Chaos Theory

Summary: Chaos theory is a mathematical theory that can be used to explain complex systems such as weather, astronomy, politics, and economics. Although many complex systems appear to behave in a random manner, chaos theory shows that, in reality, there is an underlying order that is difficult to see.

Originators: Henri Poincaré (1854-1912), Edward Lorenz (1917-2008)

Keywords: order, chaos, complex systems, determinism, butterfly effect, sensitive dependence on initial conditions, nonlinear dynamics, chaos dynamics

Many complex systems can be better understood through the lens of Chaos Theory. Henri Poincaré, a mathematician, laid the groundwork for Chaos Theory.[i] He was the first to point out that many deterministic systems display a “sensitive dependence on initial conditions.” Poincaré described this concept in the following way: “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.”

For example, Poincaré pointed out that the apparent lack of order seen in many astronomical systems was actually not random or chaotic. Instead, astronomers were just not seeing the small changes in initial conditions that were leading to humongous differences in the final phenomena that were being observed.

Later, in the 1900s, Edward Lorenz officially coined the term Chaos Theory. Lorenz studied Chaos Theory in the context of weather systems. When making weather predictions, he noticed that his calculations were significantly impacted by the extent to which he rounded his numbers.  The end result of the calculation was significantly different when he used a number rounded to three digits as compared to a number rounded to six digits.

His observations on Chaos Theory in weather systems led to his famous talk, which he entitled, “Predictability: Does the Flap of a Butterfly’s Wings in Brazil set off a Tornado in Texas?” In reference to this talk, Chaos Theory has also been described as the “butterfly effect.”

Application of Chaos Theory  

Chaos theory has a lot to teach people about decision making in complex environments. The mathematical concepts used to understand physical systems are now being applied to social environments such as politics, economics, business, and other social sciences.[ii]

Although applying Chaos Theory to business settings is still in its infancy, social scientists describe the following applications as useful when making business decisions.[iii]

  • Chaos theory suggests that spending a lot of time trying to predict the future of complex, non-linear systems may be better spent elsewhere. Instead of trying to predict long-term future outcomes, businesses should consider and plan for multiple possible outcomes.
  • Chaos theory reminds business owners that small changes in business practice can lead to huge changes in future outcomes based on the concept of sensitive dependence on initial conditions. Some business managers underestimate the possibility for large unexpected changes, and should reconsider their mindset on this matter.
  • Chaos theory assumes that there is order behind seemingly random events. Even though businesses may not be helped by making long-term future predictions, they can make short-term forecasts to help with business decisions.
  • Because of the complexity and unpredictability inherent in complex systems, businesses need clear guidelines for employees to follow. However, since sudden and drastic changes are bound to occur, business owners should be ready to adapt these guidelines as necessary.

References  

[i] Oestreicher, C. (2007). A history of chaos theory. Dialogues in Clinical Neurosciene, 9(3), 279-289.

[ii] Richards, D. (1990). Is strategic decision making chaotic? Systems Research and Behavioral Science, 35(3), 219-232.

[iii] Chaos theory and strategy: Theory, application, and managerial implications. Strategic Management Journal, 15, 167-178.

Social Proof

Summary: Social proof describes a psychological phenomenon in which people mirror the actions and opinions of others. In other words, people’s decisions are often impacted by the preferences and modeling of individuals or groups around them.

Keywords: informational social influence, marketing, group norms, standards of behavior, testimonials, crowds, social modeling, sales, business, conformity, group conformity, social media

Originator: Muzafer Sheraf (1906-1988)

 

Social proof was first described in scientific research by a psychologist named Muzafer Sheraf. Sheraf was interested in the impact of groups on individual decision making. In relation to this interest, he completed a famous experiment on group conformity in 1936.[i]

In this study, Sheraf asked participants to observe a blinking light. A blinking light in a dark room often appears to move, even when it remains still. Based on this common perception, Sheraf asked participants to indicate how many inches they thought the blinking light moved. Sheraf first asked participants to guess an answer when they were alone. Then, he asked them the same question again while they were surrounded by a group of other participants. Sheraf found that participants changed their initial answers once they moved to the group setting. Across the board, people changed their number to closer reflect what other group members had guessed.

