Some will argue that the title of this article contains a paradox once we have a better understanding of what a “ Black Swan event ” is .
What is a Black Swan event ?
In his book “ The Black Swan : The Impact of the Highly Improbable ”, Nassim Nicholas Taleb states that a Black Swan Event is “ a highly improbable event with three principal characteristics : it is unpredictable ; it carries a massive impact ; and , after the fact , we concoct an explanation that makes it appear less random , and more predictable , than it was ”. In other words , Black Swan occurrences often have enormous impact and are random and unexpected . Taleb then acknowledges what he refers to as the issue - “ Lack of knowledge when it comes to rare events with serious consequences .”
Here are the definitions of the other two swans :
Grey Swan : A grey swan is a highly probable event that has three key characteristics : it is predictable ; it has an impact that can quickly cascade ; and , after the fact , we come up with an explanation that acknowledges the probability of occurrence but shifts the focus to human error or another type of causation . Taleb ’ s worry in this case would be - “ Lack of judgment when it comes to high probability events that have the potential to cascade .”
White Swan : A white swan is a highly probable event that has three main characteristics : it is likely to occur ; its impact can be readily estimated ; and , after the fact , we develop an explanation that acknowledges the likelihood of occurrence but once more shifts the emphasis to mistakes in judgment or other human forms of causation . Just like with the black and grey swans , Taleb is worried about - “ Ineptness and incompetence when it comes to certainty events and their effects .”
Thus , Taleb is alarmed by the fact that many organizations appear to be under-equipped to handle all the Swans .
Was Covid-19 A Black Swan Event ?
Many people argue that the global Covid-19 pandemic is a Black Swan event . Is it ? Let ’ s put the argument to test using
Taleb ’ s definition of a Black Swan event .
Is Covid-19 a unique case that deviates from the norm ? In human history , pandemics have always occurred . Numerous epidemics have been officially documented . Although they are less frequent , large-scale epidemics are not unheard of . Indeed , more people are said to have died from the 1918 Flu Outbreak than those who lost lives in the First World War .
Warnings had been sounded prior to the Covid-19 outbreak . In remarks at the National Institutes of Health , both President George W . Bush ( in November 2005 ) and President Barack Obama ( in December 2014 ) issued pandemic warnings . In his 2015 TED Talk , Bill Gates also warned a pandemic was on the horizon , and we weren ’ t ready for it .
In 2017 and 2019 the US Government carried out simulations which played out a viral outbreak from outside the country that could result in massive casualties in comparison to the 2002-2004 SARS outbreak .
Regarding the severe impact criterion , it is obvious that Covid-19 has had a significant negative impact on humanity at the health and socio-economic levels , even if the 1918 flu outbreak resulted in a greater death toll . So , can we honestly say that Covid-19 was not foreseeable ?
We should therefore place Covid-19 in the Grey Swan category because it was actually predicted and had an impact that quickly cascaded . In light of this , it may be claimed that events associated to Covid-19 already had documented retroactive risks and closely related prospective risks . Governments and organizations should thus have planned better for the disruptions caused by Covid-19 . This could only have been accomplished if we had acknowledged the existence of Covid-19-like outbreaks with catastrophic effects in the past , heeded warnings from authorities and other well-informed parties , and conducted a thorough prospective risk assessment and risk treatment process before the outbreak .
Recent major global and local business disruptions
Organizations have encountered significant economic disruptions from various hazards similar to the Covid-19 case . In
May 2017 British Airways suffered an IT glitch that forced the Airline to cancel all flights from major London airports . We had the Houston , Texas Colonial Pipeline ransomware attack in May 2021 . The Pipeline supplies 45 % of fuel supplies on the East Coast of USA . It transports gas , diesel , home heating oil , and jet fuel through 2.5 million barrels each day and reaching more than 50 million people . These operations were shut down for several days as a result of this attack .
In October 2021 , Facebook and its subsidiaries , Messenger , Instagram , WhatsApp , Mapillary , and Oculus , became globally unavailable for a period of six to seven hours due to an internet outage . The February 2015 Safaricom network outage in Kenya left subscribers offline with no access to Voice , Data , SMS , M-PESA and Enterprise services . In January 2022 the collapse of Kenya Power Lighting Company towers along a high-voltage transmission line caused Kenya to suffer its third countrywide power outage in four years , with the entire Country plunged into a blackout for almost four hours after a transmission line broke . In these instances , disruptions brought on by the interruption and breakdown of vital infrastructures had a significant negative societal , economic , and reputational impact .
Although the focus of this article is on the downside risk , it ’ s important to remember that , in addition to any bad effects of an event , there may also be positive effects . We have had positive Swans ( upside risk or upside potential ), like the invention of the internet and the discovery of antibiotics .
How do you prepare for a Black Swan event ?
Organizations cannot fully plan for Black Swan events , as the term shows . They are