What do a rock, a flea, and a plate have in common with a small business? Hint: they’re all associated with surprise and danger. Any ideas?
Here’s another hint: a bird is sometimes used to refer to them. Anything yet? Okay, I’ll stop.
The rock is the dinosaur-killing asteroid that slammed into what is now the Gulf of Mexico 65 million years ago. The flea contributed to wiping out half of Europe during the Dark Ages. The plate was the tectonic kind that slipped on Boxing Day 2004, creating the south Asia, 9.3 megathrust earthquake and tsunami. And that small business? Patience, grasshopper. I’ll get to that in a minute. But first, about that bird …
Actually, it’s a swan – specifically, a black one. In nature, an adult black swan is considered so extremely rare that it’s now the metaphor for an outlier that produces a shocking disruption, if not a catastrophe. A Black Swan event.
How disruptive does a surprise have to be to qualify as a Black Swan? Well, each of the things in the foregoing list qualifies – mega-disruptions on a scale and velocity that makes them hard to prepare for. During the second half of the 14th-century, a flea-borne bacteria caused the Black Death pandemic, which killed 40 million Europeans and changed the course of western civilization. The south Asia tsunami killed hundreds of thousands as they ran for their lives. And, of course, that Cretaceous comet t-boned our planet and sent T-Rex to the extinction hall-of-fame.
But in the third decade of the 21st century, where Moore’s Law has compounded technology into talking paint, it’s not easy to surprise us anymore, is it? “What about a close encounter of the third kind,” you ask? Don’t we already know we’re not alone in the universe?
So, going forward, can we stipulate that a Black Swan event is less about something we’ve never imagined and more about being prepared for a disruption at least somewhat out of our control? For example, some are already calling the coronavirus a Black Swan. But after the SARS outbreak of 2003-04, which also originated in China, we may be worried, but we shouldn’t act surprised. And yet, even if the disease expands to a major epidemic, but is confined primarily to China without becoming a pandemic, global economic implications alone could promote the coronavirus to Black Swan status.
Now, back to small business. Every Black Swan event in history was an equal-opportunity disruptor of nature, people, businesses, and economics. But there’s an associated term that small business owners should contemplate: The Black Swan Theory. This is what eggheads like me noodle about as we attempt to prepare others for the next big disruptor.
As the CEO of your business, should you noodle about the Black Swan Theory? Well, what if tomorrow morning a herd of noisy D-9 Caterpillars serves notice that the government is redirecting traffic miles away from the long-dependable thoroughfare in front of your business? Would that become your personal Black Swan? Quick! What’s your contingency? Could you have avoided being surprised?
Arguably, the last Black Swan, the financial crisis of 2008, hit all businesses hard. But the collateral damage to small businesses was more profound, resulting in what I call Main Street’s Lost Decade (2008-2016). So, if tomorrow checks in with news that Wall Street has run off the rails – again – we can’t feign surprise. But if we’re not prepared to sustain our business during a 2008 Black Swan redux (pun slightly intended), we’d have no one to blame but ourselves.
Technically, if it can be imagined, it isn’t a Black Swan. Earthquakes, government guano, digital greed, and pandemics are part of our history. But an inevitable Black Swan impact on your business is where the theory comes in handy. It’s your job to prepare for being impacted by the next Black Swan – whether local or global – and develop a contingency plan.
The good news is, such a plan would serve against any number of business broadsides, because it would surely be heavily weighted toward financial firewalls like reducing debt or broadening your customer base. Or, providing life insurance on yourself, in case a Black Swan lands on your head and takes you out.
Whether a global Black Swan or your own personal big black bird, it’s your job to imagine and prepare for the next one.
Write this on a rock … The Black Swan Theory: It’s not a matter of if, it’s a matter of when.