Most of us have a strange relationship with risks.
When we are aware of them, we tend to downplay them, thinking that they won’t affect us.
When we are oblivious to them, not only we convince ourselves that they don’t exist, but we also try to avoid any “negative” thoughts, which in reality is our internal warning system telling us to stay alert.
But the truth of life is that we are always in a continuous dance with risks, and unless we acknowledge it, we will never be prepared for the unexpected.
The Unexpected Risks
It was 6 am on a winter Sunday morning in Athens. Christmas was only a couple of days away, but my holiday was already over and I had to report back to my unit, as I was in the middle of my military service.
The weather was clear and the temperature was good. I woke up early, got inside my old Volkswagen Beetle, and drove down the road. Then, I took a right turn and got into the main highway that leads to the outskirts of Athens.
I had just entered the slow lane, when suddenly a car fell on me at full speed. My car hit the barriers, bounced, and started spinning out of control for 40–50 meters, crossing 5 lanes and ending up at the other side of the highway. Somehow, I managed to come out of this with only a small leg injury but the car didn’t make it.
When I woke up that morning, I could never have thought that this was going to happen to me, but the risk was always there. I was just blind to it.
Risks Are Always There
Many years later, I visited Utrecht in the Netherlands. It was a beautiful Spring morning. The swans were swimming, the sun was shining and there was smell of fresh bread in the air from the local bakeries.
I wandered around the town centre for hours, enjoying the sun and taking pictures. Around lunchtime, I decided to sit at a small pub. Suddenly, a fearful waiter hurried over me to tell me that they had to close down due to a terrorist attack.
For a minute, I just couldn’t believe it. Apparently a man had attacked others inside a tram, and there was a police lockdown while he was still at large.
I had spent most of my morning walking around, oblivious to the risk of encountering a terrorist.
Like most of us, I was not ready to expect the unexpected.
Predictability Trap (What the turkey didn’t see coming)
Nassim Taleb* author of “The Black Swan: The Impact of the Highly Improbable” writes:
“Consider a turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race ‘looking out for its best interests,’. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.”
Nassim Taleb
Quite often, we tend to fall in the predictability trap. We think that tomorrow is predictable because today was a ‘normal’ day.
We always overestimate our ability to forecast and predict the future based on yesterday’s experience. Our false sense of security is what makes us more vulnerable and unprepared for the unexpected.
And when it happens, we found ourselves in a sense of panic. Because we realise that we are not invisible and our whole mental model of stability collapses.
Living in a Fragile World
Many consider globalisation to be a positive force, yet it has made our world more fragile than ever before. A disruption in the supply chain in China can create ripple effects in the global economy overnight.
According to Taleb, we are all living in a highly interconnected global environment, called “Extremistan”.
In “Extremistan”, remote or improbable risks, called ‘Black Swans’ (i.e. 2008 financial crisis, terrorist attacks, floods, fires, conflicts, pandemics), are not as improbable as we would like to think. Consequently, they cannot be described by the Gaussian (normal distribution) curve, as there are large deviations.
How many of these Black Swans have happened in the last 10 years?
All of them!
Why Just-in-time is a Bad Idea in Complex Systems
The more interconnected, just-in-time and efficient everything becomes, the more fragile and unpredictable the world becomes.
The Covid-19 pandemic has revealed the fragility of the National Health Service in the UK and many other rich countries. Hospitals and emergency services have been chronically under-funded due to austerity policies. Consequently, they currently lack even the most basic protective equipment (masks and gloves), along with beds, ambulances, and ventilators.
We allowed our health systems to work at their limits with little buffer, focusing on efficiencies and costs rather than a sustainable, flexible health system that can deal with unexpected health crises.
After all, who would have thought that a pandemic could happen in our lifetime? If we have never seen a Black Swan, we believe it doesn’t exist.
It has also revealed the fact that a number whole industries have been operating with almost no buffer. For example, many airlines claim that they will collapse due to the pandemic, demonstrating that they’ve never planned for any major disruption.
Stability is an illusion. Everything seems stable, until it is not.
Having a false sense of predictability and control creates two major problems.
- Poor preparedness for the unknowns
- Overreaction, system oscillations and chaos when risks materialise
Despite conventional wisdom, the solution to the above problems is not having ‘robust’ plans that eliminate risks. This is based on the fallacy that we can control complex chaotic systems, which makes us even more vulnerable to risks.
There is a better approach.
Antifragile by Design
An aircraft is a great example of a safe structure that for many is considered robust and rigid, strong and stable.
However, this couldn’t be further from the truth.
In reality, an aircraft is build with a deliberately unstable airframe. This instability gives it agility and allows it to change direction easily and adapt to situations.
In fact, the wings of an aircraft are designed in such a way that they can bend almost vertically without failing. This enables the structure to absorb the flight loads through movement, instead of resisting them.
But even when it comes to aircraft electronic systems, they are on purpose designed with dissimilarities. This means that if one part fails this won’t affect any other parts of the system.
This is exactly the opposite of our interconnected globalised systems, that currently allow disruption to spread like wildfire.
Aircrafts are safe because they are designed to be Antifragile**. Because they are designed to absorb the loads, and have decoupled systems.
Embracing Risks
On a more human level, a child that is overprotected and avoids risks will never really grasp the concept of risk. She will never understand how to prepare for the unexpected in life. Yet, there is a whole Health and Safety industry built around avoiding risks.
But we cannot learn about risk by “avoiding” it or pretending that it doesn’t exist.
Life isn’t about waiting for the storm to pass. It’s about learning how to dance in the rain.
Vivian Greene
This doesn’t imply that we should become reckless but that we should take all the risks that we can afford to take, and learn from them.
This is similar to vaccination, where molecules from the pathogen are introduced into our body to trigger an immune response. This helps prepare our body and protect ourselves from the real threat.
Whether we realise it or not, we are constantly dancing with risks.
The question is not whether we like dancing but how we can become better dancers.
The current pandemic offers a once-in-a-lifetime opportunity for us to reflect on our relationship with risk.
Let’s not waste it.
References
*Nassim Taleb is a scholar, statistician, and former option trader and risk analyst, focused on randomness, probability, and uncertainty.
**Nassim Taleb has introduced the term antifragile.
