The COVID-19 pandemic we are experiencing can be referred to as a “black swan” event: an unexpected, unforeseen catastrophic event. So, what are black swan events and why should we worry about it? Nassim Nicholas Taleb, one of the most original and provocative risk management and social philosophers of our time, defined black swan events as events that are unexpected because nothing in the past can convincingly point to its possibility, and these events have extreme impact. Many catastrophic events in history can be classified as black swan events. Taleb explains a Black Swan event as “an event with the following three attributes:
First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.”
Volatility is inevitable. The world of business and work is dynamic, therefore inherently risky. The problem is we human beings tend to think that we have become more sophisticated in quantifying things—that we have mastered risk and have relied on predictive models to guide our most important decisions in life. Black swan events teach us to be humble and learn that catastrophic events are rarely knowable in advance. It may be obvious in hindsight, but not in advance.
If black swan events are not predictable, does that mean that we could do nothing about it? On the contrary, accepting that black swan events are not predictable and knowable is the first step in the right direction. Adopting a nonpredictive view of the world means that we focus on something that is knowable and quantifiable, i.e. fragility.
A “fragile” organization is one in which the culture is ripe for a black swan event to severely impact it. What can you do to counter that? You can make it robust. Or, even better, anti-fragile, one that benefits from shocks. Antifragility is a word that is nonexistent in the English language—this is an original term coined again by Taleb.
Antifragility goes beyond resilience. The objective of resilience is stability—that despite the occurrence of catastrophic events, one stays the same, unmoved and stable. Antifragility does not only resist shocks but something that loves shocks. It is a situation or a mindset where one benefits from disorders and gets better as one is exposed to these black swan events. An example of anti-fragility could be when an economic downturn is felt and while all other companies suffer, your organization benefits. Due to its outstanding culture and practices it outshines all others in performance and/or in spirit making it more attractive than alternatives.
In the world of black swans, the antifragile mindset allows one to gain from disorders. Antifragile is what allows us to thrive in a world we don’t understand.