Shanghai TMP 2004 Top Management Program Shanghai Prof. F.. M. Macaranas May 2004

I. Introduction to Chaos Theory

Introduction to Chaos Theory A.Clarification / definition of terms 1.Chaos theory Definition:science that determines order in the randomness and unpredictability that exist in the natural and social systems Ex: coastlines, mountains, clouds, galaxy clusters, leaves, heart rhythms, etc.

Introduction A.Clarification / definition of terms 1.Chaos theory applications Self-organization in public administration: citizens can co-create goals, plans, and outcome that can be sustained by them and communities Dynamic evolution of industries and complex interactions among industry actors Human interaction and leadership styles: business organizations as complex adaptive systems Firms respond to changes in the environs more effectively if authentic relationships are valued at all levels of the companies Monsanto experiment: overloading 22,000 people to find new and creative ways of adapting to new environ

Introduction A.Clarification / definition of terms 1.Chaos theory applications Long-term strategies that are incremental and adaptive rather than prescriptive and rigid Furnaces that burn hotter, metals that can be more stressed, cars that burn fuel without stalling out Non-linear thinking in crisis management: real-time information provided by CNN during the Gulf War change political and military decisions unexpectedly

Introduction A.Clarification / definition of terms 1.Chaos theory underlying principles Non-linearity Determinism Sensitivity to initial conditions Sustained irregularity in the behavior of the system Unpredictable long-term behavior Self-organization Positive feedback loops Qualitative character of systems rather than numerical predictions of future states Unstable Aperiodic – no periodic repetition of values

Characteristics of Systems SystemOrderChaosRandomness Paradigmatic Example Clocks, Planets Clouds, Weather Snow on TV Screen PredictabilityVery HighFinite, Short Term None -> Simple Laws Effect of Small Errors Very SmallExplosiveNothing BUT Errors SpectrumPureYes!Noisy, Broad DimensionFiniteLowInfinite ControlEasyTricky, Very Effective Poor AttractorPoint, Cycle, Torus Strange, FractalNo!

Introduction A.Clarification / definition of terms 3.Chaos theory-based SWOT Identify the Strengths of an entity Classify whether these are characterized by order chaos randomness Identify W, O, and T Combine internal and external elements Think of a strategy based on the combination

Chaos Theory Example Chaotic systems, in this case a fractal, can appear to be smooth and ordered.

Chaos Theory Example: The Sierpinski’s Triangle first recursion second recursion third recursion fourth recursion

Applications to New Concept of National Security A.Clarification / definition of terms 3.SWOT analysis Definition: a strategic model in management that combines internal strengths and weaknesses of an entity, and external opportunities and threats facing the same entity Opportunities Threats Strengths S-O S-T Weaknesses WO W-T Fractals are recursively defined and infinitely detailed