Tag: Stanley McChrystal

The Butterfly Effect: Everything You Need to Know About This Powerful Mental Model

“You could not remove a single grain of sand from its place without thereby … changing something throughout all parts of the immeasurable whole.”

— Fichte, The Vocation of Man (1800)
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The Basics

In one of Stephen King’s greatest works, 11/22/63, a young man named Jake discovers a portal in a diner’s pantry which leads back to 1958. After a few visits and some experiments, Jake deduces that altering history is possible. However long he stays in the past, only two minutes go by in the present. He decides to live in the past until 1963 so he can prevent the assassination of President John F. Kennedy, believing that this change will greatly benefit humanity. After years of stalking Lee Harvey Oswald, Jake manages to prevent him from shooting Kennedy.

Upon returning to the present, he expects to find the world improved as a result. Instead, the opposite has happened. Earthquakes occur everywhere, his old home is in ruins, and nuclear war has destroyed much of the world. (As King wrote in an article for Marvel Spotlight, “Not good to fool with Father Time.”) Distraught, Jake returns to 1958 once again and resets history.

In addition to being a masterful work of speculative fiction, 11/22/63 is a classic example of how everything in the world is connected together.

The butterfly effect is the idea that small things can have non-linear impacts on a complex system. The concept is imagined with a butterfly flapping its wings and causing a typhoon.

Of course, a single act like the butterfly flapping its wings cannot cause a typhoon. Small events can, however, serve as catalysts that act on starting conditions.

And as John Gribbin writes in his cult-classic work Deep Simplicity, “some systems … are very sensitive to their starting conditions, so that a tiny difference in the initial ‘push’ you give them causes a big difference in where they end up, and there is feedback, so that what a system does affects its own behavior.”

In the foreword to The Butterfly Effect in Competitive Markets by Dr. Rajagopal, Tom Breuer writes:

Simple systems, with few variables, can nonetheless show unpredictable and sometimes chaotic behavior…[Albert] Libchaber conducted a series of seminal experiments. He created a small system in his lab to study convection (chaotic system behavior) in a cubic millimeter of helium. By gradually warming this up from the bottom, he could create a state of controlled turbulence. Even this tightly controlled environment displayed chaotic behavior: complex unpredictable disorder that is paradoxically governed by “orderly” rules.

… [A] seemingly stable system (as in Libchaber’s 1 ccm cell of helium) can be exposed to very small influences (like heating it up a mere 0.001 degree), and can transform from orderly convection into wild chaos. Although [such systems are] governed by deterministic phenomena, we are nonetheless unable to predict how [they] will behave over time.

What the Butterfly Effect Is Not

The point of the butterfly effect is not to get leverage. As General Stanley McChrystal writes in Team of Teams:

In popular culture, the term “butterfly effect” is almost always misused. It has become synonymous with “leverage”—the idea of a small thing that has a big impact, with the implication that, like a lever, it can be manipulated to a desired end. This misses the point of Lorenz’s insight. The reality is that small things in a complex system may have no effect or a massive one, and it is virtually impossible to know which will turn out to be the case.

Benjamin Franklin offered a poetic perspective in his variation of a proverb that’s been around since the 14th century in English and the 13th century in German, long before the identification of the butterfly effect:

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.

The lack of one horseshoe nail could be inconsequential, or it could indirectly cause the loss of a war. There is no way to predict which outcome will occur. (If you want an excellent kids book to start teaching this to your children, check out If You Give a Mouse a Cookie.)

In this post, we will seek to unravel the butterfly effect from its many incorrect connotations, and build an understanding of how it affects our individual lives and the world in general.

Edward Lorenz and the Discovery of the Butterfly Effect

“It used to be thought that the events that changed the world were things like big bombs, maniac politicians, huge earthquakes, or vast population movements, but it has now been realized that this is a very old-fashioned view held by people totally out of touch with modern thought. The things that change the world, according to Chaos theory, are the tiny things. A butterfly flaps its wings in the Amazonian jungle, and subsequently a storm ravages half of Europe.”

— from Good Omens, by Terry Pratchett and Neil Gaiman
***

Although the concept of the butterfly effect has long been debated, the identification of it as a distinct effect is credited to Edward Lorenz (1917–2008). Lorenz was a meteorologist and mathematician who successfully combined the two disciplines to create chaos theory. During the 1950s, Lorenz searched for a means of predicting the weather, as he found linear models to be ineffective.

In an experiment to model a weather prediction, he entered the initial condition as 0.506, instead of 0.506127. The result was surprising: a somewhat different prediction. From this, he deduced that the weather must turn on a dime. A tiny change in the initial conditions had enormous long-term implications. By 1963, he had formulated his ideas enough to publish an award-winning paper entitled Deterministic Nonperiodic Flow. In it, Lorenz writes:

Subject to the conditions of uniqueness, continuity, and boundedness … a central trajectory, which in a certain sense is free of transient properties, is unstable if it is nonperiodic. A noncentral trajectory … is not uniformly stable if it is nonperiodic, and if it is stable at all, its very stability is one of its transient properties, which tends to die out as time progresses. In view of the impossibility of measuring initial conditions precisely, and thereby distinguishing between a central trajectory and a nearby noncentral trajectory, all nonperiodic trajectories are effectively unstable from the point of view of practical prediction.

