How can we prepare to face the Black Swans?

“My main hobby is to provoke those people who take themselves and the quality of their knowledge too seriously, and those who don’t have the guts to say sometimes I don’t know”

Nassim Nicholas Taleb

In the previous post I explained the Black Swans Theory, elaborated by Nassim Nicholas Taleb. Today I’m going to give you some
tips so that you can deal with these black swans
– unforeseeable events but with great impact – in the best possible way.

1. Remember that in the face of Black Swans, what we don’t know is more important than what we know

Learn how to learn. Human beings tend to confuse maps (our mental models) with territory (reality). The models and beliefs we use in our daily lives are valid for known events, but we must have the humility to review them when we face Black Swans. The difficulty lies in the fact that, in the face of unforeseeable events, we do not know in advance where the map will be wrong, and the consequences of making mistakes. We are not well equipped to deal with uncertainty, but for practical reasons, we prefer to work with forecasts and predictions, even if they are often turned out to be wrong.

2. Remember that normal is often irrelevant, and worry about what can actually change your life

Spend less time worrying about things that happen on a day-to-day basis, and focus on those events that can have catastrophic effects and can spell doom for your business. For example, when it comes to taking out insurance, don’t worry so much about the premium you have to pay if you have unavoidable small damages, and worry more about having the civil liability part well covered. The Black Swan is not the rubbing on the fender of your car, but the damage that you can cause to another person in an accident, and that can lead to bankruptcy.

3. Focus as much as possible on recognizing positive Black Swans and playing with them

Black Swans, as we have indicated in the previous conversation, are on many occasions positive. We can all remember rare and unpredictable events that have had a huge positive impact on our lives. In fact, when we play the lottery we are looking for a Black Swan of the positive type. And the truth is that many of the scientific discoveries and innovations arose by serendipity, or in other words, in colloquial language, by chiripa. They were unexpected discoveries of interesting things or ideas in the process of searching for others. This is the case of Archimedes’ Law, the Law of Gravity (Newton), or discoveries such as Penicillin (Fleming), the Post-it note (3M) or Viagra (Pfizer). So, we need to be open to innovation to create as many positive Black Swan opportunities as possible. We should worry less about terrorism and more about health, because you can quit smoking, you can lose weight and eat well to reduce the direct risks to your health.

4. Worry less about the shame of failing and more about missing out on the opportunity of a lifetime

You don’t have to conform to the idea of success that others expect of you. Leaving a well-paid job, if it is by your own choice and to do something that gives more meaning to your life, is always more beneficial than the usefulness that money brought you.

5. Focus on the consequences of the Black Swan, not the likelihood of it happening

Remember that information from the past is not useful for predicting Black Swans. You’ll never get to know the unknown, because it’s unknown by definition, but you can imagine how it might affect you. So apply your common sense. There are no mathematical recipes, and probability doesn’t work with Black Swans, but you can get an idea of what the consequences of these Black Swans would be in your life and in your business.

This is, precisely, a strong idea for the management of uncertainty: to make a decision, focus on the consequences – which you can know – rather than on the probability of that Black Swan occurring.

To avoid what happened to “Russell’s turkey”, you must be prepared for the unexpected, without worrying about when it will happen. Unlike turkeys, we have the ability to imagine it.

6. Remember that our world is dominated by the unknown and the improbable

This implies the need to live with Black Swans, without treating them as something to be swept under the rug. Despite our progress, the future will become progressively less predictable, even though our own human nature conspires to hide this reality from us.