The concept of social proof came out of studies such as this one. Researchers consistently observe a tendency for individuals to move towards group conformity. Individuals often change their behaviors, opinions, and decisions to match the people around them.

 

Using Social Proof to Influence People

Social proof is commonly used in marketing and social media to influence people to buy products. Listed below are a variety of different types of social proof that are used in the context of marketing.[ii]

Social proof uses the influence of social media friends. For example, a business might indicate how many of a person’s Facebook friends “liked” a particular product they sell. People are more influenced to buy something when they know that their friends like the product.

  • Social proof uses the influence of celebrities. Research shows that people are more likely to buy a product when it is endorsed by a familiar and well-liked celebrity.
  • Social proof uses the influence of professional certifications and testimonials. Experts in an area may be called upon to endorse a product or provide a testimonial of how they have enjoyed a product.
  • Social proof uses the influence of crowds. Sometimes businesses indicate the number of people who have bought a product. When people know that a product or service is popular, they are more likely to want to buy it.

 

Social Proof and Personal Decisions

Social proof is a great marketing strategy and an effective means of influencing people to make certain choices. However, individuals should consider if social proof is always the best way to make decisions.

Quite notably, Sharif’s original study indicated that people were not aware of the extent to which they were impacted by the group. When participants where asked if they thought they were influenced by the group, most of them believed they had not been influenced. However, it was clear from the results of the study that people were wrong to believe this.

Negative forms of social proof can lead to bad decision making and giving into peer pressure. A prime example of this is college students who abuse alcohol and drugs.[iii] Research has drawn connections between social proof and this common dangerous behavior in college students. On a college campus, so many people engage in substance abuse that this behavior is observed to be the norm. Incoming students are apt to conform with the group and begin abusing substances just like the older students around them.

It is not always wrong to make decisions based on social proof. However, Sharif’s study provides an important caution that people should develop self-awareness surrounding this topic, so they can know when their decisions are being influenced by the people around them.

 

References

[i] Sherif, M. (1936). The psychology of social norms. Oxford, England: Harper.

[ii] Talib, Y. Y. A. & Saat, R. M. (2017). Social proof in social media shopping: An experimental design research. SHS Web of Conferences, 34

[iii] Cullum, J., O’Grady, M., Armeli, S., & Tennen, H. (2012). Change and stability in active and passive social influence dynamics during natural drinking events: A longitudinal measurement-burst study. Journal of Social and Clinical Psychology, 31(1), 51-80.

Network Effects

Summary: Network Effects describes the phenomenon how the value of a good or service increases as more people start to use that good or service.

Originators: Theodore Vail (1845-1920), Robert Metcalfe (1946-Present)

Keywords: network externality, demand-side economies of scale, marketing, customer base, value, monopoly, social media, congestion, good, service

Certain products only have value if a large number of people are using them. A classic example is that of technology used for communication such as a phone or fax machine. Critical mass is needed — these devices are only valuable if lots of other people have phones that you can call and machines you can fax.

This phenomenon was first described by Theodore Vail in 1908. Vail used the concept of Network Effects to build AT&T into a monopoly of telephone communication in the early 1900s. Later, Robert Metcalfe described Network Effects related to the importance of more people engaging in use of the Internet for it to become beneficial to everyone.[i]

Both the Internet and the telephone are examples of Direct Network Effects, in which more customers directly increase the value of a product or service. There are also Indirect Network Effects, which occur when more customers indirectly increase the value of a product of service. For example, when more people use Uber, this does not directly make Uber more valuable. However, the more people who use Uber, the more Uber is motivated to improve the quality of their service, which ends up indirectly impacting the value of this service.[ii]

Another prime example of Network Effects can be found in various social media services, such as Facebook. The more people who use Facebook, the more valuable Facebook becomes. This in turn, attracts more people to Facebook, as people do not want to miss out on a service that so many other people are using. Thus, Facebook continues to increase in value and attract more people at the same time.