In simpler language, he theorized that weather prediction models are inaccurate because knowing the precise starting conditions is impossible, and a tiny change can throw off the results. In order to make the concept understandable to non-scientific audiences, Lorenz began to use the butterfly analogy.

A small error in the initial data magnifies over time.

In speeches and interviews, he explained that a butterfly has the potential to create tiny changes which, while not creating a typhoon, could alter its trajectory. A flapping wing represents the minuscule changes in atmospheric pressure, and these changes compound as a model progresses. Given that small, nearly imperceptible changes can have massive implications in complex systems, Lorenz concluded that attempts to predict the weather were impossible. Elsewhere in the paper, he writes:

If, then, there is any error whatever in observing the present state—and in any real system such errors seem inevitable—an acceptable prediction of an instantaneous state in the distant future may well be impossible.

… In view of the inevitable inaccuracy and incompleteness of weather observations, precise very-long-range forecasting would seem to be nonexistent.

Lorenz always stressed that there is no way of knowing what exactly tipped a system. The butterfly is a symbolic representation of an unknowable quantity.

Furthermore, he aimed to contest the use of predictive models that assume a linear, deterministic progression and ignore the potential for derailment. Even the smallest error in an initial setup renders the model useless as inaccuracies compound over time. The exponential growth of errors in a predictive model is known as deterministic chaos. It occurs in most systems, regardless of their simplicity or complexity.

The butterfly effect is somewhat humbling—a model that exposes the flaws in other models. It shows science to be less accurate than we assume, as we have no means of making accurate predictions due to the exponential growth of errors.

Prior to the work of Lorenz, people assumed that an approximate idea of initial conditions would lead to an approximate prediction of the outcome. In Chaos: Making a New Science, James Gleick writes:

The models would churn through complicated, somewhat arbitrary webs of equations, meant to turn measurements of initial conditions … into a simulation of future trends. The programmers hoped the results were not too grossly distorted by the many unavoidable simplifying assumptions. If a model did anything too bizarre … the programmers would revise the equations to bring the output back in line with expectation… Models proved dismally blind to what the future would bring, but many people who should have known better acted as though they believed the results.

One theoretician declared, “The basic idea of Western science is that you don’t have to take into account the falling of a leaf on some planet in another galaxy when you’re trying to account for the motion of a billiard ball on a pool table on earth.”

An illustration of two weather conditions with very slightly different initial conditions. The trajectories are similar at first, before deviating further and further.

Lorenz’s findings were revolutionary because they proved this assumption to be entirely false. He found that without a perfect idea of initial conditions, predictions are useless—a shocking revelation at the time.

During the early days of computers, many people believed they would enable us to understand complex systems and make accurate predictions. People had been slaves to weather for millennia, and now they wanted to take control. With one innocent mistake, Lorenz shook the forecasting world, sending ripples which (appropriately) spread far beyond meteorology.

Ray Bradbury, the Butterfly Effect, and the Arrow of Time

Ray Bradbury’s classic science fiction story A Sound of Thunder predates the identification of chaos theory and the butterfly effect. Set in 2055, it tells of a man named Eckels who travels back 65 million years to shoot a dinosaur. Warned not to deviate from the tour guide’s plan, Eckels (along with his guide and the guide’s assistant) heads off to kill a Tyrannosaurus Rex who was going to die soon anyway when a falling tree lands on it. Eckels panics at the sight of the creature and steps off the path, leaving his guide to kill the T Rex. The guide is enraged and orders Eckels to remove the bullets before the trio returns to 2055. Upon arrival, they are confused to find that the world has changed. Language is altered and an evil dictator is now in charge. A confused Eckels notices a crushed butterfly stuck to his boot and realizes that in stepping off the path, he killed the insect and changed the future. Bradbury writes:

Eckels felt himself fall into a chair. He fumbled crazily at the thick slime on his boots. He held up a clod of dirt, trembling, “No, it cannot be. Not a little thing like that. No!”

Embedded in the mud, glistening green and gold and black, was a butterfly, very beautiful and very dead.

“Not a little thing like that! Not a butterfly!” cried Eckels.

It fell to the floor, an exquisite thing, a small thing that could upset balances and knock down a line of small dominoes and then big dominoes and then gigantic dominoes, all down the years across Time. Eckels' mind whirled. It couldn't change things. Killing one butterfly couldn't be that important! Could it?

Bradbury envisioned the passage of time as fragile and liable to be disturbed by minor changes. In the decades since the publication of A Sound of Thunder, physicists have examined its accuracy. Obviously, we cannot time–travel, so there is no way of knowing how plausible the story is, beyond predictive models. Bradbury’s work raises the questions of what time is and whether it is deterministic.

