Chaos theory, economics and information: the implications for strategic decision-making

Traditionally, rational models of decision-making assume perfect informatio n is available to the manager. In reality, the paradox of rationality is th at full information relates only to the past; choices for the future must b e of limited rationality as the future contains both risk and uncertainty. An analysis of rationality and uncertainty in relation to decision-making, therefore leads to a consideration of Chaos Theory. Whilst recognising that the future is unknowable, nonetheless, Chaos Theory allows for the possibi lity of an awareness of a range of future states. In addition, it suggests that complete and accurate information, so necessary for rational decision- making, is unobtainable, and the past is not an accurate guide to the futur e. Thus, the terms of reference for strategic management should be changed; co nditions must be created whereby effective learning takes place, from which new strategies may or may not emerge. Managers should not problem-solve th eir way out of chaos, instead, generate bold solutions which integrate all the information. Information is thus activating a process by which strategy can emerge from across all levels of the organisation, to provide at least some structured futures thinking.