Black Swans and Grey Mosquitos
Black swans are, by definition, close to impossible to predict.
Grey mosquitos are ever present, but we are nearly always blind to them.
Black Swan
In late 2007 I purchased a book that, unbeknown to me at the time, would impress upon me in a considerable manner. I do not recall what made me to buy The Black Swan by Nassim Nicholas Taleb. I might have come by chance, call it a black swan if you will.
The book opened my mind and pointed me to many wisdoms that I previously was unaware of. I was impressed when I read it, and remain under the spell of it until today. This, notwithstanding the fact that some arguments made by the author of the book were, and remain, beyond my cognitive capabilities — pazienza as Italians say.
A black swan phenomenon is qualified by three parameters. First, it is rare. Second, it produces a major impact. Third, it produces an erroneous hindsight conviction, that it was foreseeable after all. The COVID pandemic fits the bill very well.
Grey Mosquito
Over the years I have regularly been taking notes about pet-peeves in my professional life. What I mean by pet-peeves here are those annoying, sometimes infuriating, phenomena that are as recurring as they are not explicitly recognized. It is the combination of relevance of those phenomena and our blindness to their detrimental effect that perhaps warrants a separate category.
I’d refer to them as grey mosquitos
In some way we can think about a grey mosquito as an opposite of a black swan.
- A black swan is rare, a grey mosquito is not rare, it is ubiquitous.
- A black swan produces a major impact, a grey mosquito does not, a minor one is more likely to ensue. As to the misplaced conviction that a black swan could have been predicted after all, a grey mosquito is not looked upon as predictable or not. This because it is rarely acknowledged as a detrimental phenomenon.
- In addition, a grey mosquito does not entail a step-wise impact but is chronic in nature.
What is a grey mosquito? Is it not time to provide an example? An example of a grey mosquito I’d propose is an unsuspected and innocent dynamic duo of an update and its trusted sidekick — a version.
Any projection, unless it has a horizon shorter than a day, is likely to morph into multiple versions as time progresses. Monthly sales, quarterly earnings or annual operating plans are all burdened by uncertainty, often to the extent that we are not willing to fully admit. As time passes and some of the past unknowns become knows. The ranges of possible outcome identified at the outset become narrower — if we are lucky. If we are not lucky the ranges do not get narrowed and indeed new uncertainties might well appear. As uncertainties evolve we will have reasonable grounds to revisit the past projections, make adjustments and produce a new version.
It seems a reasonable way to proceed, you know now more — you should adjust your projection. So far, so good.
How can such a rational and ubiquitous activity get derailed? How does it morph into a grey mosquito? This will be described in the following text that I will publish on Medium. This text will kick-off the Grey Mosquito Series or pet-peeves of a financial manager.
Grey mosquito library
