Virus fears cut through ‘Black Swan Blindness’3 min read . Updated: 22 Mar 2020, 07:55 PM IST
Post coronavirus world will have no place for the illusionary certainty of hindsight
It has become fashionable to label events. Among all the descriptors, there is a huge temptation to label any event outside the realm of regular expectations as a ‘Black Swan’ event. That’s not necessarily inappropriate, too. According to Nassim Nicholas Taleb who wrote the seminal book The Black Swan: The Impact of the Highly Improbable, a Black Swan is largely characterized by the triplet: rarity, extreme impact and retrospective predictability. This combination of uncertainty and large impact makes the Black Swan a great puzzle, where fads, epidemics, fashion, ideas, and just about everything of significance follows such dynamics. Except that we still have not been able to jolt out of Black Swan blindness—we act as if it doesn’t exist—particularly with respect to randomness, the large deviations.
The Black Swan logic makes what we don’t know, anti-knowledge, far more relevant than what we do know. It goes on to question how we measure risk where we conveniently exclude the possibility of an outlier or a Black Swan. It coaxes and cajoles us as to why we focus on the ordinary or the minutiae, not the possible significant large deviations, despite the obvious evidence of their huge influence. It tests our assumptions on understanding any phenomenon just focusing on the normal. Can we understand health without considering wild diseases and epidemics?
The current coronavirus crisis, will shape all aspects — economy, politics and culture — for years to come. It has now got the Black Swan thinking back into our consciousness. But how long will it last? We live in times where the ill-effects of climate change, global warming couldn’t have been more severe which only triggers the possibilities of such outliers — a risk which we cannot afford to take anymore. Black Swans being unpredictable, we need to adjust to their existence (rather than naively trying to predict them).
Talking about adjustments, the pandemic has proven to be a test case for work from home worldwide. Where do we go from here? The chances of your co-worker being a bot is higher than ever before. The talk around automation is only getting buzzier. As organizations get stretched for higher productivity, workers grapple with mental health issues, when touch becomes taboo, automation seems to be solving all of this at one go.
According to the Recode, robot sellers are seeing coronavirus as a chance to broadcast their bots’ abilities from further substituting humans in supply chain management and disinfecting hospitals and streets to delivering food, drugs, and supplies to even being a sterilization robot and so on. There is a renewed urgency behind the trend towards increased automation and the use of robotics. That’s the thing about the impact of large, significant events they don’t arrive on schedule. Investors posit that the best companies are those that are built during the downtime or recession. Startup/ investment opportunities can be seen in building more resilient supply chain ecosystems, building disaster recovery systems, making thermal imaging/ scanning possible on the go, building scalable mental health support models and so on.
The post corona world will be a world that would have been shaped by uncertainty, a world where overconfidence will not be fed by the illusionary certainty of hindsight. As chief executive officers (CEOs) reassess the risks they inhabit in a post corona world, there will be an upside to thinking differently: by focusing on the anti-knowledge, by not overestimating how much they understand the world and underestimating the role of chance in events. It makes sense to introduce a language for thinking and talking about the mind. According to Nobel Prize winner David Kahneman in his book Thinking Fast and Slow, mental life can be described by the metaphor of two agents, called System 1 and System 2, which respectively produce fast and slow thinking. He writes that System 1 operates automatically, quickly, with little or no effort and no sense of voluntary control. System 2 allocates attention to the effortful mental activities that demand it, including complex computations.
The problem is that the sense-making machinery of System 1 makes us see the world as more tidy, simple, predictable and coherent than it really is. The illusion that one has understood the past feeds the further illusion that one can predict and control the future.
As CEOs tinker to collect as much as those serendipitous “Black Swans" (of the positive kind). Where there is huge payoff from the unknown, its time for perhaps more System 2 thinking!
Shrija Agrawal is executive editor, HT Ideas Lab, Hindustan Times Digital. Due Diligence will cover issues in India’s venture capital, private equity, deals and startups space.