The Butterfly Effect

The world is vast and complex and it may sometimes seem that our small decisions and actions have little to no impact on the big picture. However, if you think about minute details of your life, you may be able to see how a small event was actually the catalyst for a huge change in your life. For example, maybe you bumped into someone at a coffee shop that happens to work at your dream company and eventually got you an interview there. What if you had chosen a different coffee shop, or been there five minutes later? You may not have met the person that got you into your dream job. The idea that something small, like getting coffee, can have much larger effects, such as altering your career is called the butterfly effect.

The butterfly effect rests on the notion that the world is deeply interconnected, such that one small occurrence can influence a much larger complex system. The effect is named after an allegory for chaos theory; it evokes the idea that a small butterfly flapping its wings could, hypothetically, cause a typhoon. Or it could not – the mind-boggling part of the butterfly effect is that it’s virtually impossible to predict whether a small system will lead to chaotic behavior.¹

Chaos Theory: The butterfly effect is part of chaos theory, which states that there are limitations to predictions even in small discrete systems. Chaos is possible because systems are extremely sensitive to initial conditions.² Small differences in starting conditions can, over time, make a big difference in the way that a complex system of interrelated phenomena evolves.³ Systems usually have feedback loops, which also means that once those small differences are incorporated within its system, there is no telling what will later be affected – it is out of our control. Chaos theory is specifically interested in the study of random or unpredictable behavior even in systems that are supposed to be governed by deterministic laws.⁴ Deterministic laws are supposed to remove any randomness, as determinism in a philosophical sense is the idea that all events are completely determined by previous existing causes.⁵ The butterfly effect dispels the idea of deterministic systems, as it suggests that there are non-linear ways in which small differences change the effects of a cause.

Black Swan: The butterfly effect is related to another phenomenon, the black swan. Black swans are events that are ‘outliers’, seemingly random but with life-changing impact on our world. The key understanding of black swans, similar to the butterfly effect, is that it is impossible to predict these events, even though they are ultimately consequential.

The earliest utterances relating to the butterfly effect seem to have come from Benjamin Franklin, from the 13th or 14th century. He offered a poetic description of the idea that small things can have significant effects on larger consequences:

“For want of a nail the shoe was lost,

For want of a shoe the horse was lost,

For want of a horse the rider was lost,

For want of a rider the battle was lost,

For want of a battle the kingdom was lost,

And all for the want of a horseshoe nail.” ¹

However, although ideas similar to the concept may have been circulating for centuries, the butterfly effect was first named by meteorologist and mathematician Edward Lorenz. Lorenz was searching for ways to accurately predict the weather, however, he found that mathematical linear models did not provide accurate predictions.¹ Just as it would be almost impossible to predict that you would land your dream job by deciding to get coffee, Lorenz found that initial weather conditions were not sufficient indicators of future weather conditions.

Lorenz realized that small changes in initial conditions could lead to drastically different effects when he changed an initial atmospheric condition by 0.000127. Such a small, seemingly insignificant change, caused a model to predict very different future weather conditions.¹ He realized that minuscule changes in a starting condition could mean an enormous difference in later events. In 1963, he published a paper with these ideas, titled Deterministic Nonperiodic Flow. In this paper, he essentially argued that weather predictions are inaccurate not only because knowing the precise starting conditions is impossible, but a tiny degree of change also throws off the results.¹

The paper was scientific and jargon-heavy, which led Lorenz to start using a more palatable concept during interviews: the butterfly effect. He likened his findings to the idea that a butterfly’s wing flapping represents the tiny change in atmospheric condition that would have the potential to alter the trajectory of a typhoon. He stressed that it didn’t necessarily change the course of events, but that it could, and that there was essentially no way of knowing what caused changes in weather. Lorenz, therefore, advocated for deterministic chaos models, that account for the exponential growth of errors.¹

The butterfly is literally all about consequences. It describes how very small things can have great impacts, which means that we can’t just ignore the little things. Even the identification of the butterfly effect had significant impacts on how scientists and economists understood the world.

When Lorenz discussed his findings, it had a significant impact on the way people understood scientific predictions. Up until this point, science had used linear, deterministic models that assumed that it was easy to trace the path between a cause, A and an effect, B.

There was a generally held belief that scientists need not worry about minute details external to the phenomenon that was being studied, because it would have no impact on the relationship between A and B. The butterfly effect demonstrated that causes and effects do not have a purely linear relationship and do not exist independently to other things happening externally, making it difficult to accurately make predictions.

But the butterfly effect has consequences that fall outside of science as well. The butterfly effect is widely studied in business because it suggests that small initial actions can lead to much yield great rewards in the future.⁹ This suggests significant insights for marketing. It suggests small simple actions could be a catalyst for attracting lots of customers and becoming a successful business.

