It's Not A Black Swan . . . It Really Isn't

Nassim Nicholas Taleb has unwittingly provided 21st century management - and maybe you - with the slickest silicon coating they could ever have asked for.  Having read the book that carries this escape clause, I know Mr. Taleb would tell the misusers of his creation they should be ashamed of themselves.  You've seen it - maybe even done it.  It has become fashionable of late for people today to lay their issues and poor performance fully at the feet of a nefarious bird - The Black Swan.  I have heard it used to explain the circumstances leading to the most recent bursting financial bubble as well as leaking oil in the Gulf of Mexico.  In my simple words, Taleb's Black Swan events occur and could not have been predicted based on what was known at the time.  Any way, this is not the same as failing to consider downstream impacts of your decisions - in multiple (including catastrophic) scenarios.

Let's de-construct the sub-prime mortgage mess to clarify what is and isn't an unpredictable event - in wild shorthand.  First let's level set that for most of us this looked like an overnight failure and wondered how in the world it could happen so fast.  Well, it didn't happen that fast.  Investment grade bond yields were falling for years so investors were clamoring for places to earn better returns.  Armies of really smart people set to  designing a way to generate higher yields.  The process began with banks (loosely used term) lending money for homes to people who should never have had them (o.k., gross generalization).  These loans are sold upstream to investment banks who further packaged them into, well, essentially AAA rated securities with seemingly no downside risk with better yields than, uh, normal bonds.   Oh, and the people who rate the riskiness of the securities are paid by the people who want to sell them.  Go back and read that last sentence again before you move on.

Now that you've seen some of the parts of this little party let me ask you this: if you knew it in advance what would you have said?  I know you wouldn't say it made perfect sense and was a riskless money machine.  The risks are obvious.  Lending $500,000 to a guy that can't make payments on $10,000 - it happened.  "Banks" selling every loan they make and having very little in the game - huh?  Ratings agencies being paid by the people they have to review and rate products for.  By the way, someone did see it coming and made a lot of money waiting for it to blow up.  So, it was predictable and therefore not a Black Swan.

And neither are the things that go south in your department, desk, company or with your clients.  One of the greatest worries I have over all this finger pointing at black birds is this - it tells me people aren't learning from their mistakes.  Are you?  Are you helping your business, peers, team and yourself improve by facing into things that you could have?  Here are three keys to stopping the spread of 'black swans' and improving performance in your organization:

1. Acknowledged the failure and own it.  It's critical that leaders name the failure and refuse to lay blame on a confluence of uncontrollable events. It tells everyone in the organization that we must do better and that improvement begins now.
2. Asked harder questions and get to the core issue.  Most of us stop at the point that we get a plausible explanation for what happened.  I've had to say, more than once to very intelligent people, "I know WHAT happened, we have to answer WHY?"  You see, it's 'why?' that gives us insight into other things we might be overlooking.  You may find it's as a missing control, or more difficult strategic capabilities gaps.  Here's what you know - the same organization that put the process in place that is failing put a bunch of other stuff in place.  The core issue can point to additional pain points.
3. Apply what you learn to your overall operating environment and customer-facing processes.  This is where performance improvement and customer satisfaction can make big gains.  I've seen a single insight - phone calls take too long - lead to additional improvements to other areas of an operation which end up reducing costs and improving performance well upstream from the customer phone call.  Every business needs that kind of improvement.

There are not that many black swans and they aren't likely walking around wreaking havoc in your business.  The moment you stop arguing they are is the same moment you will free the power of you, your department and your business to succeed.