All Swans are White.
There was a time in Europe when everyone knew that swans were white. No one had ever seen a swan that wasn't white and no one doubted the truth that all swans were white. If anyone had suggested a swan could be anything but white people would have had serious doubts about their sanity.... after all the evidence was there for everyone to see.
Then Australia was "discovered" by Europe and, as incredible as it sounded to everyone, black swans were discovered as well.
Of course we shouldn't be surprised by the fact that a "truth" was proved wrong; after all not too many centuries before everyone knew the world was flat and that if you sailed too far you would fall off the edge!
"Safe as houses"
Up until a few months ago people put their money in houses, as it was "as safe as houses" to do so. Of course we had seen the occasional blip in prices but for them to drop by more than a few percent for a brief period was highly improbable. Sub prime lending and the credit crunch have since made large price drops a reality in many countries.
We also believed in putting our money in the bank for the same reason; banks didn't go bust, they were full of people who understood money and were very cautious. A run on the bank was almost unknown, was outside most people's experience and highly improbable. A few small town banks in the US had experienced problems but few people living in Europe and the rest of the world knew of it. Then the highly improbable happened, banks in Iceland froze savings accounts overnight, governments in Europe had to help their banks with huge loans and many banks were effectively nationalised. The unthinkable had happened. Business growth slowed down in many sectors and a world recession loomed.
Some people hadn't put all their money in the banks, they had bought shares; after all, despite some stocks fluctuating, stock markets worldwide grew year on year and were a good way to grow your capital, provided you spread your risk. Then stock markets worldwide lost tremendous sums and the world entered an uncertain period.
Highly improbable
All the above were Black Swan events. They were highly improbable to happen, or impossible to imagine.
Of course house prices have dropped before; in the 1920s the world went into a depression that lasted years; although we've not had a recession in the UK for 16 years we did experience recession in the 1990s, 1980s .....and many times before. But recent events have rocked the world and filled the media.
Predicting Black Swans
Could you have predicted these Black Swan events?
Yes. Or so writes Nassim Nicholas Taleb in The Black Swan.
Black Swan events are almost impossible to predict, when they happen their impact is huge and experts worldwide try to rationalise them afterwards. In The Black Swan,
the author, puts black Swans into perspective, he also explains why you should never run for a train or read a newspaper!
Are Black Swans relevant to business?
Yes. Understanding Black Swans could save you money. It certainly helps you plan for all eventualities.
Understanding Black Swans saved me 9000 a few weeks ago. You see like over 100,000 people in the UK I had invested money in Icebank, an online Icelandic bank. Because I knew enough about Black Swans to know that highly improbable things happen all the time I had spread my risk with personal and business accounts spread around several banks and countries. However being aware of the sub prime situation I sat down and imagined the worse case scenario. In my book it was highly improbable but a run on the banks could happen.
So I spread my risk by closing one bank account in Iceland and moved it to HSBC. This was just 12 hours before the bank's assets were taken over by the Icelandic government and accounts were frozen. Because I had imagined the worse I paid £30 for a CHAPS transfer and my money arrived safely.
My other account is now frozen. Fortunately it had much less money in it and, because it is covered by a guarantee, the UK authorities will refund it eventually. The original guarantee was via the Icelandic government but they are effectively bankrupt' so it was a tense time while the UK negotiated with Iceland and eventually loaned them enough to cover the monies owed, to personal investors, by but all now looks well and at least I have my 9000. Thanks to understanding Black Swans.
So yes, Black Swans can strike anywhere and as part of our planning we should always try to imagine how highly improbable events might affect our business.
For example say your e-commerce website was unavailable for several weeks - maybe your hosting service goes down or the site is hacked. Or the mail service goes on strike and your Christmas mailshot isn't sent. Have you a fall back plan. Could you survive these highly improbable events?
Learning More
Clearly we all need to understand about Black Swans and I recommend reading the book. It cost me just over 5 ....and saved me 9000.
Stefan Drew is known internationally as the Marketing Magician. Based in the UK he advises businesses, worldwide, on marketing. His focus is on the highly effective marketing strategies and methods that are low cost or free to use.
Stefan's work has been featured on the BBC and in the press of over 50 countries.
Stefan also has an interest in Sun Tzu Marketing Strategies, a subject which he teaches in his Marketing Masterclasses.
#By Stefan Drew
