Opinion: Black Swan events are a great opportunity
The global reaction to the Silicon Valley Bank collapse was shocking. It will have ripple effects that will change the way business is conducted in many ways. While it is impossible to predict how this will unfold, the high-level lessons from “Black Swan” events like this one are always amazing and a great opportunity to reflect and learn.
The black swan theory, or theory of black Swan events, is a metaphor that describes an event that is unexpected, has a major impact, and is often inappropriately justified after the fact with the benefitof hindsight. -Wikipedia
When “Black Swan” events occur, I recall the following frameworks and philosophies I have learned and studied over the past few years about “unexpected events:
“When we are surprised by something, even though we admit we made a mistake we say, “Oh, I’ll never do that again.” The truth is that it is hard to predict the future. That’s the right lesson to learn from unexpected events: the world is unpredictable.” – Daniel Kahneman
“Things that have never occurred before happen all of the time.” – Scott Sagan (Stanford Professor).
Rare Events are Not That Rare: We’re not good at learning from past mistakes. We mistakenly believe that something cannot happen now because it hasn’t happened before. We then defend our lack planning accordingly: “That hadn’t happened before!” – Nassim Talab
“Risk is not what you see!”: The greatest economic risk is the one that no one is talking about. If no one’s talking, then no one’s prepared. And if nobody’s prepared for its arrival, it will only make matters worse.” Housel stated. Housel stated, “Think of risk in the same way California thinks of earthquakes.” “If you live California, you know there will be major earthquakes in the future but don’t know when or how. . . But you have an expectation . . You are always ready for it.” – Morgan Housel
These mental frameworks are not the only reason I enjoy studying history. I also love reading “future predictions from experts” instead. It is fascinating to see how events unfolded and how they happened. You will also notice that no two events are the same. Humans have a tendency to use “recency bias” to predict future events based on past events.
How many times have you seen headlines that included a twist on the following ….? “The next 2008 crisis is occurring now” OR …. “This is going to be exactly like the DOT COM bust!”
Be prepared for unexpected surprises that may occur at any time, even if you know they will.
The 2008 financial crisis, and the dot-com bust, were unique events that occurred in their own right and will likely never occur again. Future crises may share similarities, but the future is unknown.
Control what you can control, and make sure to have a safety margin around your life and business. And last but not least, be prepared for unexpected surprises that may occur 100% of the time at an inconsolable time in the future.
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