Using Network Effects to Improve Businesses

Businesses who succeed at utilizing Network Effects can gain a competitive advantage in their industry. Consider two ways in which this can happen:

  1. Businesses can harness the power of Network Effects through engaging with products that are already highly valuable. They can consider what products are being used by a large number of people and consider utilizing those products within their business.

For example, Visa is a type of credit card used by over 2.9 billion people. Businesses can make a point to accept Visa credit cards and gain more customers who might have gone elsewhere if the business only accepted cash.

Businesses can harness the power of social media through advertising via various media platforms that are already popular and attract large numbers of people. 

  1. Businesses can create network effects within their own products and services through encouraging high engagement, interacting with customers, and providing high quality products.

The reason many social media platforms developed high network effects is because they are engaging and interactive. This is a means of drawing new customers in and building up a client base to build value within the business.

Once people engage with a product or service, businesses can focus on keeping products and services as high quality as possible. This keeps people engaged in the long run.

References 

[i] Easley, D. & Kleinberg, J. (2010). Networks, crowds, and markets. Reasoning about a highly connected world. Cambridge University Press.

[ii] Clements, M. T. (2004). Direct and indirect network effects: Are they equivalent? International Journal of Industrial Organization, 22(5), 633-645.


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Prisoner’s Dilemma

Summary: The Prisoner’s Dilemma is a hypothetical scenario which illustrates the difficulty of deciding whether to cooperate or compete with other people. Understanding the costs and benefits of cooperating and competing is applicable to various fields including business, economics, and politics.

Originators: Merrill Flood (1908-1991, Melvin Dresher (1911-1992), Albert William Tucker (1905-1995)

Keywords: game theory, cooperation, competition, problem-solving, strategy, consequences, cooperation level, individual behavior, evolutionary game theory, mutual cooperation

The Prisoner’s Dilemma is a scenario that was created to describe concepts behind game theory.[i]  Game theory is the study of how and why people cooperate or compete with one another. The Prisoner’s Dilemma was originally created by two scientists named Merrill Flood and Melvin Dresher. In later years, professor Albert William Tucker developed the Prisoner’s Dilemma further, using it as a teaching tool for his graduate psychology students.

Here’s the scenario: Two friends – let’s call them Jim and Matt – have been convicted of a crime. The police bring Jim and Matt in for questioning and place them in separate rooms. Each of them has two options. They can confess to the crime, or remain silent regarding the crime. Matt and Jim are both told that the option they choose will affect them personally and affect their friend in the following ways.

  • If they both choose to remain silent, each will receive only 1 year in prison.
  • Another option is for both of them to confess. If this happens, they each get two years in prison.
  • The final option is for one of them to confess and the other to remain silent. If Matt confesses and Jim remains silent, Jim will get three years in prison and Matt will go free. And vice versa.

What should each of them do? Consider this scenario from Matt’s perspective.

Is it best for Matt to cooperate by remaining silent? In some ways, this is the riskier choice. There is no chance for him to go free. He will either serve one year with Jim or three years alone. But Matt may care about Jim and want to consider his well-being as well. Remaining silent could lead to the best case scenario for both of them together.

Or, is it best for Matt to compete by confessing to the crime. In some ways, this is the safest choice. Matt could go free. And he avoids any chance of the longest possible sentence of three years. But it would also be a decision made out of self-interest, and Matt may want to consider if only his interest is important to him.

Cooperating or Competing

Is it better to cooperate or compete? This is the main question behind The Prisoner’s Dilemma.

This question, as illustrated in the scenario, is highly applicable to a number of fields such as business, economics, and politics.

The Prisoner’s Dilemma is a reminder that cooperation is not always best.[ii]  Immediately cooperating can lead to consequences if the other party is only thinking about personal self-interest. For example, when it comes to salary negotiations, it is not always in a person’s best interest to take the first salary offered. Sometimes it is better to push for a higher salary, even though this might not work out. Another example would be pricing a product. Often it is better for businesses to compete with one another by lowering prices. Lowering prices can lead to higher profit margins than if a business cooperated and priced similarly to other businesses in the area.

