Paradigms and The New Paradigms and The New Science of ComplexityScience of Complexity

Presentation copyright © 2000 by Barry Brownstein

The Future Belongs To The The Future Belongs To The HumbleHumble

“Some people will never learn anything for this reason: because they understand everything too soon.”

“No one is less ready for tomorrow than the person who holds the most rigid beliefs about what tomorrow will contain.”

“We don’t know what we don’t know.” “Since the existing theory is producing the current

results, new levels of results require new theories.”

More on ParadigmsMore on Paradigms

“When we unaware-then the fixes and adaptations to circumstances create an increasingly complicated system in which rule books look like your only salvation.”

When we are aware- “management is accomplished with minimum effort or intervention. There is no need for tight control on those doing the work … Incompetence gets turned around through education”

Predicting in HollywoodPredicting in Hollywood > $20 million/picture

– Nicolas Cage– Jim Carrey– Kevin Costner– Tom Cruise – Harrison Ford– Mel Gibson– Tom Hanks– Robin Williams– Bruce Willis

Box office/last film

– 16.5 (million)

– 26

– 35.1

– 55.7

– 31.0

– 81.5

– 79.4

– 5.0

– 27.1

Forecasting Financial MarketsForecasting Financial Markets

Q. In a ‘average’ year of interest volatility, if you invested a $1000 in treasury bill futures and were correct about the direction of interest rates for 52 straight weeks how much money would you have?

More On Stock ForecastingMore On Stock Forecasting

Markets are a spontaneous order and perhaps are inherently unpredictable, but not random

Do events drive markets?

– If you had tomorrow’s newspaper could you predict the market?

Forecasting The WeatherForecasting The Weather

Next day accuracy 70% 2 day accuracy 63% 3 day accuracy 60% 4 day accuracy 55% long-term not much better than chance The metaphor of the “Butterfly Effect”

Chaos and Complexity Major paradigm shift in the natural sciences and

social sciences. Previously explanations of how the world works were

cast in terms of order and regularity. System moved in predictable ways.

Now, the emphasis is on the creative role of disorder and irregularity. Systems move in self-organizing ways with unexpected and unpredictable outcomes.

Linear vs. Complex Systems a given cause (action) has one effect (outcome) small effects negligible additive, independent not highly sensitive to initial conditions closed system in equilibrium change is smooth except for outside shocks predictable

a given cause can have many different outcomes

small effects vary synergistic, interdependent very sensitive to initial

conditions open, self-organizing

systems far from equilibrium; allows for discovery

abrupt and erratic change not uncommon

inherently unpredictable

InterdependenceInterdependence

“Every being in nature has its existence so connected with other beings that if set apart from them it would instantly perish.”- Ralph Waldo Emerson

“In civilized society man stands at all times in need of the cooperation and assistance of great multitudes”- Adam Smith

Orioles vs. Yankees

– Bernie Williams vs. Albert Belle

The Importance of LanguageThe Importance of Language “A complex system such as a corporation can occur

only in a linguistic culture. And it can only occur in a system of language that allows for complex systems.”

Our linear language for both social and business affairs makes it difficult to deal with complex systems.

“Language includes practices of speaking and action.”

– “showing the way by going first”