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Roger L. Costello wrote:
> From what I have read, a characteristic of complex systems is that small
> changes/differences are magnified. They even have a name for this
> characteristic - the Butterfly Effect
> Butterfly Effect - a butterfly stirring the air today in Peking can
> transform storm systems next month in New York.
> Beta vs VHS
> An example of the Butterfly Effect in the economy is shown with Beta
> versus VHS videotapes. A small difference in the initial user-base (in
> favor of VHS) resulted in an avalanche of people purchasing VHS machines
> (despite Beta being technically superior). Thus, a small difference was
> greatly magnified.
The archtypical Beta vs VHS story ("Beta was technically superior, but
lost out for <some non-technical or random reason>.") doesn't match what
really happened. Sony was first to market, had a larger user-base and a
virtual monopoly on prerecorded programming. But VHS was first with a
two hour tape, which could record an entire movie unattended. That
techical advantage and the consumer benefit it provided was what turned
the tide to VHS.
So I don't think the (real) Beta vs VHS story is a good example of the
Butterfly Effect in the economy. In seems more like an example where
consumer choice magnified by the Network Effect leads to a stable
situation with only one dominant technology. We've certainly seen plenty
of similar cases over the past couple of decades. I expect that if the
experiment were re-run multiple with similar initial conditions, the
outcome would be the same (which is not what you'd expect if the
Butterfly Effect was involved).
 - http://www.guardian.co.uk/online/comment/story/0,12449,881780,00.html
 - http://www.wikipedia.org/wiki/Network_effect