On the other hand, The Prisoner’s Dilemma also illustrates that it isn’t always best to look out for one’s self-interest only. When businesses show mutual cooperation, it can lead to increased profit for both of them. Businesses sometimes form mutually beneficial strategic partnerships, such as when Starbucks coffee is sold in Barnes and Noble bookstores. Mutual cooperation is also an important strategy in politics. For example, mutual cooperation between countries may be risky and require compromise; however, it can also be a means of keeping peace and enhancing trade.[iii]

References

[i] Dixit, A. “Prisoners’ Dilemma: The Concise Encyclopedia of Economics.” Library of Economics and Liberty. Web. http://www.econlib.org/library/Enc/PrisonersDilemma.html.

[ii] Stucke, M. E. (2013). Is competition always good? Journal of Antitrust Enforcement, 1(1), 162-197.

[iii] Jervis, R. (1978). Cooperation under the security dilemma. World Politics, 30(2), 167-214.

Bronfenbrenner’s Bioecological Model of Development (Bronfenbrenner)

Bronfenbrenner’s bioecological model is a theory of educational psychology that studies human development over time.

Urie Bronfenbrenner was a Russian-American developmental psychologist whose bioecological model was integral to the formation of American Headstart pre-kindergarten programs. [1] He was influenced by fellow developmental psychologist Lev Vygotsky. The model suggests the interactions between the individual and their environment, categorized into various systems, shape their development over time.

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Metacognition (Flavell)

Metacognition is defined in simplest terms as “thinking about your own thinking.” The root “meta” means “beyond,” so the term refers to “beyond thinking.” Specifically, this means that it encompasses the processes of planning, tracking, and assessing your own understanding or performance.

The phrase was termed by American developmental psychologist John H. Flavell in 1979, and the theory developed throughout the 1980s among researchers working with young children in early cognitive stages.

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Maker Spaces

A maker space is a community space in a school or other gathering place where students are able to take part in hands-on learning in creative ways. They are called maker spaces because they provide opportunities for students to design, create, manufacture, and invent new things. They are usually housed in school libraries or other community spaces.

Some would argue that the seeds of the maker space movement have been in existence forever, but the official idea emerged in 2005 after Make: magazine launched. The magazine was founded by Dale Dougherty, and is published bimonthly on their website, which serves as an online community of DIY “makers.”

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Situated Cognition (Brown, Collins, & Duguid)

Summary: Situated cognition is the theory that people’s knowledge is embedded in the activity, context, and culture in which it was learned. It is also referred to as “situated learning.”

Originators & proponents: John Seely Brown, Allan Collins, Paul Duguid

Keywords: activity, authentic domain activity, authentic learning, cognitive apprenticeship, content-specific learning, context, culture, everyday learning, knowledge, legitimate peripheral participation, socio-cultural learning, social construction of knowledge, social interaction, teaching methods

Situated cognition (Brown, Collins, & Duguid)

Situated cognition is a theory which emphasizes that people’s knowledge is constructed within and linked to the activity, context, and culture in which it was learned[1][2].

Learning is social and not isolated, as people learn while interacting with each other through shared activities and through language, as they discuss, share knowledge, and problem-solve during these tasks.

For example, while language learners can study a dictionary to increase their vocabulary, this often solitary work only teaches basic parts of learning a language; when language learners talk with someone who is a native speaker of the language, they will learn important aspects of how these words are used in the native speaker’s home culture and how the words are used in everyday social interactions.

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Abraham Maslow Biography

In his seminal work “Motivation and Personality, Abraham Maslow wrote: “The scientist who is also something of a poet, philosopher, and even a dreamer, is almost certainly an improvement on his more constricted colleagues.” [6] While he was not talking about himself, it is nonetheless true that Abraham Maslow was not only the scientist known as the Father of Humanistic Psychology, [1] but he was also something of a poet, philosopher, and dreamer. A glance through the life and life’s work of this acclaimed figure reveals a man who spent his days urging his fellow human beings to thrive, and showing others how to do the same.

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