Tuesday, March 10, 2009

Perfect Risk and the Perfect Question

In J-school (that's journalism school), we learned how to ask questions, and get answers. A good journalist never asks a question unless he or she knows the answer. The question is merely context for the story. It brings the reader into the story, and provides a stage for answers, or news, to be delivered. This little piece of trivia is something that I have found useful in my post journalism world.

The answer is the question. I know that I am lost when I can't think of the question. Here's a scenario to help you visualize what I am talking about.

You are are in the woods, with a compass, and the needle is pointing in a direction. If you turn, the needle will move to another direction. But what if you are directionless? What if you are one of those people who can't tell north from south? What is right and left is all you know about direction?

My point is this: You have to know which direction you need to go before you use the compass, but the compass only tells you where the future is in relation to where you are standing at that moment.

So, therein lies the problem. Most of us ask the question, what direction should we go in? This then leads to lots of guessing brought about by a bevy of clues combined with instincts, intuition and sometimes personal agendas.

I would suggest the first question should be: What could possibly happen that I have not yet imagined? What events could happen, and what could lead up to the event? Sometimes you have to ask a blunt question - what could someone do that would be unimaginable that we would be shocked and dumbfounded. The answer to the questions is what I call "perfect risk".

Perfect risk is the risk that we can't see, didn't imagine, or perhaps couldn't articulate. It is rare, has extreme impact, and generates "retrospective predictability" - the need to explain it after the fact.

For example, perfect risk is 9-11. To think that someone could devise and execute such a devastating plan is beyond the realm of human behavior. If one looks back into our history, we see other examples of this too: People whose horrific actions set the benchmark for all of mankind; massive devastating floods.

Vision can be deceiving if one's vision is daunted with what I refer to as personal noise - such as beliefs, agendas and causes of the day.

Narrow mindedness and narrow vision is historical. Those who believed the world was flat were ignoring a reality because all they could see was an edge at the horizon. What if someone hadn't said, hey, what do you say we sail this baby over that cliff on the horizon? They never would have discovered that there is no cliff, and indeed, a whole world.

The book, "Black Swan" is about the impact of the highly improbable. The writer, Nassim Nicholas Taleb, writes that the sighting of the first black swan points to a "severe limitation to our learning and observations or experience and the fragility of our knowledge." He goes on to say that one single observation can invalidate a general statement derived from millennium of confirmatory sightings of millions of white swans. The single black swan changed all that.

He points to three attributes of a "black swan."
1. It is an outlier - it lies outside the realm of regular expectations because nothing in the past can point to its possibility.
2. It carries extreme impact.
3. It is retrospective. (We feel the need to explain it after the fact, as if to prove that we are not surprised after all.) Kind of like saying, "I meant to say I thought of that one day, but the moment passed and it never came up again, and probably this is an anomaly due to possible environmental conditions that are unique to the species."

So the question in seeking out the black swan is this: What are the events that could shake the foundation of our very being?

That brings me to the definition of risk and the quandary for today's leaders.

Risk is the unforeseen and the unknown. It is what you have not yet imagined. Yet, we are focused on focused on the minutia, the details, the tactics and the to-do lists.

Perhaps the reason for this is that we have a higher level of control that way, but it is not an active way of preventing such events, or on the upside, creating a cure for cancer.

I think one of the problems is the way we approach strategic planning in organizations. We always begin with the direction (what we need to focus on), and then targets (what do we need to achieve by when) and then strategies and initiatives (what we are going to do first.)

In order to see beyond the moment, and imagine the perfect risk, or the black swan, we need to begin with two things - research and information that will catapult us from our comfy chairs to help us to identify possible events, the courage to say it out loud at the board and executive. table.

Then do this: count the black swans, or significant events, that you have seen in your life. These could be inventions, catastrophes or technological changes and personal experiences.

It's frightening to think in these terms, because events of this magnitude change our lives. But we can't avoid them. They are are often forces beyond our control or at least our vision. Once we see the possibilities, taking action gets interesting.

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