Physicists refer to the Arrow of Time—the non-reversible progression of entropy (disorder.) As time moves forward, matter becomes more and more chaotic and does not spontaneously return to its original state. If you break an egg, it remains broken and cannot spontaneously re-form, for example. The Arrow of Time gives us a sense of past, present, and future. Arthur Eddington (the astronomer and physicist who coined the term) explained:

Let us draw an arrow arbitrarily. If as we follow the arrow we find more and more of the random element in the state of the world, then the arrow is pointing towards the future; if the random element decreases the arrow points towards the past. That is the only distinction known to physics. This follows at once if our fundamental contention is admitted that the introduction of randomness is the only thing which cannot be undone.

In short, the passage of time as we perceive it does exist, conditional to the existence of entropy. As long as entropy is non-reversible, time can be said to exist. The closest thing we have to a true measurement of time is a measurement of entropy. If the progression of time is nothing but a journey towards chaos, it makes sense for small changes to affect the future by amplifying chaos.

We do not yet know if entropy creates time or is a byproduct of it. Subsequently, we cannot know if changing the past would change the future. Would stepping on a butterfly shift the path of entropy? Did Eckels move off the path out of his own free will, or was that event predetermined? Was the dictatorial future he returned to always meant to be?

These interconnected concepts — the butterfly effect, chaos theory, determinism, free will, time travel — have captured many imaginations since their discoveries. Films ranging from It’s a Wonderful Life to Donnie Darko and the eponymous Butterfly Effect have explored the complexities of cause and effect. Once again, it is important to note that works of fiction tend to view the symbolic butterfly as the cause of an effect. According to Lorenz’s original writing, though, the point is that small details can tip the balance without being identifiable.

The Butterfly Effect in Business

Marketplaces are, in essence, chaotic systems that are influenced by tiny changes. This makes it difficult to predict the future, as the successes and failures of businesses can appear random. Periods of economic growth and decline sprout from nowhere. This is the result of the exponential impact of subtle stimuli—the economic equivalent of the butterfly effect. Breuer explains:

We live in an interconnected, or rather a hyper-connected society. Organizations and markets “behave” like networks. This triggers chaotic (complex) rather than linear behavior.

Preparing for the future and seeing logic in the chaos of consumer behaviour is not easy. Once-powerful giants collapse as they fall behind the times. Tiny start-ups rise from the ashes and take over industries. Small alterations in existing technology transform how people live their lives. Fads capture everyone’s imagination, then disappear.

Businesses have two options in this situation: build a timeless product or service, or race to keep up with change. Many businesses opt for a combination of the two. For example, Doc Martens continues selling the classic 1460 boot, while bringing out new designs each season. This approach requires extreme vigilance and attention to consumer desires, in an attempt to both remain relevant and appear timeless. Businesses leverage the compounding impact of small tweaks that aim to generate interest in all they have to offer.

In The Butterfly Effect in Competitive Markets, Dr. Rajagopal writes that

most global firms are penetrating bottom-of-the-pyramid market segments by introducing small changes in technology, value perceptions, [and] marketing-mix strategies, and driving production on an unimagined scale of magnitude to derive a major effect on markets. …Procter & Gamble, Kellogg’s, Unilever, Nestlé, Apple, and Samsung, have experienced this effect in their business growth…. Well-managed companies drive small changes in their business strategies by nipping the pulse of consumers….

Most firms use such effect by making a small change in their strategy in reference to produce, price, place, promotion, … posture (developing corporate image), and proliferation…to gain higher market share and profit in a short span.

For most businesses, incessant small changes are the most effective way to produce the metaphorical typhoon. These iterations keep consumers engaged while preserving brand identity. If these small tweaks fail, the impact is hopefully not too great. But if they succeed and compound, the rewards can be monumental.

By nature, all markets are chaotic, and what seem like inconsequential alterations can propel a business up or down. Rajagopal explains how the butterfly effect connects to business:

Globalization and frequent shifts in consumer preferences toward products and services have accelerated chaos in the market due to the rush of firms, products, and business strategies. Chaos theory in markets addresses the behavior of strategic and dynamic moves of competing firms that are highly sensitive to existing market conditions triggering the butterfly effect.

The initial conditions (economic, social, cultural, political) in which a business sets up are vital influences on its success or failure. Lorenz found that the smallest change in the preliminary conditions created a different outcome in weather predictions, and we can consider the same to be true for businesses. The first few months and years are a crucial time, when rates of failure are highest and the basic brand identity forms. Any of the early decisions, achievements, or mistakes have the potential to be the wing flap that creates a storm.

Benoit Mandelbrot on the Butterfly Effect in Economics

International economies can be thought of as a single system, wherein each part influences the others. Much like the atmosphere, the economy is a complex system in which we see only the visible outcomes—rain or shine, boom or bust. With the advent of globalization and improved communication technology, the economy is even more interconnected than in the past. One episode of market volatility can cause problems for the entire system. The butterfly effect in economics refers to the compounding impact of small changes. As a consequence, it is nearly impossible to make accurate predictions for the future or to identify the precise cause of an inexplicable change. Long periods of stability are followed by sudden declines, and vice versa.

