Do not confuse your Black
Swans. One is a swashbuckling 1932 novel about pirates – which, come to
think of it, may not be without educational value to entrepreneurs. The other
is a fashionable text on uncertainty by Professor Nassim Nicholas Taleb.
Professor Taleb must be a seriously clever chap, because he
has managed to combine the hitherto diametrically opposed disciplines of
epistemology and high finance.
Epistemology, the theory of knowledge, is hard core
philosophy. As a rule, entrepreneurs are well advised to stay clear of it –
especially the strong stuff like Rene Descartes.
Speaking from personal experience, it is hard to focus on your business when
you start doubting your own existence.
Yet the Prof uses this most esoteric branch of philosophy to
make a practical point. With far more eloquence and learning than we can muster
in a short blog post, he concludes that it is human nature to try to invest
uncertain events with an artificial certainty, so it is not surprising that we
are surprised when the unexpected happens – as it always does.
We could have told him that.
Blue chip shareholders rely on the artificial certainty of
predictable rates of return, but entrepreneurs look to make a living where the
big boys are afraid to go. We hope that it is the unorthodox, the unexpected,
and the unpredictable that will make our fortunes.
Yet there is a difference between the unpredictable and the
Those who fail to predict something like to claim it was
unpredictable – but in most cases that something was predictable because
someone else predicted it. Indeed most of the examples of the
unpredictable cited by Prof T himself were in fact widely predicted.
There is a mountain of pre-1914 literature predicting the
Great War and there are numerous on-the-record warnings of a major terror
attack on the USA predating 11 September, 2001. As for the current recession,
most of the small business sector was talking not about “if” but about “when” –
the proof can be found in our podcasts, among many other places.
Yet most of the major players were caught with their pants
down by these predictable – and predicted – events. Their craving for artificial
certainty made them dependent on highly paid “experts”, who themselves had a
vested interest in feeding that artificial certainty. Between them they created
a vicious circle of irrationality.
So the wise entrepreneur will react to the uncertainties of
an uncertain world not by gambling recklessly on long shots, but by becoming
more open minded, abandoning orthodoxies and artificial certainties, in order
to become better at prediction than the close-minded “experts”
who keep getting it wrong.