Global business executives, are you prepared for an uncertain future? If not, consider the parable of the turkey for guidance.
Global business executives, are you prepared for an uncertain future? If not, consider the parable of the turkey for guidance.
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It’s that wonderful time of the year where leaves turn bright amber, apples hang from trees, tempting smells waft from the kitchen and families across the
However, this particular Thanksgiving, I’d like to bring up the parable of the turkey as told by NassimNicholas Taleb as a constant reminder that all business executives should always plan for the unexpected – no matter how remote the possibility.
As detailed in “The Black Swan”, Taleb asks us to consider the life of a turkey. You see, the lifecycle of most turkeys is well known to the outside observer. A turkey is born, and then fed generously everyday. For 1,000days straight the turkey expects its morning shovel of grain, grass, acorns orshoots.
A monumental event happens to that turkey on day1001—and we all know what that event is. Until that point of course, everything is considered “normal” by the turkey. In fact most days deviate only slightly from the norm, with maybe a few minor exceptions.
Getting back to day 1001, Taleb points out, “A turkey cannot figure out what is in store for it tomorrow based on the events of today.” And Taleb notes that this is one of the key challenges with assuming tomorrow or even next year will be much like today.
Author Peter L.Bernstein often asks,“What is ‘normal’ anyway?” Good question.
Quantitative financial analysts, attempting to model the stock market, took heavy losses in 2008 as they assumed the past would bea relevant predictor of the future. Automobile manufacturers forecasted that demand would be similar to last year (maybe a bit less), and now many are frantically leasing space outside of key US ports to store unsold cars. This year has seen the DOW index range between 13,000 and 8,000. And Mr. Greenspan, former Federal Reserve Chairman, said in testimony to the United States Congress in October 2008, “This crisis… has turned out to be much broader than anything I could have imagined.”
What’s a business executive to do?
Don’t throw out the models—just yet. I have previouslymentioned that modeling can be a very valuable tool for companies assessing future scenarios, determining cause and effect, and allocating scarce resources. But use caution; models are support tools that should be combined with good judgment, experience, and the input of others to effectively drive decisions.