Benoit Mandelbrot (the “father of fractals”) began applying the butterfly effect to economics several decades ago. In a 1999 article for Scientific American, he explained his findings. Mandelbrot saw how unstable markets could be, and he cited an example of a company which saw its stock drop 40% in one day, followed by another 6%, before rising by 10%—the typhoon created by an unseen butterfly. When Benoit looked at traditional economic models, he found that they did not even allow for the occurrence of such events. Standard models denied the existence of dramatic market shifts. Benoit writes in Scientific American:

According to portfolio theory, the probability of these large fluctuations would be a few millionths of a millionth of a millionth of a millionth. (The fluctuations are greater than 10 standard deviations.) But in fact, one observes spikes on a regular basis—as often as every month—and their probability amounts to a few hundredths.

If these changes are unpredictable, what causes them? Mandelbrot’s answer lay in his work on fractals. To explain fractals would require a whole separate post, so we will go with Mandelbrot’s own simplified description: “A fractal is a geometric shape that can be separated into parts, each of which is a reduced-scale version of the whole.” He goes on to explain the connection:

In finance, this concept is not a rootless abstraction but a theoretical reformulation of a down-to-earth bit of market folklore—namely that movements of a stock or currency all look alike when a market chart is enlarged or reduced so that it fits the same time and price scale. An observer then cannot tell which of the data concern prices that change from week to week, day to day or hour to hour. This quality defines the charts as fractal curves and makes available many powerful tools of mathematical and computer analysis.”

In a talk, Mandelbrot held up his coffee and declared that predicting its temperature in a minute is impossible, but in an hour is perfectly possible. He applied the same concept to markets that change in dramatic ways in the short term. Even if a long-term pattern can be deduced, it has little use for those who trade on a shorter timescale.

Mandelbrot explains how his fractals can be used to create a more useful model of the chaotic nature of the economy:

Instead, multifractals can be put to work to “stress-test” a portfolio. In this technique, the rules underlying multifractals attempt to create the same patterns of variability as do the unknown rules that govern actual markets. Multifractals describe accurately the relation between the shape of the generator and the patterns of up-and-down swings of prices to be found on charts of real market data… They provide estimates of the probability of what the market might do and allow one to prepare for inevitable sea changes. The new modeling techniques are designed to cast a light of order into the seemingly impenetrable thicket of the financial markets. They also recognize the mariner’s warning that, as recent events demonstrate, deserves to be heeded: On even the calmest sea, a gale may be just over the horizon.

In The Misbehaviour of Markets, Mandelbrot and Richard Hudson expand upon the topic of financial chaos. They begin with a discussion of the infamous 2008 crash and its implications:

The worldwide market crash of autumn 2008 had many causes: greedy bankers, lax regulators and gullible investors, to name a few. But there is also a less-obvious cause: our all-too-limited understanding of how markets work, how prices move and how risks evolve. …

Markets are complex, and treacherous. The bone-chilling fall of September 29, 2008—a 7 percent, 777 point plunge in the Dow Jones Industrial Average—was, in historical terms, just a particularly dramatic demonstration of that fact. In just a few hours, more than $1.6 trillion was wiped off the value of American industry—$5 trillion worldwide.

Mandelbrot and Hudson believe that the 2008 credit crisis can be attributed in part to the increasing confidence in financial predictions. People who created computer models designed to guess the future failed to take into account the butterfly effect. No matter how complex the models became, they could not create a perfect picture of initial conditions or account for the compounding impact of small changes. Just as people believed they could predict and therefore control the weather before Lorenz published his work, people thought they could do the same for markets until the 2008 crash proved otherwise. Wall Street banks trusted their models of the future so much that they felt safe borrowing growing sums of money for what was, in essence, gambling. After all, their predictions said such a crash was impossible. Impossible or not, it happened.

According to Mandelbrot and Hudson, predictive models view markets as “a risky but ultimately … manageable world.” As with meteorology, economic predictions are based on approximate ideas of initial conditions—ideas that, as we know, are close to useless. As Mandelbrot and Hudson write:

[C]auses are usually obscure. … The precise market mechanism that links news to price, cause to effect, is mysterious and seems inconsistent. Threat of war: Dollar falls. Threat of war: Dollar rises. Which of the two will actually happen? After the fact, it seems obvious; in hindsight, fundamental analysis can be reconstituted and is always brilliant. But before the fact, both outcomes may seem equally likely.

