Is The Coronavirus A Black Swan?

The Black Swan: The Impact of the Highly Improbable was a book written in 2007 by Nassim Nicholas Taleb, a Lebanese-American option trader and risk analyst, who turned into an acclaimed and entertaining essayist. Not shy to express strong opinions, in an often pugnacious and sometimes rambling style, deliberately irreverent, mixing short philosophical tales and scientific commentary, Nassim Nicholas Taleb enjoys presenting himself as a Flaneur and a Phoenician wine lover, whose theory of existence is based on “sceptical empiricism”. One of his conclusions is that we overestimate rationality in our lives.

Before becoming common language, The Black Swan was an original and audacious analysis of the ways in which humans try to make sense of unexpected events.

The Black Swan is based on the idea that the random and highly improbable events that disrupt the beautiful order we seek to control, to make our environment as predictable as possible, are also those that have the greatest effect on our lives.

A Black Swan is an event with three key characteristics: 

1. Rarity: it is outside the scope of our ordinary expectations, as there is no convincing evidence in the past that it is likely to occur (it is statistically referred to as an “outlier”).
2. Impact: reality is strongly impacted.
3. Retrospective predictability: our human nature pushes us to elaborate explanations concerning its occurrence, in order to give it an appearance of predictability (which, however, was impossible a priori). 

Some global examples of Black Swans could be the invention of the wheel, the Titanic, the Great Depression, Star Wars: Episode IV, Harry Potter, September 11th.

Nassim Nicholas Taleb calls those unexpected disturbances Black Swans, in reference to the discovery of black swans in Australia, made in 1790, by English naturalists, when all their previous observations led them to believe that all swans were white. And then a black swan appeared at the edge of a pond...

The example of the black swan illustrates the fact that our knowledge is very fragile, as well as the risk of being trapped by what we believe we know for certain; a single observation is capable of invalidating a general assertion derived from the thousand-year-old spectacle of white swans. It only takes one black bird to call into question all the certainties and force ornithologists to reinterpret the past, reconsider all the theories, classifications and models on which they have viewed reality until then.

The existence of Black Swans confronts us with the fact that our knowledge of past events is not always useful in predicting the future. Black Swans cannot be modeled; unlike risk, which is probable, the unpredictable is the unknown.

According to Nassim Nicholas Taleb, the Black Swan effect began to accelerate during the industrial revolution, when the world became more complex, while ordinary events, the ones we study, talk about, try to predict by reading the newspapers, became increasingly insignificant.

The major problem for business is no longer how best “to manage”, but how to react to the unexpected and how to react quickly. The company's horizon remains the long term, but a long term seriously split into “short times”. The path open to companies is now more akin to a trip similar to the Paris-Dakar, than a ride in a limousine on a motorway, with automatic gears: evasive road maps, tracks full of holes, competitors appearing in the rear-view mirror at the last moment and the obligation to arrive on time at each stage to avoid elimination (a metaphor suggested by Michel Hébert, in Le marketing et la communication face à l’imprévisible : Mobilité, Réactivité, Adaptation, 2011).

This is by no means to underestimate the importance of forecasts, and rather to be humble and cautious in the face of our fantasies of an understandable “structured world”.

Agility, flexibility, adaptation and responsiveness in crisis situations, have become key qualities required in the “world of disorder”, to reinforce leaders’ ability to win the contest of circumstances, to “surf” on opportunities arising from the unexpected.

Just like athletes, skillful leaders think fast, make decisions without procrastinating and quickly change tactics, during the game itself, even when confronted to the unthinkable or the unimaginable. Change cannot be improvised, it is necessary to consciously practice and reflect on change, in order to be ready when the time comes. Athletes have long known to spend a lot of time working on these rapid changes in tactics.

In parallel, skillful leaders benefit from slowing down and taking time to face the nature of events they are experimenting. Don't be afraid to be slow, be afraid only to be immobile, as one ancient Chinese proverb suggested a long time ago.

The game is complex.

We have recently been under heavy stress, witnessing the COVID-19 jump continents faster that would have allowed 19th century tourism. We may have read it on The Internet and started to believe that the unexpected had happened: Black Swan!

On a second and closer look, we can wonder if the coronavirus is truly a rarity, outside the scope of our ordinary expectations; beside our rationalization tendencies, was there no convincing evidence that it was likely to occur?

To assert that the coronavirus is a Black Swan seems a bit exaggerated (or just plain denial of reality).

We have begun to witness probable dramatic economic events, that have stirred up a pandemic paranoia around the world (are we all going to die and are our paychecks going to be hit?), but can we honestly affirm that the coronavirus was unpredictable?

Yes, the coronavirus has shaken down big-cap stocks and financial markets have realized that the coronavirus is maybe going to have a significant impact on many (most, all?) world economies. The combined fortunes of the world’s 500 richest people fell by $444 billion, as the coronavirus has continued to spread. More and more countries are on emergency mode. Global supply chains and international travel are being disrupted and there is now talk of cancelling or postponing the Tokyo Olympics. But can we honestly assert that the coronavirus is a rarity that suddenly appeared outside the scope of our ordinary expectations?

With one country after another locking down borders and if the crisis does indeed spiral out of control, anxiety mingling with fear will continue to agitate minds, and xenophobic responses could be expected to rise. Statistically speaking, is this unpredictable or probable?

Cancellations of major events are on the increase in Switzerland and the Swiss army is preparing to provide logistical and medical assistance to the local authorities. High self-discipline is asked from citizens.

Instead of “crying Black Swan”, shouldn’t we dare to ask again ourselves if sufficient lessons have been learned after the harrowing Sars experience, the highly pathogenic avian influenza or the Nipah virus?

Have we succeeded in fooling ourselves, ignoring previous similar events or that any of them were not useful in predicting the future?

We can certainly agree that the unpredictable is an important challenge for countries and businesses, and that nowadays, it even seems to have become the norm. This said, the coronavirus does not look like a Black Swan.

We won’t know for sure, until the end of the crisis.

This does not exclude the fact that the virus is currently testing leadership across the boards. 

Will we be able to create resilience in operations and a sense of shared purpose, to go through the turbulences that hurt the organizations in the short term? 

Once the storm has passed, let’s hope that we will have the courage to slow down and think together how to get ready to face the Black Swans that await for us in the future.

Illustration: Kim Kimbro, black swan, ink on paper, 2018