Science, Strategy and War The Strategic Theory of ... - Boekje Pienter

members of the Santa Fe Institute, noted that the theory of equilibrium-seeking markets wasfundamentally wrong. Instead, markets are distinctly non-linear and always in disequilibrium.The economy must be regarded as a complex adaptive system driven byfeedback mechanisms (supply and demand fluctuations keep an economic system in balance)and positive feedback mechanisms (marketing and advertising help one firm get a jump onothers, which give it more capital to increase its marketing and advertising, and so on) 97 .Instability was also noted in the financial system. Sudden fluctuations in one region canripple through the entire tightly connected global financial system. The fact that informationis disseminated ever more rapidly increases the awareness of developments which leads tofaster action to adapt to change or to anticipate it, which can actually precipitate the arrivalof the dreaded effect or ever cause a worsening of it. It may cause a rapid chain reaction.This is explained under the rubric “self-organized criticality” which was defined in 1991 byBak and Chen as ‘large interactive systems perpetually organize themselves to a critical statein which a minor event starts a chain reaction that can lead to a catastrophe…chain reactionsof all sizes are an integral part of the dynamics. Furthermore composite systems never reachequilibrium but instead evolve from one metastable state to the next’ 98 .Non-linearity, Chaos and organizational lifeNot surprisingly, non-linearity, Chaos theory, Complexity theory (including Chaos Theory)have also been widely applied to organizational behavior, both from an intra-organizationalperspective (the dynamics within an organization) as well as from the inter-organizationalperspective (competition, market dynamics, war). First, the intra-organizational perspective.Already in 1975 Jantsch pointed out that his findings on self-organization, andunderstanding human systems in terms of dissipating structures would provide a theoreticalbasis not only for social and cultural organization but also for self-organization towardshigher states of system organization 99 . Prigogine and Gell-Mann too make direct referencesto the applicability of complexity theory and social systems such as businesses andeconomies. Another author noted that:Chaos theory is a promising framework that accounts for the dynamic evolution of industriesand the complex interactions among industry actors. By conceptualizing industries as chaoticsystems, a number of managerial implications can be developed. Long term forecasting isalmost impossible for chaotic systems and dramatic change can occur unexpectedly; as aresult, flexibility and adaptiveness are essential for organizations to survive. Nevertheless,chaotic systems exhibit a degree of order, enabling short-term forecasting to be undertakenand underlying patterns can be discerned. Chaos theory also points to the importance ofdeveloping guidelines and decision rules to cope with complexity; and of searching for nonobviousand indirect means of achieving goals 100 .ant colonies and beehives to the dealing room of a stock exchange. They assert that we can regardsuch social structures as open an non-linear in which feedback and competition abound. In economicsit was found that world's economies possess non-linear characteristic of complex dynamic systems.Market crashes show sensitivity to small disturbances such as a localized financial earthquake orrumors and beliefs among analysts, stockbrokers and speculators. See p.335.97 Brian Arthur, ‘Positive Feedback in the Economy’ , Scientific American (February, 1990), 131-40.98 Per Bak and Kan Chen, ‘Self-organized criticality’, Scientific American, January 1991, p.46.Metastable denotes having only a slight margin of stability or only a delicate equilibrium.99 Jantsch, p.61.100 Michael Lissack, ‘Complexity: the Science, its Vocabulary, and its Relation to Organizations,Emergence, Vol.1, Iss.1, p.112.147