In the same way that apparently similar weather conditions can create drastically different outcomes, apparently similar market conditions can create drastically different outcomes. We cannot see the extent to which the economy is interconnected and we cannot identify where the butterfly lies. Mandelbrot and Hudson disagree with the view of the economy as separate from other parts of our world. Everything connects:

No one is alone in this world. No act is without consequences for others. It is a tenet of chaos theory that, in dynamical systems, the outcome of any process is sensitive to its starting point—or in the famous cliché, the flap of a butterfly’s wings in the Amazon can cause a tornado in Texas. I do not assert that markets are chaotic…. But clearly, the global economy is an unfathomably complicated machine. To all the complexity of the physical world… you add the psychological complexity of men acting on their fleeting expectations….

Why do people prefer to blame crashes (such as the 2008 credit crisis) on the folly of those in the financial industry? Jonathan Cainer provides a succinct explanation:

Why do we love the idea that people might be secretly working together to control and organise the world? Because we do not like to face the fact that our world runs on a combination of chaos, incompetence, and confusion.

Historic Examples of the Butterfly Effect

“A very small cause which escapes our notice determines a considerable effect that we cannot fail to see, and then we say the effect is due to chance. If we knew exactly the laws of nature and the situation of the universe at the initial moment, we could predict exactly the situation of that same universe at a succeeding moment. But even if it were the case that the natural laws had no longer any secret for us, we could still only know the initial situation *approximately*. If that enabled us to predict the succeeding situation with *the same approximation*, that is all we require, and we should say that the phenomenon had been predicted, that it is governed by laws. But it is not always so; it may happen that small differences in the initial conditions produce very great ones in the final phenomena. A small error in the former will produce an enormous error in the latter. Prediction becomes impossible, and we have the fortuitous phenomenon.”

— Jules Henri Poincaré (1854–1912)

***

Many examples exist of instances where a tiny detail led to a dramatic change. In each case, the world we live in could be different if the situation had been reversed. Here are some examples of how the butterfly effect has shaped our lives.

  • The bombing of Nagasaki. The US initially intended to bomb the Japanese city of Kuroko, with the munitions factory as a target. On the day the US planned to attack, cloudy weather conditions prevented the factory from being seen by military personnel as they flew overhead. The airplane passed over the city three times before the pilots gave up. Locals huddled in shelters heard the hum of the airplane preparing to drop the nuclear bomb and prepared for their destruction. Except Kuroko was never bombed. Military personnel decided on Nagasaki as the target due to improved visibility. The implications of that split-second decision were monumental. We cannot even begin to comprehend how different history might have been if that day had not been cloudy. Kuroko is sometimes referred to as the luckiest city in Japan, and those who lived there during the war are still shaken by the near miss.
  • The Academy of Fine Arts in Vienna rejecting Adolf Hitler’s application, twice. In the early 1900s, a young Hitler applied for art school and was rejected, possibly by a Jewish professor. By his own estimation and that of scholars, this rejection went on to shape his metamorphosis from a bohemian aspiring artist into the human manifestation of evil. We can only speculate as to how history would have been different. But it is safe to assume that a great deal of tragedy could have been avoided if Hitler had applied himself to watercolors, not to genocide.
  • The assassination of Archduke Franz Ferdinand. A little-known fact about the event considered to be the catalyst for both world wars is that it almost didn’t happen. On the 28th of June, 1914, a teenage Bosnian-Serb named Gavrilo Princip went to Sarajevo with two other nationalists in order to assassinate the Archduke. The initial assassination attempt failed; a bomb or grenade exploded beneath the car behind the Archduke’s and wounded its occupants. The route was supposed to have been changed after that, but the Archduke’s driver didn’t get the message. Had he actually taken the alternate route, Princip would not have been on the same street as the car and would not have had the chance to shoot the Archduke and his wife that day. Were it not for a failure of communication, both world wars might never have happened.
  • The Chernobyl disaster. In 1986, a test at the Chernobyl nuclear plant went awry and released 400 times the radiation produced by the bombing of Hiroshima. One hundred fifteen thousand people were evacuated from the area, with many deaths and birth defects resulting from the radiation. Even today, some areas remain too dangerous to visit. However, it could have been much worse. After the initial explosion, three plant workers volunteered to turn off the underwater valves to prevent a second explosion. It has long been believed that the trio died as a result, although there is now some evidence this may not have been the case. Regardless, diving into a dark basement flooded with radioactive water was a heroic act. Had they failed to turn off the valve, half of Europe would have been destroyed and rendered uninhabitable for half a million years. Russia, Ukraine, and Kiev also would have become unfit for human habitation. Whether they lived or not, the three men—Alexei Ananenko, Valeri Bezpalov and Boris Baranov—stilled the wings of a deadly butterfly. Indeed, the entire Chernobyl disaster was the result of poor design and the ineptitude of staff. The long-term result (in addition to the impact on residents of the area) was a widespread anxiety towards nuclear plants and bias against nuclear power, leading to a preference for fossil fuels. Some people have speculated that Chernobyl is responsible for the acceleration of global warming, as countries became unduly slow to adopt nuclear power.
  • The Cuban Missile Crisis. We all may owe our lives to a single Russian Navy officer named Vasili Arkhipov, who has been called “the man who saved the world.” During the Cuban Missile Crisis, Arkhipov was stationed on a nuclear-armed submarine near Cuba. American aircraft and ships began using depth charges to signal the submarine that it should surface so it could be identified. With the submarine submerged too deep to monitor radio signals, the crew had no idea what was going on in the world above. The captain, Savitsky, decided the signal meant that war had broken out and he prepared to launch a nuclear torpedo. Everyone agreed with him—except Arkhipov. Had the torpedo launched, nuclear clouds would have hit Moscow, London, East Anglia and Germany, before wiping out half of the British population. The result could have been a worldwide nuclear holocaust, as countries retaliated and the conflict spread. Yet within an overheated underwater room, Arkhipov exercised his veto power and prevented a launch. Without the courage of one man, our world could be unimaginably different.

