Newspaper article THE JOURNAL RECORD

Strategists Should Hold Applause for Chaos Theory

Newspaper article THE JOURNAL RECORD

Strategists Should Hold Applause for Chaos Theory

Article excerpt

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 flowerpot 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 flowerpot 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. …

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