Smart Thinking

Patterns, Fragility and the Black Swan

In search of the Black Swan: Black Swan Thinking, Black Swan Events and the dangers of complexity, fragility and hyper interconnectedness.

FLYING PIGS ARE MYTHICAL (or so we assume), but if flying pigs were suddenly discovered they would be ‘Black Swans’. In 16th century London Juvenal’s phrase was a common expression of impossibility (i.e. ‘you may as well see a black swan’) indicating that the existence of such was considered very much in the same vein as flying pigs in our time. A Dutch expedition led by Willem de Vlamingh discovered Black Swans in Western Australia in 1697 and so ‘destroyed’ a previously held certainty. I have only ever seen white swans, therefore all swans must be white was therefore an understandable, yet poor conclusion.

A rare bird in the lands, and very like a black swan [Juvenal]

Black Swan Events

Black Swans are outlier events, impossibly difficult to predict (except of course with hindsight). They may be positive or negative events and are invariably surprising. If you cast your mind back over the past 50 years some outlier events which would have seemed practically incompressible in the early part of the 20th century: Kennedy put a Man on the Moon, the invention of the Internet changed business and communications, ubiquity of the mobile phone, collapse of Soviet Union, factoring the human genome, nanotechnology, the full of regimes across North Africa, credit and banking crisis, the rise and (and potentially imminent fall) of the Euro zone, discovery of insidious diseases hopping between species. Some of these events were Black Swans, but predictable catastrophe in fragile systems is not a Black Swan; hence the 2008 credit crisis should not be so classified.

When I suspend reality and project my consciousness towards 2050, I imagine memory recovery booths (maybe even with product placement in memory recreation to stimulate ‘backdated brand loyalty’). Supermarkets replacing superpowers, an Open Source Kibbutz, Think Tank Gaming, the formation of an Internet Rumour Council, avatar insurance, avatar bodyguards and cyber kidnapping. We had micro-finance, will micro-litigation come next, or happiness forecasts, nano-detectors for the home, information as a status good, a dangerous robots act, immersive dictionaries, the outlawing of economics, hyper-localism spawning micro-nations and a micro UN. Will we be able to buy life top-ups or literally eat information (imagine the potential for indigestion remedies)? Obviously I am being controversial to illustrate the point but there will be at least 10 major trends in the next 50 years which currently seem unimaginable and completely impractical. A major scientific theory will be disproved; there will be the discovery of a major disease ‘currently’ circulating undetected in the population, some countries will no longer exist. Blue chips will vanish (remember Bear Stearns, Lehman Brothers, the federal takeover and delisting of Fannie Mae and Freddie Mac). There will be hundreds and thousands of lesser trends, each impacting society and business in ways of which we can only hypothesise. The most interesting, beneficial and dangerous will be Black Swans and invariably we won’t see them coming.

Black Swan Thinkers

Black Swan thinkers accept a number of key principles a) we do not really understand the world b) nature knows best, and is most resilient in absorbing the impact of, or exploiting the potential of Black Swans c) A Black Swan will sometimes arise around fragile systems which are typically over-sized, lack redundancy and are densely connected.  As Black Swans are extreme outliers, pattern analysis techniques such as Pattern Based Strategy (PBS) are ‘incapable’ of detecting or reacting to them. PBS, scenario planning and related disciplines provide a useful thinking and evaluation framework with which we can certainly detect previously unseen trends but they are not sufficiently tuned to edge cases to spot wildly unrelated and extreme outliers. Imagine trying to detect radiation without a Geiger counter, and worse still without any concept of radiation’s existence and its negative potential.

This leaves us with a bit of a problem and we have two coping strategies. First we need better approaches to predicting the unpredictable. Black Swans may be impossible to see in advance from our position, but not necessarily from the position of other observers. “Christmas is a Black Swan for turkeys, but not for their butcher”. There is therefore an important (as I term) ‘distance between observers’ and the ability to comprehend and react to the Black Swan. If for example I posted an article “All turkeys, please read urgently”, I suspect it would do little to protect them from ending up on the Christmas table. This is because the turkey cannot read, does not know what a blog is, doesn’t understand the concept of Christmas and its ‘centrality’ to the festivities. It also has limited ability to ‘go in to hiding’ or put forward a cogent counter-argument against its consumption. Its Black Swan is therefore drastic and unavoidable in terms of its direct sphere of influence. If we did manage to get the concept across, the turkey would quickly need to extrapolate the then predictable catastrophe of Thanksgiving.

Defences against the Black Swan

Second, if Black Swans are very hard to see in advance then we need system defences. Nature uses diversity and redundancy to cope; we might use seat belts, airbags and spare parts. If you were insulating yourself from a career Black Swan you would not over specialise (my Cri de Coeur for the preservation and veneration of polymaths). You would also build redundancy into your social networks at all levels and you would spread reliance across redundant nodes. Of course that redundancy requires sufficient analogue and digital duplication to isolate you from the Black Swan that wipes out the entire IT industry.

Should you really worry about Black Swans? I would say worry about predictable catastrophe and build resilience. The 2008 credit crisis was not a Black Swan. It was a predictable and largely cyclical event that for reasons of expediency and collective blindness was ignored. When it hit, many commentators retrospectively declared ‘all the signs were there’. This is true, but the system was also dangerously fragile. It is amazing that Mother Nature avoids these mistakes.

My advice therefore is very simple:

  1. Talk to many observers in many fields. You may find a butcher who can explain and help you avoid ‘the turkey’s fate at Christmas’. Crowdsourcing and Open Innovation are good techniques, although you are more likely to find ‘Black Cygnets’ rather than fully grown Swans. If you are using pattern analysis and PBS techniques do not use exclusively narrow search beams. Wide multidisciplinary horizontal sweeps might spot something rather interesting. The big danger of the Black Swan is the inability to comprehend its meaning and being completely at its mercy (as we see in the case of the turkey).
  2. Be very wary of fragility. Complex, over-sized and highly interconnected systems are ripe for surprise corrections. A negative Black Swan might be close by.
  3. Don’t treat predictable catastrophe as a Black Swan. Predictable catastrophe can and should be avoided.

The wisdom of the Black Swan tells us that ‘perceived impossibility might later be disproved’.

The father of Black Swan thinking is Nassim Nicholas Taleb, author of the thought provoking books “The Black Swan”, “Fooled by Randomness”, “The Bed of Procrustes” and others.

By Steve Nimmons

Steve is a Certified European Engineer, Chartered Engineer, Chartered Fellow of the British Computer Society, Fellow of the Institution of Engineering and Technology, Royal Society of Arts, Linnean Society and Society of Antiquaries of Scotland. He is an Electric Circle Patron of the Royal Institution of Great Britain, a Liveryman and Freeman of London and serves on numerous industry panels. He is a member of Chatham House, the Royal United Services Institute and the Chartered Institute of Journalists.

By continuing to use the site, you agree to the use of cookies. more information

The cookie settings on this website are set to "allow cookies" to give you the best browsing experience possible. If you continue to use this website without changing your cookie settings or you click "Accept" below then you are consenting to this.