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The Pandemic: Black Swan or Grey Rhino?

“When we know we actually do live in uncertainty, then we ought to admit it.” – Richard Feynman

The world’s efforts to grapple with extraordinary events have in recent years produced two catchphrases that are often bandied about a little carelessly.

The mercurial scholar and risk analyst Nassim Nicholas Taleb introduced a vivid metaphor in his 2007 book ‘The Black Swan: The Impact of the Highly Improbable.’ The phrase, which has entered business, political, and academic parlance over the years, applies to events that have three attributes: they are rare, they have extreme impact, and they have retrospective predictability (not prospective predictability). We fall prey to Black Swan events when we make the mistake of trying to learn too much from the past, which can often be a poor teacher in a human world of accelerating complexity. Taleb relied heavily on the legendary work of Daniel Kahneman and Amos Tversky on cognitive biases – psychological errors in processing information about the world that blindside individuals and groups every day of their lives.

The Black Swan metaphor popularised by Nassim Nicholas Taleb has entered the risk management lexicon. Memorably, Taleb says: “The inability to predict outliers implies the inability to predict the course of history.”

A related concept is that of the ‘Grey Rhino’ (or ‘Gray Rhino’ in the American variant). American policy analyst Michele Wucker has popularised this more aggressive-sounding term in her 2016 book of the same name. According to Wucker, a Grey Rhino is a threat that has a high probability of occurring yet is ignored. She based her idea on an analysis revealing that many of the events that cause major trouble in various domains were actually predicted and were avoidable. They simply didn’t receive the attention they deserved. Big, two-ton rhinos with spiky horns are thundering towards us all the time, but we treat them with astonishing nonchalance. And we pay the price of our indifference.  

Michele Wucker has come up with the concept of ‘Grey Rhino’ events. “It’s a metaphor for missing the big, obvious thing that’s coming at you,” Wucker says.

We are in the midst of an extraordinary and bewildering global event, and debates about how to classify the novel coronavirus pandemic are rife online. Is it a true Black Swan event, or is it more like the Grey Rhino because an epidemiological disaster was foretold so frequently by many researchers in recent decades? Or was it really the proverbial Elephant in the Room: a threat that always existed and never received a nod from the people who run the world (or pretend to run it?) Did we fail to take heed of Igor Ansoff’s 1975 admonition to pay attention to weak signals if we hoped to avoid strategic surprises?

These debates on this current pandemic will continue to rage and expand in coming months, years, and decades. But, as the inimitable Richard Feynman’s quote at the beginning of this article reminds us, a large dose of humility at our failings may be necessary for us to persist with this battle and win. 

At MyTreasur-e, we strongly believe in helping our customers build resilience in the face of unavoidable uncertainty. This philosophy is built right into the DNA of our cutting-edge treasury management solution.