It’s amazing what you can learn from Wikipedia. I was reading a couple of blog posts from Sourcing Innovation where “the doctor” describes how to “avoid the Black Swan”. He had what looked like some great advice on how to avoid this thing...but it was lost on me because I didn’t know what a Black Swan was. (Please pardon my ignorance...).
Curiosity got the best of me so I went on to the source of all knowledge, Wikipedia ,and discovered the Theory of the Black Swan. The original meaning of black swan (from back in the 16th century) was an expression that implied rarity ... “ it’s as rare as a black swan”. Black Swan events are described by Nassim Nicholas Taleb in his book “The Black Swan: The impact of the Highly Improbable”. In his book, Taleb identifies Black Swan events as having three key attributes;
- The event is a surprise to the observer (what might be a Black Swan surprise for the Turkey is not a Black Swan surprise for the Butcher – so...avoid being the turkey!)
- The event has a major impact.
- Once rationalized by hindsight, the event is seen as being “expected”.
Black Swan events can be negative (like the collapse of the levies in New Orleans after Katrina) or positive (like the invention of the personal computer). According to Taleb, the key is to not try and predict Black Swan events, but instead to try and build robustness against negative events and the ability to exploit positive events.
In his article, 'Tips for avoiding the Black Swan', the doctor gives a good list of things you can do to avoid the impact of a negative Black Swan. To this list, I’d like to add one more thing. Given that you can’t, by definition, predict a Black Swan event, the ability to respond when a Black Swan event occurs can mean the difference between a bump in the road and disaster. This ability to respond requires three things;
- The ability to recognize an event and model the impact of this event on your business.
- The ability to model various potential resolutions to the event.
- The ability to compare these resolutions and identify the best option.
Responsiveness allows you to not only limit the impact of a negative event, but can also position you to benefit in the case of a positive Black Swan event. Are you ready for the next Black Swan? Comment back and let us know!