Of Black Swans and Taking Showers

January 15, 2013
17 Views

Those pesky “Black Swans” – extremely low probability events with a large impact have been burned into the lexicon of just about every MBA.  With “Black Swan awareness” in mind, executives are counseled to be on the prowl for unlikely events that could potentially wipe out their headquarters, disrupt supply chains, bankrupt the company, or even lead to employee deaths. And while Black Swans are definitely reasons to seek safer ground, it’s inevitable the biggest risk is right under your nose!

Those pesky “Black Swans” – extremely low probability events with a large impact have been burned into the lexicon of just about every MBA.  With “Black Swan awareness” in mind, executives are counseled to be on the prowl for unlikely events that could potentially wipe out their headquarters, disrupt supply chains, bankrupt the company, or even lead to employee deaths. And while Black Swans are definitely reasons to seek safer ground, it’s inevitable the biggest risk is right under your nose!

Author Jared Diamond writes for the Weekend Financial Times about the importance of understanding everyday risks. In studies of New Guineans, he cites how jungle dwellers will refuse to camp out underneath a dead tree. That’s because even though the risk of such a tree falling on you is 1 in 1000; if one does enough camping under dead trees eventually it will lead to an untimely death. Diamond writes; “New Guineans have learnt from experience which are the real dangers in their lifestyle and they remain constantly alert to those dangers.”

Speaking of daily dangers, Diamond mentions for older adults, it’s more likely you’ll die slipping and falling in the shower, than in any horrific event your mind can conjure.

I blame the media for this over-estimation of extreme events. Simply open a newspaper and you’ll think the world is coming to an end. Fires, earthquakes, wars, pestilence and central bankers (yes, the inclusion of central bankers in “disasters” is intentional) are prominent.  With evidence of just your local paper or watching one hour of CNN, it’s easy to believe the world is filled with one extreme disaster after another.

And while Black Swans are definitely something to prepare for in terms of creating more robust or anti-fragile structures, it’s often daily events that are more likely to hurt us. Case in point, while dying in an airplane crash is a horrific way to check out (1:250,000 probability of death in a given year), it’s much more statistically likely that you’ll meet your maker traveling in a car to your local grocery store (1:5000).

So, yes, prepare as much as you can for extreme events.  Identify the “known knowns” for which you have probability theory to assist, the “known unknowns” where Bayes might help, and try to build robustness for the very infrequent Black Swan type “unknown unknowns”.  

But in all this, please pay attention to the risks closer to home, those dangers you might face every day. And watch out when taking a shower. That first step in, could be quite a doozy.

 

You may be interested

Is Big Data the Salvation of the Newspaper Industry?
Analytics
0 shares482 views
Analytics
0 shares482 views

Is Big Data the Salvation of the Newspaper Industry?

Rehan Ijaz - May 27, 2017

The newspaper industry has been declining for the past decade. In 2007, Paul Gillan, a former reporter, launched the website…

Big Data is the Key to the Future of Multi-Device Marketing
Big Data
0 shares515 views
Big Data
0 shares515 views

Big Data is the Key to the Future of Multi-Device Marketing

Ryan Kh - May 26, 2017

Digital marketers must reach customers across multiple devices. According to Criteo Mobile eCommerce Report, 40% of all online transactions involve…

Empowering Partners and Customers with Data Insights: A Win-Win for Everyone
Analytics
0 shares469 views
Analytics
0 shares469 views

Empowering Partners and Customers with Data Insights: A Win-Win for Everyone

Guy Greenberg - May 26, 2017

All businesses in the digital age rely on analytics for various activities: Product managers rely on analytics to gain insights…