It’s been a while since I quoted from The Black Swan on this blog. I presented this book at the September, 2007 First Friday Book Synopsis. It still pops up in the “let’s discuss” and even some “best-seller” lists. Here’s my description from my handout:
• A Black Swan is an event which follows three attributes:
• First, it is an outlier. (rarity)
• 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. (retrospective, though not prospective, predictability).
In the New York Times Magazine this past Sunday, we find this article: Spillonomics: Underestimating Risk by David Leonhardt. Here’s an excerpt:
When an event is difficult to imagine, we tend to underestimate its likelihood. This is the proverbial black swan. Most of the people running Deepwater Horizon probably never had a rig explode on them. So they assumed it would not happen, at least not to them.
Similarly, Ben Bernanke and Alan Greenspan liked to argue, not so long ago, that the national real estate market was not in a bubble because it had never been in one before. Wall Street traders took the same view and built mathematical models that did not allow for the possibility that house prices would decline. And many home buyers signed up for unaffordable mortgages, believing they could refinance or sell the house once its price rose. That’s what house prices did, it seemed.
The point of the article is fairly clear: if we can’t imagine that something will actually happen, then we think it won’t ever happen. It does not matter that someone somewhere has said, “this might really happen.” If it’s beyond what we think can happen/will happen, then we act as though it will never happen.
Big mistake. Big mistake!
“No one could have imagined them taking a plane, slamming it into the Pentagon into the World Trade Center, using planes as a missile.”
As I said to you in the private session, I probably should have said, “I could not have imagined,” because within two days, people started to come to me and say, “Oh, but there were these reports in 1998 and 1999. The intelligence community did look at information about this.”
To the best of my knowledge, Mr. Chairman, this kind of analysis about the use of airplanes as weapons actually was never briefed to us.
I cannot tell you that there might not have been a report here or a report there that reached somebody in our midst.
I think that Ms. Rice was being very truthful – in spite of the fact that there had been plenty of “imaginings’ of this kind of attack. Tom Clancy had imagined something similar in a best-selling novel. There had been some reports discussing the possibility of just such an attack. Whether Ms. Rice had read the novel, or heard about the reports, was beside the point. Since it had never happened, it “never could happen,” – at least, to our thinking. This is the black swan problem.
The oil rig disaster, the subprime mortgage meltdown, are events that should tell us all—“we’d best expect the next unimagined possibility to actually happen at some point.”
It sort of reminds me of the opening paragraphs of M. Scott Peck’s The Road Less Traveled:
Life is difficult.
This is a great truth, one of the greatest truths. It is a great truth because once we truly see this truth, we transcend. It. Once we truly acknowledge that life is difficult – once we truly understand and accept it – then life is no longer difficult. Becasue once it is accepted, the fact that life is difficult no longer matters.
Most do not fully see this truth that life is difficult. Instead they moan more or less incessantly….
Discipline is the basic set of tools we require to solve life’s problems.
Without discipline we can solve nothing.
So, I think we need to learn to think this way:
The Black Swan, the impossible to believe it will actually happen bad event, will probably happen. The worst case scenario is very likely to happen – if not this time, then soon. Let’s prepare for it; let’s be ready for it; let’s not be surprised when it happens – because it will happen. The black swan will visit our company, our project, our life – and when it does, we should not be surprised.
Update: I just read this article, Countervailing power: After the BP catastrophe and financial market collapse: Taking back the sway big business has over our government by Robert Kuttner, which adds a few elements to the conversation. I do not think it takes away from my point — but it does help us understand why the people who are saying “this could happen” are not listened to very well.
More than half a century ago, the late economist John Kenneth Galbraith coined an important concept — “countervailing power.’’ Big business, Galbraith observed, had immense economic influence. But countervailing forces such as the trade union movement or activist citizens groups could neutralize that economic power by harnessing government to keep business’s less savory tendencies from overpowering its benign ones.
But that was then. Despite a seemingly formidable environmentalist movement, the oil industry overwhelmed its regulators. Americans for Financial Reform, the coalition of consumer groups pushing for better banking regulation, is outspent by Wall Street lobbyists by at least 100 to one.
There has been a lot of commentary lately contending that we have a tendency to underestimate risk. Truly catastrophic events occur only rarely — they are “black swans.’’ In the meantime, a lot of money can be made by betting that disaster won’t occur, or that it will occur on somebody else’s watch.
But who, in this account, is “we’’? In fact, plenty of voices in the wilderness were warning against the risk of a catastrophic oil blowout, or a financial one. These critics did not lack prescience or insight. What they lacked was political power.
It’s true that technologies, both financial and oleaginous, are becoming ever more complex; and this does create new kinds of risk. But the cure is less technical than political.
Citizens need to act more vigorously to restore Galbraith’s countervailing power. Otherwise, private business acting in its short run self interest will ruin us twice — once when private markets pay no heed to the risks they are imposing, and a second time when they corrupt our regulatory institutions.
“Life is difficult; don’t be lazy” – 2 great lessons from M. Scott Peck’s The Road Less Traveled, maybe the best book I have ever read
Yesterday, Bob Morris and I both weighed in on this blog with our “best business books” list from 2009. (Our lists were very different – mine here, Bob’s here). So I started thinking about which books I have read that have had true, lasting impact on my thinking, and even occasionally my behavior. I keep thinking back to one book. I read it in the 1980’s, and though I do not live up to its teachings, I certainly remember them — frequently. I might even call it the best book I have ever read, because it gives me such profound life lessons.
