Chaos theory: don’t trust your initial state
Why radical and unpredictable changes in business landscapes can emerge from unlikely sources
By Anna Jäfvert and Gustav Hansson
The force of chaos fundamentally affects how we plan, make strategic decisions and organize ourselves. Chaos theory, AKA ‘the science of surprises,’ is an approach that attempts to comprehend this unwieldy part of our existence.
On one level, chaos theory is an exploration into how minor or chance details lead to to noteworthy outcomes. How one cup of coffee led to the creation of a multi-billion dollar company, how one rounding error in the sales forecast led to the demise of a whole product line and how one missed connection saved the world from a climate apocalypse.
Understanding the nature of chaos theory—and how it relates to aspects of business such as strategic goals, project management and scenario planning—can provide the necessary means to not only navigate through tough times, but leverage from them. If you’re interested in putting it into practice, frog has the tools and competences to provide tangible use cases to equip you for success, even within a chaotic context.
The evolution of chaos
Scientists used to believe that the world we live in was fundamentally linear and predictable, operating in the same fashion as a machine. If 1+1 equals 2, then 2+2 should equal 4. In this reductionist way of thinking, one could utilize all the variables needed to accurately depict the future state of something. Sounds good, right? The problem is that the universe does not behave in the same way as a machine, the universe is instead constantly shifting in and out of a state of chaos, produced by the collision of stable and unstable forces.
What’s missing from this equation is what’s commonly referred to as noise; unknown variables and imprecise measurements (think of insufficient decimals, rather than faulty instruments or shaky hands). In turn, we are left with unpredictable outcomes — which are found everywhere. Yet, human beings have a tendency to treat the abnormal as outliers; not part of the same field, system or genre. Today, however, we know that unpredictable occurrences are intrinsic to the system itself. Back in 1984, no one could have predicted that Nike would sell $126 million worth of Air Jordan shoes within the first year of launch, when their initial forecast was $3 million over four years. This can’t be explained merely as an anomaly, but rather the product of a complex system going in and out of a state of chaos.
To explore chaos on a slightly deeper level, as well as to stimulate some new ideas on how chaos could affect, and be leveraged for, the way you work, we’ve summarized two of its most tangible characteristics below.
Chaos is sensitive to initial conditions
Chaos theory is often simplified to what is called the butterfly effect—and went mainstream when Dr. Ian Malcolm (Jeff Goldblum) used it to explain chaos theory in the 1993 film, Jurassic Park. The butterfly effect was accidentally discovered by Edward Lorenz in the 1960s when he was working on weather forecast simulations. Lorenz’s seminal discovery showed that minor alterations to initial inputs (in this case, the difference between the number of decimals) can have immense consequences on a larger scale — implying that a butterfly flapping its wings in one part of the world can cause a tornado in another. The fact that changing the initial conditions of a simulation by only a fraction can generate radically different scenarios means that anything affected by chaos is also wildly unpredictable.
Chaos exists alongside order
At some point in our timelines, we will all likely use the word ‘chaotic’ to describe our lives, referring to complete disorder. But is that a fair description of the term in its scientific context? No — there’s also order in chaos. The simplest way to find order in chaos is by looking to nature. If you examine tree growth, the shape of a mountain or the formation of clouds, you will find both chaos and order together. Even though the individual examples may look different from each other, they show the same patterns — they are self-similar (commonly referred to as fractal). This means that no matter where you look, or what scale you look at, the appearance of the structure will be the same.
The combination of sensitive dependence on initial conditions and self-similarity result in what is known as the strange attractor (a phenomena belonging to the world of physics that is too complex for the scope of this article). This is how we arrive at patterns that are unique, repetitive and highly unpredictable.
Pulling it all together
What we’ve attempted to (briefly) explain is this: the initial state tells you nothing about the mature state, though it will greatly affect it. Thus, regardless of world-class scenario planning teams, organizations cannot a priori know how things will turn out when it comes to budgeting or forecasting. No matter how much the Nike team analyzed and forecasted ahead of the launch of Air Jordans, their chances of making a correct prediction on a four-year sales forecast could never account for the chaos aspect.
Just like Nike, all organizations are dynamic ventures, exposed to elements of both stability and instability: control vs. autonomy, imitation vs. innovation, waterfall vs. agile. This pushes us into a state of chaos which prompts the above-described characteristics (and more). The state of chaos is, thus, inescapable. With this insight in mind, we’ll leave you with a few questions to reflect upon:
- If predictions hold no firm truth, what steps could you take to make profitable decisions?
- If the initial state tells you nothing about the mature state, how do you get to where you want to go?
- If the world and the conditions for your business constantly change, how should you organize yourselves?
Further reading:
- James Gleick, Chaos
- Sami A. Houry, Chaos and Organizational Emergence: Towards Short-Term Predictive Modeling to Navigate a Way Out of Chaos
- Prof. Robert Sapolsky, Chaos and Reductionism
- R. A. Thiétart and B. Forgues, Chaos Theory and Organization
Anna Jäfvert—Senior Consultant, frog
Gustav Hansson — Management Consultant, frog
Gustav has diverse experience from various industries, primarily working on different strategy projects — currently with a focus on helping companies become more data-driven. He holds a Bachelor’s degree from the University of Mississippi and a Master’s degree from Handelshögskolan Göteborg. With a background as a professional tennis player, Gustav combines his passion for sports with business expertise.
With a big thanks to the brilliant teams at frog Sweden, Finland and Denmark for our shared journeys into chaos theory and beyond.
Illustration by Ana Maria Zuluaga Ramírez
