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Crisis and the “Black Swan”

Written by: Dr. Rick Johnson

Article Overview: Black Swans are important events, either good or bad, that are highly improbable but happen nonetheless. Using the term Black Swan is a metaphor for an event that just is weird or unexplainable before hand using logic. None the less, Black Swans are explainable after the fact. Most are rare events that have extreme impact on the business. (Taleb, Nassim Nicholas. The Black Swan. New York: Random House, 2007.)

Crisis and the “Black Swan”

Black Swans are important events, either good or bad, that are highly improbable but happen nonetheless. Using the term Black Swan is a metaphor for an event that just is weird or unexplainable before hand using logic. None the less, Black Swans are explainable after the fact. Most are rare events that have extreme impact on the business. (Taleb, Nassim Nicholas. New York: Random House, 2007.)

White Swans



Taleb states that most people don't think black swans exist, simply by having seen only white ones.

"We put a label on an event and use that knowledge to reason about the future. We use stereotyping and labeling for filling an unknown mental void. This creates a blindness that just may disallow us from recognizing a Black Swan even if it's right in front of us."



I believe that Black Swans could be considered the boldest definition of crisis.

When you have seen only white swans in your life, you think "all swans are white". But it might be that you just haven't recognized a Black Swan yet. Remember, Taleb defines a "Black Swan" as a highly improbable event, but with an enormous impact when it occurs. But, in my opinion, that doesn't mean they can't be recognized or even predicted.

Recession

So, is the current recession a "Black Swan"? I don't think so. Whereas, the terrorist attack of 9/11 is believed to be a Black Swan. Was 9/11 predictable; Most say no, however, looking back, the signs were there. We just didn't recognize them or corordinate our communications well enough to prevent it from happenng. Today's recession may not be a Black Swan but how this country reacts to this crisis combined with the challenges of the global economy, nuclear proliferation and dealing with the rogue nations of the world could create a Black Swan.

Black Swans are the "Epitomy of Crisis"

Some academics have defined crisis management as reactive leadership. This

stems from a belief that crisis is both unpredictable and unexpected; but this is simply not true. A Crisis often helps develop an organization's principles, beliefs, culture, and core values. Without this clarity, behavior becomes incongruent with its internal environment. A leader, who is "tuned-in" and can recognize the potential for a Black Swan leading to an impending crisis and understands how to harness the urgency brought on by the situation, can minimize the potential dangers and maximize efforts to take advantage of opportunities created by the Black Swan itself.

Although the "Black Swan" is suggested to be a rare occurrence, crisis is a universal reality. Simply put, it is an inevitable part of doing business.

Thomas Kuhn (An American Science Intellectual) stated crisis begins when "existing organizations have ceased to adequately meet the problems posed by an environment that they [in part] have created ... the sense of malfunction that can lead to crisis..."

Failure to heed the initial signals and recognize that the relationship with the environment is changing can actually cause a crisis. However, this does not terrify good leaders because they understand that crisis is necessary for growth and development. It provides the urgency, attention, and opportunity to adapt the business to impending challenge that may not have been recognized in the past.

Black Swans (Crisis) demand adaption to Change



Understanding why leaders are sometimes ineffective at adapting to change

is crucial to understanding crisis. The ability of an organization to grow and step out of its comfort zone without the urgency of crisis is extremely difficult. Change is often threatening to stable relationships, balances of power, process and procedures, or current distribution of resources and influence. Change magnifies differences of opinion between individual beliefs and perspectives. But, these differences under the right leadership can actually become the heart of progress and change.

The most effective way to deal with crisis is to recognize, prioritize, and mobilize

awareness for needed change. Understanding and focusing on the core purpose of the organization is necessary to understand how an organization's principles are related to impending change. Unfortunately, self-serving biases, and the tendency to discount the future often prevent leaders from listening to their environment. Ineffective leaders often don't comprehend the signals due to an inhereant state of denial.

Successful growing organizations have gone through the experience of change. In fact, these organizations recognized the necessity to manage change. That is what leadership is really about; the ability to manage change and deal with crisis.

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Article Tags: attitude, black swan, leadership, motivation



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