Preparing for Black Swans

Black SwanMarch 29, 2011

The Sendai (or Tohoku) earthquake has been called a “Black Swan,” a totally unforeseeable event. Can organizations prepare for black swans, or that idea totally illogical hokum?

An example of a pure black swan event was discovery of archaea, the third form of life other than flora and fauna. Before seeing it, premonition that archaea existed was zero.

If not a black swan, the 8.9 Richter Tohoku earthquake was at least gray. Although unprecedented even in Japan’s fault-ridden geology, it could have been imagined. Its 46-foot wave rolled over a 13-foot sea wall guarding the Fukushima Nuclear Plant and washed over the bluff on which it was built. The plant’s safety systems did not provide for being drenched or for being cut off from all outside power and transport for days on end. Technicians that coped with huge concentrations of radioactive energy had access to resources little better than the 19th century. They had to improvise. After all plans collapse, human ability to improvise is the only safety system left.

Available records of prior earthquakes show at least one tsunami over 30 feet. Theoretical models suggested that a big whomp, like a whole mountain sliding into the sea, could plop a wave 300 feet high. Power company officials thought that a 7.5 Richter quake might pump one up to 19 feet, but never finished preparing for it. Had they done so, they would not have stopped it anyway. The only effective preparation would have sited the plant more than 100 meters above sea level.

Media reporting of Tohoku’s unfolding story was ragged. Incapacity to cover a comprehensive disaster nudges news organizations to emphasize one aspect of it, taking on a Pollyanna or a paranoid bias, depending on what seems to hook followers. Fear of radiation grabbed attention. Nearly all damage and casualties, covering a big populated area, are from the tsunami. Business-oriented media slighted ground level reporting to project its economic fallout, something their staff and systemic biases were equipped to do. One of the best media overviews of just the physical, nuclear situation was by the Guardian, using a table summarizing that overall status as of March 28, 2011.

Can organizations prepare for black swan catastrophes? Locally? Elsewhere? If so, how? Black swans can be predicted in general, but not specifically. For instance, the aftermath of bombing a nuclear facility is impossible to project, but sometime, somewhere that could occur. Large-scale, black swan catastrophes seem sure to increase because both population density and technological density are increasing. More people and property are likely to be affected, a trend that concerns insurance companies. If little but nature is affected, disasters are backwater news.

No plan can preclude every Armageddon nightmare. No building or process can withstand atomization – complete local destruction. But managers do prepare for white swans with “what if” contingency plans: emergency drills, IT backups, succession plans, dual locations for document copies, backup suppliers, and so on. But what about black swans?

The only recourse is to develop structures and processes to be robust and flexible as well as low waste, operated by highly competent, flexible organizations prepared to improvise. If the time comes when they must improvise like the technicians taming the nukes on the Miyagi coast, prepare them to do it superbly.

That kind of preparation is part of the purpose of developing what the book Compression defined as a Vigorous Learning Organization. Such competence should highly benefit society and itself even if an organization never experiences a black swan. To dig further see “Systemic Bias.”

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