06 June 2010

Black Swans & Brown Pelicans

Those familiar with the concept of a Black Swan, know that Nassim Taleb's Black Swan is a metaphor to explain the disproportionate magnitude and consequence of rare, unexpected events.
This decade's Black Swan arrived in the form of a Brown Pelican in the Gulf of Mexico.
Looking back, one can fathom how management disasters occur in a high-stakes system of unregulated capitalism.
There's a financial incentive for going forward, and a financial disincentive for holding back. ~Lane Wallace
It occurred to me that a Black Swan is not neccessarily a discrete event (or series of events), rather it is
the continuous unfolding paradigm of uncertainty we live in.
There is false security in thinking of Black Swans as discrete events.

BP's Deepwater Horizon oilcano disaster is a culture-changing Black Swan. This disaster reminds me that unknowns cannot be conveniently isolated and discretized on a timeline - as comforting as that might be. Rather, the unforeseen continually unfolds.

It bears reflecting on the immutable: the world is a complex system.
Our complex world is like a spirited race horse. The harder we tug to control it, the more it resists to prove a point.
~Roger Martin
Ever fearful of the impact of lurking Black Swans, we feverously quantify complex systems to make predictions.

We are adept at, but not particularly accurate in, making predictions - whether in the sciences, engineering, or business. Yet the lure of predictive numbers is intoxicating (with the side benefit of providing a living to many professionals).

Years ago I made a living as an engineer making computer models of groundwater contamination as a predictive tool. The results from the model simulations were used to design engineering solutions and to support environmental litigation.

These contaminant flow models were alluring mathematical applications that produced aesthetically pleasing color contours of simulated toxic plumes. The problem is, the models had little or no basis in reality; yet millions of dollars were spent based on the results.
Our world is an intensely complicated, ambiguous system of systems that defies comprehensive quantification
~Roger Martin
Risk management professionals are quick to distinguish between the concepts of Risk and Uncertainty, saying
With risk, we know the odds. With uncertainty, we don't.
If risk is "we don't know what’ll happen, but we know the odds", I have become a skeptic. Here's the rub
Unless the odds-makers are gods, what we're left with - after the hubris and volatile gases burn off - is uncertainty.
At times I have been metrics-obsessed. I have deluded and comforted myself with data collection.

The metrics-obsessed believe that collecting numbers will reveal actionable things we can't afford to ignore. Further, the metrics-obsessed believe that numbers might somehow answer questions they haven't yet thought to ask. Perhaps. Like others questioning their faith, I still obsess about numbers - just in case.

I know certainty is an illusion, so I plan accordingly.

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