From these handful of examples, it is clear how fragile the world is, and how dire the effects of tiny events can be on starting conditions.

We like to think we can predict the future and exercise a degree of control over powerful systems such as the weather and the economy. Yet the butterfly effect shows that we cannot. The systems around us are chaotic and entropic, prone to sudden change. For some kinds of systems, we can try to create favorable starting conditions and be mindful of the kinds of catalysts that might act on those conditions – but that’s as far as our power extends. If we think that we can identify every catalyst and control or predict outcomes, we are only setting ourselves up for a fall.

The “Ink Spot” Strategy That Propels Wal-Mart And Counterinsurgency

I thought this was interesting. Here is Sam Walton, in his own words, detailing the Wal-Mart Strategy from the earliest days. What was novel at the time is now a somewhat common way for businesses to expand. It's also used in the military as part of an “ink spot” strategy.

But before we get to that, here is Sam Walton writing in Made in America:

Now that we were out of debt, we could really do something with our key strategy, which was simply to put good-sized discount stores into little one-horse towns which everybody else was ignoring. In those days, Kmart wasn’t going to towns below 50,000, and even Gibson’s wouldn’t go to towns much smaller than 10,000 or 12,000. We knew our formula was working even in towns smaller than 5,000 people, and there were plenty of those towns out there for us to expand into. When people want to simplify the Wal-Mart story, that’s usually how they sum up the secret of our success: “Oh, they went into small towns when nobody else would.” And a long time ago, when we were first being noticed, a lot of folks in the industry wrote us off as a bunch of country hicks who had stumbled onto this idea by a big accident.

Maybe it was an accident, but that strategy wouldn’t have worked at all if we hadn’t come up with a method for implementing it. That method was to saturate a market area by spreading out, then filling in. In the early growth years of discounting, a lot of national companies with distribution systems already in place— Kmart, for example— were growing by sticking stores all over the country. Obviously, we couldn’t support anything like that.

But while the big guys were leapfrogging from large city to large city, they became so spread out and so involved in real estate and zoning laws and city politics that they left huge pockets of business out there for us. Our growth strategy was born out of necessity, but at least we recognized it as a strategy pretty early on. We figured we had to build our stores so that our distribution centers, or warehouses, could take care of them, but also so those stores could be controlled. We wanted them within reach of our district managers, and of ourselves here in Bentonville, so we could get out there and look after them. Each store had to be within a day’s drive of a distribution center.

We saturated northwest Arkansas. We saturated Oklahoma. We saturated Missouri. We went from Neosho to Joplin, to Monett and Aurora, to Nevada and Belton, to Harrisonville, and then on to Fort Scott and Olathe in Kansas —and so on. Sometimes we would jump over an area, like when we opened store number 23 in Ruston, Louisiana, and we didn’t have a thing in south Arkansas, which is between us and Ruston. So then we started back -filling south Arkansas. In those days we didn’t really plan for the future. We just felt like we could keep rolling these stores out this way, and they would keep working, in Tennessee, or Kansas, or Nebraska— wherever we decided to go. But we did try to think ahead some when it came to the cities. We never planned on actually going into the cities. What we did instead was build our stores in a ring around a city— pretty far out— and wait for the growth to come to us. That strategy worked practically everywhere. We started early with Tulsa, putting stores in Broken Arrow and Sand Springs. Around Kansas City, we built in Warrensburg, Belton, and Grandview on the Missouri side of town and in Bonner Springs and Leavenworth across the river in Kansas. We did the same thing in Dallas.

This saturation strategy had all sorts of benefits beyond control and distribution. From the very beginning, we never believed in spending much money on advertising, and saturation helped us to save a fortune in that department. When you move like we did from town to town in these mostly rural areas, word of mouth gets your message out to customers pretty quickly without much advertising. When we had seventy-five stores in Arkansas, seventy-five in Missouri, eighty in Oklahoma, whatever, people knew who we were, and everybody except the merchants who weren’t discounting looked forward to our coming to their town. By doing it this way, we usually could get by with distributing just one advertising circular a month instead of running a whole lot of newspaper advertising. We’ve never been big advertisers, and, relative to our size today, we still aren’t. Just like today, we became our own competitors. In the Springfield, Missouri, area, for example, we had forty stores within 100 miles. When Kmart finally came in there with three stores, they had a rough time going up against our kind of strength.

