On risk, and the Black Swan

What don’t you know?

I’m in financial services - as are many of you who follow me. Risk is our four-letter word, our watchword, our bogeyman and our savior. Risk is what we do. 

But risk is also our worst enemy, because at some point, risk consists entirely of things we don’t see, don’t know, and can’t - or won’t - anticipate. 

Take the coronavirus situation - a perfect “Black Swan,” as Nassim Taleb would say. Unquestionably, it represents unexpected risk - at the worst, to our health and safety, and at best, to the economy. Emotions are running high - you should have seen my local Costco this weekend! - and panic is the order of the day. But ultimately, we know very little right now, whether about the disease itself, or the possible ramifications. 

Yet there’s opportunity in risk, in “black swans” - if we can manage to look past the panic and the emotion. What’s the long view? Is there an opportunity amidst the paranoia by thinking in terms of years, not months?

In one of the very first deals we reviewed as Dare Capital, this dynamic resurfaced. Panic, uncertainty, unknown factors, and an unanticipated “black swan” event - it was all there. 

Spoiler alert: We made the deal. Here's why.

“A Black Swan has three attributes: unpredictability, consequences, and retrospective explainability. Black Swan logic makes what you don't know far more relevant than what you do know.”

- Nassim Nicholas Taleb, “Black Swan”

My reading list this month

(I love suggestions, please send any you have my way!)

The Great Mental Models, by Shane Parrish

Loserthink: How Untrained Brains are Ruining America, by Scott Adams

Remote: Office Not Required, by Jason Fried (this one is extremely relevant as we all start thinking about transitioning to remote in case of quarantines. Next month I'll focus on best practices for remote work - please send me your tips!)

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Cole Harmonson is the CEO of Dare Capital, a working capital firm for growing companies. Dare to build with us - apply here for financing.