We’re all familiar with the butterfly effect. You know, a butterfly flapping its wing in Brazil ultimately causes a tornado in Texas.
The butterfly effect is a fascinating concept that illustrates how the smallest of actions can have significant consequences in complex systems.
Let me tell you about the mother of all butterfly effects that happened 110 years ago this month.
SARAJEVO, Bosnia (June 28, 1914) – A wrong left turn.
On a beautiful summer morning, one hundred and ten years ago, a most innocuous mistake set in motion a string of events that would have unimaginable consequences.
On a state visit to a recently annexed region of Bosnia, an area fraught with simmering revolutionary undertones, the Austrian Archduke Franz Ferdinand and his wife Sophie were assassinated in an open touring car by a member of the Serbian separatist movement known as the Black Hand.
But it needn’t have been so.
It turns out that the Black Hand had a number of assassins targeting Archduke Ferdinand stationed on the parade route. Along the way, there were several unsuccessful attempts to assassinate Ferdinand (such as trying to roll a bomb under the car), but these efforts were thwarted, both by heavy crowds and a strong police presence.
Dejected, one of the would-be assassins, a 19-year-old Serbian nationalist named Gavrilo Princip, walked away and headed down a side street, on his way to regroup with his fellow Black Hand conspirators.
Meanwhile, the driver of the Archduke’s car, heading for a local hospital so that the Archduke could visit some of those injured by the earlier unsuccessful car bombing attempt, inadvertently took a wrong left turn off the main road. Realizing his error, the driver came to a stop. Gavrilo Princip could not believe his luck, as he found himself standing directly across from the Archduke and his wife.
Two shots rang out. Both Ferdinand and his wife Sophie fell dead in the back seat of the touring car.
That simple twist of fate – a wrong left turn – ultimately led to all of the globe becoming swept up in the first World War, which itself went on to open the door to the rise of communism, fascism, Hitler and WWII.
275,000,000 total deaths (so far) and counting.
That was one helluva butterfly wing flap.
There are many lessons that come out of the above experience.
Never think that in a complex adaptive system (in this case, global politics) future events can be known with certainty. They can’t. In fact, in many cases, they cannot even be imagined.
Understand that Chaos Theory underlies all of the above. Realize that even the smallest, seemingly isolated event has the potential to change everything. The world is far more unpredictable than most people realize.
The economy and the financial markets are also complex adaptive systems. They too are unpredictable and cannot be forecast with any consistency. At BCM, we recognize this and know that while you cannot predict, you can prepare. If you have any questions, please give us a call.