Nassim Taleb first coined the term “Black Swan event” in his book Fooled by Randomness in 2001.
He used it as a metaphor to describe events that come as a surprise, have a major effect, and are often rationalized after the fact as having been predictable with the benefit of hindsight.
His second book, The Black Swan gives as examples of black swan events the rise of the Internet, the personal computer, World War I, dissolution of the Soviet Union, and the 9/11 attacks.
The question remains for me – were these events predictable?
Peter Schwartz, in his book 1994 book The Art of the Long View argues that the fall of the Berlin Wall was predictable, but few companies or governments for that matter were poised to take advantage of the situation.
And he claims that this was caused by institutionalised Paradigm Blindness.
The concept of paradigm blindness implies that individuals, groups, and organizations are unwilling or unable to accept any challenge to their core ways of making sense of the world and determining how they interpret and make sense of what goes on around them.
When we develop entrenched views of the world, we can become very good at filtering out information that does not support our views and assumptions and allowing in information that does.
These are some famous examples of paradigm blindness in action:
“I think there is a world market for maybe five computers.” — Thomas Watson, chairman of IBM, 1943
“But what is it good for?” — Engineer at the Advanced Computing Systems Division of IBM, 1968, commenting on the microchip.
“There is no reason anyone would want a computer in their home.” — Ken Olson, president, chairman and founder of Digital Equipment Corp., 1977
“This ‘telephone’ has too many shortcomings to be seriously considered as a means of communication. The device is inherently of no value to us.” — Western Union internal memo, 1876.
“Who the hell wants to hear actors talk?” — H.M. Warner, Warner Brothers, 1927.
“We don’t like their sound, and guitar music is on the way out.” — Decca Recording Co. rejecting the Beatles, 1962.
“Heavier-than-air flying machines are impossible.” — Lord Kelvin, president, Royal Society, 1895.
“Drill for oil ? You mean drill into the ground to try and find oil ? You’re crazy.” — Some drillers who Edwin L. Drake tried to enlist to his project to drill for oil in 1859.
“Stocks have reached what looks like a permanently high plateau.” — Irving Fisher, Professor of Economics, Yale University, 1929.
“Everything that can be invented has been invented.” — Charles H. Duell, Commissioner, U.S. Office of Patents, 1899.
“Louis Pasteur’s theory of germs is ridiculous fiction.” — Pierre Pachet, Professor of Physiology at Toulouse, 1872
Paradigm blindness is a serious threat to Directors who are not in the habit of challenging their strongly held assumptions.
Alarmingly, it is not surprising to hear directors say in conversations regarding disruptive technologies and their future impact – ‘that will never happen’; or ‘that won’t impact on our organisation’.
The competitive landscape is changing and we have to get used to that continuing.
Shareholders are not well served by a passive approach to the changes occurring and we need to ensure that we are not suffering from our own form of paradigm blindness when considering the potential impact of disruptive change on the future of our organisations.
The term “Black Swan” can give a false sense of security.
It can breed the belief that “Because it is not easily predictable then I cannot be held accountable if I do not anticipate its arrival”.
But what is predictable today is the significant change in the external environment that will have the potential to impact all of our organisations.
The speed of commercialisation of new technology is unprecedented, leaving much less time to respond than in times gone by.
The question for boards is not whether we will be impacted by Black Swan events, but rather will our paradigm blindness make us slow to respond to trends that should have been predictable if only we had had our eyes and ears open to the information?