The book is The Road Less Traveled: A New Psychology of Love, Traditional Values and Spiritual Growth by M. Scott Peck. (You can purchase the 25th anniversary edition at Amazon here). My well-read and fully-marked-up copy is in storage, but thanks to Amazon’s preview feature, I here include the greatest first page of a non-fiction book that I have ever read:
Life is difficult.
This is a great truth, one of the greatest truths. It is a great truth because once we truly see this truth, we transcend it. Once we truly know that life is difficult – once we truly understand and accept it – then life is no longer difficult. Because once it is accepted, the fact that life is difficult no longer matters.
Most do not fully see that truth that life is difficult. Instead they moan more or less incessantly, noisily or subtly, about the enormity of their problems, their burdens, and their difficulties as if life were generally easy, as if life should be easy. They voice their belief, noisily or subtly, that their difficulties represent a unique kind of affliction that should not be and that has somehow been especially visited upon them, or else upon their families, their tribe, their class, their nation, their race or even their species, and not upon others. I know about this moaning because I have done my share.
Life is a series of problems. Do we want to moan about them or solve them? Do we want to teach our children to solve them?
Discipline is the basic set of tools to solve life’s problems. Without discipline we can solve nothing.
From this book, I remember two great truths:
1) Life is difficult. When you accept this truth, then you can “expect” the next difficulty to arrive, and tackle it as it should be tackled – as the next difficulty on your list of difficulties. There is no life without difficulties! This is truly a great truth. (And, yes, very Buddhist – although you can find plenty of confirmation in Christian Scripture).
2). You (and all of us) are lazy – seek to overcome your laziness! In the book, Peck does not define laziness as doing nothing (couch potato laziness), but rather, laziness is spending time on the “wrong thing.” And the “right thing” is always beckoned by love. Here is the principle: Even if we work diligently on work that needs to be done at some point, if it is not the thing you should be working on at this moment, it is laziness. Avoiding the challenge that we most need to tackle is laziness.
Peck defines laziness as a failure to love. Here is a quote (lifted from a quotes page from the web; as I said, my copy is in storage): evil is laziness carried to its ultimate, extraordinary extreme. As I have defined it, love is the antithesis of laziness. Ordinary laziness is a passive failure to love.
So, as we think about the best books we have read in the last year, maybe it is time to revisit books that most shaped us – and to remember their valuable lessons. And if you have never read The Road Less Traveled, let me encourage you to do so. I believe it is worth the investment of time.
In this series, Bob Morris poses a key question and then responds to it with material from one or more of the business books he has reviewed for Amazon and Borders.
In the June 2009 issue of talent management magazine, Robert P. Gandossy and Michelle Salob Frieberg identify eight of the most common mistakes companies make when managing talent. “The head of executive development for GE once said without a touch if arrogance: ‘We will share what we do around talent and leadership with anyone – including our competitors – because we don’t believe its replicable.’ Yet what GE does is not all that complicated: It hires great people. It sells careers, not jobs. It identifies, rewards and develops great talent. That’s it. But if the answers are so straightforward, why don’t more companies get it right?”
[Note: What follows is an abbreviated version the complete article.]
1. Complex programs and practices vs. simple ones: The best leadership development processes aren’t overly engineered or sophisticated. Avoid complex and rigid models.
2. Do as I say, not as I do: If the CEO and senior executives won’t spend the time to make talent and leadership a priority, neither will anyone else. Leadership is not just about what leaders do. It’s about who they are…all the time. If someone is not a role model, and exemplar, she or he is not a leader.
3. Haves vs. have-nots: Make the top talent feels special. Establish a fair, accurate, and consistently applied rating and rewards system. Celebrate development of superior talent and especially its performance, its contributions.
4. The road less traveled: Recognizing there is a need to focus on leadership is only the first baby step. Then they must act. This need not be complicated – just start somewhere. Get the hiring right. Focus on the high-potentials who have character: work ethic, conscientiousness, ability to work with others, etc.
5. Potholes left unfilled: Hold supervisors and high-potentials accountable for taking all necessary developmental action steps, monitor their initiatives, and assess progress.
6. Broken chains: Connect all leadership practices (e.g. interviewing, hiring, orientation, training, performance management, talent reviews, development) rather than allow them to become isolated and held captive in organizational “silos” and “dungeons.”
7. Confidence without capability: Many leaders express faith in and support of talent management but really do not manage it. Confidence should be based on what has been accomplished, not on what has merely been endorsed. Managing talent itself requires talent that has been developed to do that.
8. Just-in-time talent: Too many companies buy talent or high-potential talent on the open market. This is time-consuming and increasingly cost-prohibitive. Over-inflated, under-developed talent tends to underperform.
Therefore, most CEOs now realize, the best way to ensure a strong pipeline of talent is to find and develop it themselves.” How? In Q&A #159, I share the “Four Guidelines for Action” that Gandossy and Michelle Frieberg recommend in their article.
Meanwhile, you can obtain a free subscription to talent management magazine by visiting:
Comments, questions, requests, or suggestions? Please share them. They will be most welcome and I thank you for them. Best regards, Bob