The Inevitability of the Highly Improbable: Dangerous Ideas

Nassim Nicholas Taleb is the noted and highly entertaining author of a number of works on randomness, most famously The Black Swan: The Impact of the Highly Improbable, which I would have titled The Inevitability of the Highly Improbable.

The idea is dangerous because it challenges us to have a radically different mind. The common mind cannot see the obvious: the prevalence of seemingly or actual random phenomena that demonstrate that we frequently don't know what in the hell is going on, especially in matters that really count.

Take the "subprime mortgage crisis" through which interest-only housing loans to Americans with shaky credit ratings are roiling economic conditions throughout the world, and, simultaneously, strengthening the position of the Arab and Singaporian banking institutions that have been bailing out American banks. While in hindsight it is easy to see that the potential for a "big problem" was always present in these credit markets, I would wager that, for most of us, this debacle seemed to "come out of no where!" But not if you think the way Taleb is urging us to do. In his world, calamity and fortune are twins always aborning.

Taleb relishes his attacks on the conventional wisdom that assumes tomorrow will be like today. We look at reality through the "triplet of opacity:"

1. "The illusion of understanding, or how everyone thinks he knows what is going on in a world that is more complicated (or random) than they realize;
2. "The retrospective distortion, or how we can assess matters only after the fact, as if they were in a rearview mirror; and
3. "The overvaluation of factual information and the handicap of authoritative and learned people."

Abetted by the discipline of statistics (and its particular emphasis on averages and the bell curve), these factors combine to make it impossible for us to see what is directly in front of our eyes, i.e., that there is much, much greater uncertainty in life at all levels -- individual, group, organizational and societal -- than we want there to be. In fact, it is exactly the desire for "normality" that shapes the mind into an instrument of misunderstanding rather than insight.

Taleb's argument has tremendous implications for strategic planning. For one thing, it blows forecasting completely out the window. Forecasting assumes linearity, a kind of "x has always been followed by y" thinking," in an era when such reality is constantly being proven wrong. The ratio of mullahs who believe that the Koran promotes tolerance to those who encourage martyrdom is likely to be a lot more important statistic for the future than month-to-month comparisons of spending on Halo, a new combat action release from Microsoft for Xbox, albeit one that is a lot harder to calculate. (On the other hand, if martyrs are developing new ambitions by playing Halo, I take it back.)

If the calamitous and the miraculous are truly common place, the mind of the strategic planner must stretch to encompass revealed truth. We must begin with the presumption of randomness, the presumption that the unlikely is likely and see what that leads us to anticipate.

I believe that the presumption of chaos takes us toward a new type of mind, a state of being that embraces what is rather than what we thought would be/should be. What is the nature of a mind that does not know certainty; that does not even believe that certainty exists? It's fuzzy. It's emergent. It's something like what happenned when Jimi Hendrix's guitar and amplifier lined up in a particular configuration to generate feedback he didn't know how to calculate precisely but trusted.