So for the most part, we just started repeating what worked, stamping out stores cookie-cutter style. The only decision we had to make was what size format to put in what market. We had five different store sizes—running from about 30,000 to 60,000 square feet— and we would hardly ever pass up any market because it was too small. I had traveled so much myself looking at competitors in the variety store business that I had a good feel for the kind of potential in these communities. Bud and I knew what we wanted in the way of locations. Like so many of the ideas that have made our company work from the beginning, we’re still more or less following this same strategy, although today we’ve moved into some cities outright. But I think our main real estate effort should be directed at getting out in front of expansion and letting the population build out to us.

A lot of companies are now trying to do similar things.

Interestingly, something similar came up in General Stanley McChrystal's memoir My Share of the Task:

The strategy was neither new nor guaranteed to work. It was a version of the “ink spot” approach French General Lyautey made famous in Madagascar and Morocco and one often adopted in counterinsurgency campaigns of the nineteenth and twentieth centuries. The concept called for providing secure zones inside which the population could be protected, governed, and allowed to conduct economic activity free from insurgent pressure. The theory held that as people were free to live their lives, this would enhance the government’s legitimacy and strength. And as these domains of government control expanded— like inkblots seeping on a page— they would conjoin. The United States’ counterinsurgency doctrine, which outlined the steps of “clear, hold, and build,” was a manifestation of this approach. That summer, we added “sustain” as a fourth tenet. Success in counterinsurgency was less dependent upon the brilliance of the strategy— the concept is not that hard to understand— than it was on the execution. Counterinsurgency is easy to prescribe, difficult to perform.

16 Leadership Lessons from a Four Star General

"We like to equate leaders with values we admire, but the two can be separate and distinct."
“We like to equate leaders with values we admire, but the two can be separate and distinct.”

Say what you want about General Stanley McChrystal and the Rolling Stone article that led to his premature retirement from the military he spent his life serving but I could hardly put down his memoir: My Share of the Task.

McChrystal's life was “a series of unplanned detours, unanticipated challenges, and unexpected opportunities.” More by luck than design, he ended up being part of events that will loom large in history.

While the book was entirely fascinating, I was most interested in what McChrystal had to say about a lifetime spent in leadership roles in an evolving force. Through the stories we see not only how he leads, but how changing circumstances led to him changing.

When I read the book, I couldn't help but see parts of my life through the lens of leadership: both mine personally and what I witness in companies around the world. Leadership is tough and there are few better teachers than McChrystal. I know I learned and internalized a lot reading this book.

I'll excerpt some of his obvious lessons below but the full book is worth reading in its entirety.

1. Leadership is the single biggest reason for success or failure.

So, after a lifetime, what had I learned about leadership? Probably not enough. But I saw enough for me to believe it was the single biggest reason organizations succeeded or failed. It dwarfed numbers, technology, ideology, and historical forces in determining the outcome of events. I used to tell junior leaders that the nine otherwise identical parachute infantry battalions of the 82nd Airborne Division ranged widely in effectiveness, the disparity almost entirely a function of leadership.

“Switch just two people— the battalion commander and command sergeant major—from the best battalion with those of the worst, and within ninety days the relative effectiveness of the battalions will have switched as well,” I’d say. I still believe I was correct.

2. Leadership is difficult to measure.

Yet leadership is difficult to measure and often difficult even to adequately describe. I lack the academic bona fides to provide a scholarly analysis of leadership and human behavior. So I’ll simply relate what, after a lifetime of being led and learning to lead, I’ve concluded.

Leadership is the art of influencing others. It differs from giving a simple order or managing in that it shapes the longer-term attitudes and behavior of individuals and groups. George Washington’s tattered army persisted to ultimate victory. Those troops displayed the kind of effort that can never be ordered— only evoked. Effective leaders stir an intangible but very real desire inside people. That drive can be reflected in extraordinary courage, selfless sacrifice, and commitment.

3. Leadership is neither good nor evil.

We like to equate leaders with values we admire, but the two can be separate and distinct. Self-serving or evil intent motivated some of the most effective leaders I saw, like Abu Musab al-Zarqawi. In the end, leadership is a skill that can be used like any other, but with far greater effect.

4. Leaders take us to where we'd otherwise not go.

Although Englishmen rushing into the breach behind Henry V is a familiar image, leaders whose personal example or patient persuasion causes dramatic changes in otherwise inertia-bound organizations or societies are far more significant. The teacher who awakens and encourages in students a sense of possibility and responsibility is, to me, the ultimate leader.

5. Success is rarely the work of a single leader.

… leaders work best in partnership with other leaders. In Iraq in 2004, I received specific direction to track Zarqawi and bring him to justice. But it was the collaboration of leaders below me, inside TF 714, that built the teams, relentlessly hunted, and ultimately destroyed his lethal network.

