and competitors. In short, wise corporate chiefs acknowledge Hayek’s wisdom and let 100 business units bloom, 1,000 individuals contend.

Let’s hold the applause for chaos theory. Instead of the frantic pursuit of total comprehension (via central-control schemes), let’s revel instead in our very lack of comprehension! While less successful businesspeople retain consulting chaoticians to construct ponderous models aimed at explaining what went wrong yesterday, the champion entrepreneur in another 10 tries, one of which just might click.

The historian Arthur Schlesinger wrote, “Ignorance of the present, ignorance of the future—these are pardonable. But ignorance of how ignorant we are is unpardonable.” At this point anyway, it’s criminal to waste precious days trying to figure out what Granddad might have done differently 70 years ago to keep that flower pot from beaning you this morning.

(C)1991 TPG Communications.

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