It’s extremely unfashionable to be the “Black Swan” crier in your organization, or the person who warns line of business managers about the heavy impact of extreme but unlikely events. In fact just the opposite is the norm, where plenty of company executives get rewarded in career growth and compensation for ignoring risks, or sweeping them under the rug for others to tackle down the road. It’s time to listen—really listen—to what Black Swan criers in your own company are saying.
In 18th century England, the town crier would be dressed in fine clothing, given a bell, and told to “cry” or proclaim significant news to merchants and citizens alike. Sometimes the town crier brought bad news—such as tax increases. Fortunately, such a person was protected by laws stating that anyone causing harm to the town crier could be convicted of treason. Wikipedia notes the phrase; “don’t shoot the messenger” was a real command!
Fast forwarding to our current time, there are few rewards for those who “cry” or warn about the dangers of “Black Swans” or extreme but rare events that carry a high impact. See here for a list of “Black Swan” events since 2001.
Case in point, leading up to the September 2008 financial crisis, only a few prognosticators could see that quasi-government agencies such as Fannie Mae and Freddie Mac were buying too many no-documentation, no-income (NINJA) loans that could go bust if the US economy went into recession. Nassim Taleb, author of the Black Swan, was a key figure that needed no more than a glance at these agency’s financials in 2007 to declare, “(They seem) to be sitting on a barrel of dynamite, vulnerable to the slightest hiccup”.
And of course, that dynamite was lit as the global economy teetered on the edge of major depression, and the agencies ultimately lost a combined $15B. Of course, Mr. Taleb was ridiculed as a “clown” and “rabble rouser” for many of his prognostications.
Today’s corporate potential whistleblowers don’t fare much better in terms of warning about everyday risks whether they reside in supply chains, nuclear power plants, cloud computing infrastructures or other such complex systems prone to fragility. It’s much easier to carry on with business as usual, than plan and prepare for events that however unlikely, could end up disabling or dismantling your organization in one fell swoop.
Indeed, Taleb argues it’s much easier for managers to tout what they “did”, rather than what they avoided by taking proper risk management precautions. “The corporate manager who avoids a loss will often not be rewarded,” he says.
Business executives should not turn their eyes and ears from their own “town criers” preaching Black Swans. While painful to listen to, and sometimes counter-intuitive for today’s “business wisdom”, those closest to your business operations often see what can blow up, long your before mid-level and corporate executives gain visibility.
These “Black Swan” criers may never be personally rewarded with a gold medal for highlighting key risks, but it’s the smart business that ultimately finds a way to seek their opinions and at least scenario plan for their noted “worst case event” outcomes.