Future Friday: What is a Black Swan?

by Michael Haberman on June 7, 2013 · 1 comment


 

 

Black swans are rare birds and thus rare events are called black swans.

Black swans are rare birds and thus rare events are called black swans.

Here on Future Friday I try to introduce terms and methods used by the futurist community, in my attempt to help make you a practical HR futurist. One of these terms that has become popular is that of “black swan”. You may have seen it, here is what it means.

 History

Although the term used in its present context is relatively new, it comes originally from the Latin poet Decimus Lunius Luvenalis, known in English as Juvenal. He said some events were “rara avis in terris nigroque simillima cygno” (“a rare bird in the lands, very much like a black swan.” This term was popular in 16th century London as an statement of impossibility. At that time all swans were white. Thus a black swan was considered to be impossible. That however was laid to rest when black swans were discovered in Australia by Dutch explorer Willem de Vlamingh. They are however still rare birds.

In the 21st century the term was introduced by by Nassim Nicholas Taleb in his 2001 book Fooled By Randomness, which concerned financial events. His 2007 book (revised and completed in 2010) The Black Swan extended the metaphor to events outside of financial markets according to Wikipedia. His books deal with the effect of randomness and the effect that a random event can have. These random events are also know by other names such as “wild cards”, “disruptive events” and “outliers”, the last term made popular by Malcolm Gladwell.

Definition

By definition a black swan is an event that is unforeseen, thus it has a very low probability yet, if it occurs, it will have a major impact. According to Taleb a Black Swan has three features:

  1. The event is a surprise (to the observer).
  2. The event has a major effect.
  3. After the first recorded instance of the event, it is rationalized by hindsight, as if it could have been expected; that is, the relevant data were available but unaccounted for in risk mitigation programs. The same is true for the personal perception by individuals

Taleb downplayed the importance of paying attention to trends, since in his view black swans are responsible for the major changes in the world. Futurist Stephen Millet, in his book Managing the Future, says that Taleb is correct in emphasizing the importance of emphasizing black swan events but he says Taleb is incorrect in totally discounting paying attention to trends and continuities.

The Lesson

The premise of a black swan is that it is something that cannot be foreseen and thus there is no way to prepare for them. Millett disagrees with that premise, as do I. Millett says that one big error that people and companies make is in not considering the possibility of unexpected events. Millett says “So the strategy is to be aware of the possibility of an approaching black swan and be prepared to deal with it when it lands. In this situation, the mental attitude of awareness of the possibility and the willingness to be flexible are more useful than trying to see a black swan in the dark.”

Millett suggests that in order to be prepared you need to consistently monitor know trends and to continually scan for emerging trends. (These will be future topics.) He does say however, that trying to imagine events that today seem unimaginable is a challenge. His solution to this dilemma is continuous learning and exercise of the imagination.

You can sit there in some moments of quiet reflection and start asking yourself “How would we deal with ______?” The exercise of developing answers for each of the different words you use to fill in the blank will help you develop a flexibility that will help you handle the black swan.

 

Photo credit: Flickr Creative Commons from Rubybottoms

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{ 1 comment… read it below or add one }

Greg June 7, 2013 at 9:10 am

Great post Mike. Very relevant to our situation. Thanks!

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