Additionally, the butterfly effect more accurately captures the complex market that we operate in. Marketplaces are complex systems with many interconnected pieces, especially in today’s modern world. Whether a business fails or succeeds may be attributed to very small details in their strategy.

Physician Dr. Rajagopal writes about the butterfly in competitive markets in his 2015 book.¹⁰ In the book, Dr. Rajagopal explains how successful businesses like Apple and Nestlé often approach the competitive market by introducing small changes that result in a major effect on the market.¹ For example, think about the fact that Apple often only introduces small technological upgrades between their iPhone models, but still, each time they release a new model, the devices are often flying off the shelf. Since it is difficult for businesses to accurately predict how they will fare in a competitive market, it is a better idea to focus on small, controllable details.

With its focus on interconnectivity, the butterfly effect also indicates that an individual’s actions can have ramifications on a wider population. Just think about how much a political leader’s actions impact the state of the world. The butterfly effect asks us to be thoughtful with our decisions because we never know what the consequences of those decisions are. It can also be incredibly motivating, as it suggests that our actions DO matter in altering the trajectory of the world, no matter how small they might be. Such information is important when it comes to issues like climate change because people often believe that their individual actions will not have a big enough impact on carbon emissions. The butterfly effect suggests that while a small action, like choosing to use a reusable straw, may not have a linear effect on carbon emissions, but that it could still alter the trajectory of climate change in some way.

It is sometimes debated whether the popular understanding of the butterfly effect is accurate. In popular discourse, the butterfly effect is often akin to the idea of leverage. The book Team of Teams: New Rules of Engagement for a Complex World, describes this likening to be a mistake, suggesting that the butterfly effect does not describe the ability for a small thing to be leveraged to manipulate greater effects.¹¹ This is because a key point of Lorenz’s theory is that things cannot be predicted by their initial conditions. Although small things can have a large impact, it is difficult, if not impossible, to accurately predict the relationship between small actions and effects. As we have mentioned, the butterfly effect does not mean that small things will necessarily lead to large consequences, but that they equally could or could not. Chaos cannot be predicted, which means the butterfly effect should not mean that we should understand small actions as tools for manipulating outcomes.¹

The butterfly effect also doesn’t spell out good news for many economic models. Economic models are often predicated on the idea that consumers have stable, well-defined preferences, which makes their behavior easy to predict. However, if the butterfly effect is true, then it suggests that not only are these models false but perhaps no universal predictions of human behavior are possible. Although dismissing the idea of predictions altogether may be drastic, the butterfly effect at least demonstrates that we cannot trace linear relationships between causes and effects and that economic models may need to be reconfigured to incorporate a certain level of uncertainty.

Disease in an Interconnected World

COVID-19 is a good example of how a small incident can have a disastrous impact on the entire world. There has been speculation that a pandemic was inevitable, given the interconnected state of our globalized world, where it is impossible to stop something happening in one country to spread to other nations. Navindu Katugampola, a financial investor, describes the way that COVID-19 has evolved as an example of the butterfly effect.¹² It began in a food market in China and today, has touched almost every single city in the world. A small incident has had non-linear, but massive, impacts on the world and society, with the consequences exacerbated because we are so connected.

Additionally, COVID-19 shows how different sectors are all part of a complex system and therefore, how when there is a change in one sector, like health, other sectors like finance, mental health, or the environment are also impacted.

Small Actions and Climate Change

As was earlier speculated, the butterfly effect can demonstrate how small, individual acts can help contribute to the state of our earth. There seems to be little agreement on what will happen to planet earth as a result of human activity, but it is generally accepted that our activity has had drastic impacts on our environment and that habitats have changed as a result. Earth is one massive, complex ecosystem, but it is important that we realize that one generation’s collective actions can have incredibly powerful (and scary) consequences on the system, an idea that stems from the butterfly effect.¹³ Even though we may not be able to accurately predict exactly what will happen if we continue the way that we are, as the butterfly effect does not pretend to be able to trace how small actions have larger effects, it does demonstrate that what we do matters. Instead of believing that we are doomed and there is no way for our individual actions to change the trajectory of climate change, the butterfly effect suggests that our small actions could quite strikingly alter the route that we’re on.

Nassim Taleb

If you were interested in the ways in which the butterfly effect is similar to the idea of black swans, then you should read our thinker profile on Nassim Taleb, the man who wrote a famous book entitled Black Swans. In the piece, we explicate how Taleb’s line of thinking concludes that the world is random and unpredictable, but that there is strength to be found within this uncertainty.

The Consumer Upside of an Economic Downturn 

As has been mentioned, COVID-19 is a great example of the butterfly effect. Although it may be easy to trace relationships between things like COVID-19 and the economy, this article explores how COVID-19 has also led to economic behavior that would be hard to trace linearly, or hard to predict.

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