What are black swans?
Every project will run into problems and unexpected risks. No matter how much you plan, these issues will arrive. They often come in different sizing from minor to devastating. Often the minor problems can be solved by carefully laid out contingency plans and great planning. However greater risks and problems can become of such magnitude that any basic planning won’t be sufficient, and more drastic measures must be taken. These can be categorized as black swans. The term black swan originally came from an ancient saying that black swans didn’t exist, this was then later reinterpreted when the first Europeans encountered it.
The theory, in regards to disasters and management, was developed by Nassim Nicholas Taleb, a Lebanese American risk analysist and mathematician. The point of the theory was to explain the hard-to-predict and rare events that are beyond what normal history, science and technology can expect. Examples of such are the financial crisis of 2008 and the dotcom bubble of 2001. Some would argue that the COVID-19 pandemic also is a black swan, however Taleb thinks otherwise because according to statistical analysis it was predicted that such a pandemic would happen eventually, therefore it can’t fall under the category of a black swan.
How knowledge of black swans can help us in our own projects:
So how can we use knowledge of this and bring it into our own project management? Well, the entire point of black swans is that they are unpredictable, therefore we should not try to predict them. Instead, we build up a resilience within our organization or project. Resilience refers to the ability to regain quickly after something bad has happened. Resilience is built up by investing more money into the risk-safety budget and having more staff ready to help and act when a black swan hits. Often these investments will be hard to fit into the budget and many will deem them unnecessary costs. However, the consequences of these disasters will result in a monetary loss that is far greater than what you would have invested into the risk-safety budget.
Key takeaways from the post:
- A black swan is an extremely rare event with severe consequences, that cannot be predicted.
- Resilience is the best way to mitigate the consequences of the disaster
- Resilience can be build by careful resource management and rehearsing