1. Black Swans, Shapeshifters
and Flexibility
Geary W. Sikich
Principal
Logical Management Systems, Corp.
www.logicalmanagement.com
+1 (219) 922-7718
Copyright 2012, Logical Management Systems, Corp., allall rights reserved
Copyright 2012, Logical Management Systems, Corp., rights reserved

2. Black Swans
“Black Swan” highly improbable
event with three principal
characteristics: it is unpredictable;
it carries a massive impact; and,
after the fact, we concoct an
explanation that makes it appear
less random, and more
predictable, than it was.
Taleb the problem –
“Lack of knowledge when it comes
to rare events with serious
consequences.”
Nassim Taleb, “The Black Swan: The Impact of the Highly Improbable”
Copyright 2012, Logical Management Systems, Corp., all rights reserved

3. Black Swans
If you don’t know what you
don’t know, how can you
prepare for it?
Conventional practices leave
us vulnerable to
random, potentially
catastrophic events, that
cannot be predicted based on
simple extrapolations from the
past or projections of the
future.
Copyright 2012, Logical Management Systems, Corp., all rights reserved

4. Relevance
Non-predictability of
events is not relevant
with regard to the
consequences of events.
Effective decision
making does not mean
“perfect” – all decisions
are flawed.
Copyright 2012, Logical Management Systems, Corp., all rights reserved

5. Black Swans, Shapeshifters and Flexibility
The problem –
 “Black Swan” is a subjective term – Your “Black Swan” may
be my “White” or “Gray” Swan.
 “Black Swan” events labeled after the fact (unpredictable).
 “Black Swan” events are selective in their consequences for
those who experience them (but you will not know until
after the event has been labeled or mislabeled).
 “Black Swan” events sudden discontinuities of great
consequence that reshape the government and business
environments, bringing both dangers and opportunities.
Copyright 2012, Logical Management Systems, Corp., all rights reserved

6. Black Swans, Shapeshifters and Flexibility
More than 85% of all
business information exists
as unstructured data.
Can you imagine any
important decision that has
been made leveraging on
15% of the real information
potential?
Copyright 2012, Logical Management Systems, Corp., all rights reserved

7. Black Swans? Wishful Thinking? Misinterpretation?
Since 1956 there have
been over 200+ incidents
– from sunk rigs to
blowouts, collapse, spills,
damage…
Copyright 2012, Logical Management Systems, Corp., all rights reserved

8. Black Swans? Wishful Thinking? Misinterpretation?
Volcanic States?
Idaho 10 volcanoes
New Hampshire 2 volcanoes
Copyright 2012, Logical Management Systems, Corp., all rights reserved

9. Black Swans, Shapeshifters and Flexibility
Trigger Points
Unpredictability is the new normal
Rigid forecasts, leave the organization inflexible; therefore
Leadership, strategists and planners are better served to practice
“Active Analysis” and ensure the ability of the organization to
execute with the capabilities and capacities on hand at any given
time.
Unpredictability can be positive or negative
The increased rate of knowledge creates increased unpredictability
Copyright 2012, Logical Management Systems, Corp., all rights reserved

10. Summary of Key Points
 Clearly defined rules for the world do not exist, therefore
computing future “Black Swans” can only be accomplished
if one knows future uncertainty.
 Incompleteness of predictive models (as the “Black Swan”
is unpredictable, can you really model it?).
 Incorrectly specified parameters/scope (Measurement
tools are inadequate).
 Overly complex (It’s not easy to detect paradigm shifts; it’s
best to claim to detect as many as possible and quietly
bury your failures).
Copyright 2012, Logical Management Systems, Corp., all rights reserved

11. Summary of Key Points
 Scenarios may no longer be appropriate (Unpredictability,
evolving nature of the event over time means that the
event seldom ends in the form that it started -
shapeshifter).
 Obsolescence of models (Unpredictability and evolution
make models obsolete).
 High cost to develop, operate and maintain (Skill set
requires vast amounts of experience; limited by time and
the nature of rare events).
 Rare events require a high degree of interpretational skill
(knowledge, experience, background – human capital).
Copyright 2012, Logical Management Systems, Corp., all rights reserved

12. Black, Blank, Unfinished
There will be another
crisis, another recession and
another panic. And all will have
something in common: They will
be caused, at least in part, by
factors and events that no one is
talking about today.
Wars, earthquakes, oil
spills, assassinations... no one
predicts these things because they
can't be predicted. But they can
have a huge impact.
Copyright 2012, Logical Management Systems, Corp., all rights reserved