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| Free food for thought |
| Don’t chance it |
The black swan was the example used by John Stuart Mill to illustrate the problem of induction in the philosophy of science, which states that no amount of empirical evidence for a proposition can ever prove conclusively that it is true.
For hundreds of years zoologists assumed that all swans were white. But then with the discovery of Australia came the sighting of a black swan. Nassim Nicholas Taleb, in his book of the same name, has a more specific definition - for him, a black swan is an event that meets three conditions: a) it was unpredictable; b) it had a big impact, and c) after the event, we tried to explain it and make it appear more predictable than it actually was. The rise of Google is one example; 9/11 is another.
Taleb believes the modern world increasingly resembles a fantasy realm he calls “Extremistan”, where inequality, unexpectedness and improbability rule, and where black swans happen.
Bu most statisticians and economists believe that the world is more like “Mediocristan”, an orderly and predictable place where events follow a bell curve-like distribution on a graph. Taleb’s mission is to demonstrate that many of the models we use to understand the world are based on the mistaken assumption that we live in Mediocristan rather than Extremistan.
Corporations produce grand strategies for future growth, forgetting that their most profitable activity arose from a chance phone call made a year earlier. Financial analysts build sophisticated models of risk to reassure clients that their investments will be safe; within six months a global financial crisis wipes the firm out.”
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Tom Nutall, reviewing The Black Swan
Australian Financial Review, 14 September 2007
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| A four-point Guide for CEOs: how to be humble |
"The best deals we ever made were when our egos were in check," Hayward says. "The worst were when our egos were out of control."
This is the paradox of success: the very traits that launch people to the top - supreme confidence and unabashed salesmanship - can also send them tumbling to the bottom, which in some recent cases has included prison cells.
"Over-confidence is rife in corporate America," Hayward says. "It's the most fundamental error of judgment that any executive can make."
It takes overconfidence just to be in business. History shows that most start-up enterprises flop, and that as many as 80 percent of all mergers and acquisitions fail to deliver on their promises of higher value. But the people involved in these pursuits never make mention of these probabilities. Instead, they focus on the slim chances of success.
This overconfidence becomes insidious when it is based on falsehoods. Too often, corporate executives are surrounded by praise just because they are the boss. The worst CEOs simply start to believe their own press releases and dismiss any information to the contrary. "There's a tremendously fine line between being supremely confident and having an out-of-control ego," Hayward says.
"And you can cross that line at any minute of any day, in a way that can destroy the reputation of your company."
Here are four things Hayward recommends to avoid crossing the line: |
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