6. Leaders are empathetic.

The best leaders I’ve seen have an uncanny ability to understand, empathize, and communicate with those they lead. They need not agree or share the same background or status in society as their followers, but they understand their hopes, fears, and passions. Great leaders intuitively sense, or simply ask, how people feel and what resonates with them. At their worst, demigods like Adolf Hitler manipulate the passions of frustrated populations into misguided forces. But empathy can be remarkably positive when a Nelson Mandela reshapes and redirects the energy of a movement away from violence and into constructive nation-building.

7. Leadership is not popularity.

For soldiers, the choice between popularity and effectiveness is ultimately no choice at all. Soldiers want to win; their survival depends upon it. They will accept, and even take pride in, the quirks and shortcomings of a leader if they believe he or she can produce success.

8. The best leaders are genuine.

I found soldiers would tolerate my being less of a leader than I hoped to be, but they would not forgive me being less than I claimed to be. Simple honesty matters.

9. Leaders can be found at any rank and at any age.

I often found myself led by soldiers many levels junior to me, and I was the better for it. Deferring to the expertise and skills of the leader best suited to any given situation requires enough self-confidence to subjugate one’s ego, but it signals a strong respect for the people with whom one serves.

10. Charisma is not leadership.

Personal gifts like intellect or charisma help. But neither are required nor enough to be a leader.

Physical appearance, poise, and outward self-confidence can be confused with leadership—for a time. I saw many new lieutenants arrive to battalions and fail to live up to the expectations their handsome, broad-shouldered look generated. Conversely, I saw others overcome the initial doubts created by small stature or a squeaky voice. It took time and enough interaction with followers, but performance usually became more important than the advantages of innate traits.

Later in my career, I encountered some figures who had learned to leverage superficial gifts so effectively that they appeared to be better leaders than they were. It took me some time and interaction —often under the pressure of difficult situations—before I could determine whether they possessed those bedrock skills and qualities that infantry platoons would seek to find and assess in young sergeants and lieutenants. Modern media exacerbate the challenge of sorting reality from orchestrated perception.

11. Leaders walk a fine line between self-confidence and humility.

Soldiers want leaders who are sure of their ability to lead the team to success but humble enough to recognize their limitations. I learned that it was better to admit ignorance or fear than to display false knowledge or bravado. And candidly admitting doubts or difficulties is key to building confidence in your honesty. But expressing doubts and confidence is a delicate balance. When things look their worst, followers look to the leader for reassurance that they can and will succeed.

12. People are born; leaders are made.

I was born the son of a leader with a clear path to a profession of leadership. But whatever leadership I later possessed, I learned from others. I grew up in a household of overt values, many of which hardened in me only as I matured. Although history fascinated me, and mentors surrounded me, the overall direction and key decisions of my life and career were rarely impacted by specific advice, or even a particularly relevant example I’d read or seen. I rarely wondered What would Nelson, Buford, Grant, or my father have done? But as I grew, I was increasingly aware of the guideposts and guardrails that leaders had set for me, often through their examples. The question became What kind of leader have I decided to be? Over time, decisions came easily against that standard, even when the consequences were grave.

13. Leaders are people, and people constantly change.

Even well into my career I was still figuring out what kind of leader I wanted to be. For many years I found myself bouncing between competing models of a hard-bitten taskmaster and a nurturing father figure— sometimes alternating within a relatively short time span. That could be tough on the people I led, and a bit unfair. They looked for and deserved steady, consistent leadership. When I failed to provide that, I gave conflicting messages that produced uncertainty and reduced the effectiveness of the team we were trying to create. As I got older, the swings between leadership styles were less pronounced and frequent as I learned the value of consistency. But even at the end I still wasn’t the leader I believed I should be.

14. Leaders are human.

They get tired, angry, and jealous and carry the same range of emotions and frailties common to mankind. Most leaders periodically display them. The leaders I most admired were totally human but constantly strove to be the best humans they could be.

15. Leaders make mistakes, and they are often costly.

The first reflex is normally to deny the failure to themselves; the second is to hide it from others, because most leaders covet a reputation for infallibility. But it’s a fool’s dream and is inherently dishonest.

16. Leadership is a choice.

Rank, authority, and even responsibility can be inherited or assigned, whether or not an individual desires or deserves them. Even the mantle of leadership occasionally falls to people who haven’t sought it. But actually leading is different. A leader decides to accept responsibility for others in a way that assumes stewardship of their hopes, their dreams, and sometimes their very lives. It can be a crushing burden, but I found it an indescribable honor.

In the end, “there are few secrets to leadership.”

It is mostly just hard work. More than anything else it requires self-discipline. Colorful, charismatic characters often fascinate people, even soldiers. But over time, effectiveness is what counts. Those who lead most successfully do so while looking out for their followers’ welfare. Self-discipline manifests itself in countless ways. In a leader I see it as doing those things that should be done, even when they are unpleasant, inconvenient, or dangerous; and refraining from those that shouldn’t, even when they are pleasant, easy, or safe.

McChrystal's memoir is entirely worth reading.