Consultants' Corner

Predicting the Unpredictable

Clay Ricord
Insurance Experts' Forum, June 7, 2012

If you are interested in a very good (but not necessarily easy) read, try Nassim Taleb’s "The Black Swan." The book takes you on a journey crossing history, perceptions and logic. The idea behind "The Black Swan" is that events that have low or no predictability do regularly occur and can have very large, game-changing impacts.

One of his examples is 9/11; few of us would ever have thought such an attack possible. But after the fact, connect-the-dot analysis shows that it was visible in hindsight. Couple that notion of improbable yet highly impactful events with the idea that we are wired so that dealing with the unlikely is just something people don’t do well. We like order and predictability. “Like” may not be strong enough; we almost require predictability. We want the world to fit our view.

You may have seen or heard of the “Invisible Gorilla.” With only a mild expectation set, people can miss what is right in front of them—in this case, a guy in a gorilla suit whom you would think impossible to miss. Because it is not in their realm of possibility of the situation, most folks do not see it.

You and your team face this head-on nearly every day. Your ability to see what is going on and be open to identifying black swans has a direct effect on your success. Looking for the unknowns and what project management calls “the unknown unknowns” is a basic part of managing risk. But to do it, you have to identify those threats and opportunities that would be high-impact and not filter them out because they don’t fit your expectation of what should be happening.

“New Coke” was launched in 1985. Market research supported the popularity of the new formula, however the competitive force of Pepsi called for action, and a few days after the launch, a forceful backlash developed. It was a movement, a reaction management never considered possible. For Coke, it was a Black Swan event.

Improving “vision” starts with identifying the assumptions and beliefs that underlie perceptions of the situation. Once you can get a hold of those, you can improve your ability to manage the risks and opportunities you face.

Clay Ricord is a senior consultant for the Robert E. Nolan Co., a management consulting firm specializing in the insurance industry.

Readers are encouraged to respond to Clay using the “Add Your Comments” box below. He can also be reached at Clay_Ricord@renolan.com

This blog was exclusively written for Insurance Networking News. It may not be reposted or reused without permission from Insurance Networking News.

The opinions of bloggers on www.insurancenetworking.com do not necessarily reflect those of Insurance Networking News.

Comments (0)

Be the first to comment on this post using the section below.

Add Your Comments...

Already Registered?

If you have already registered to Insurance Networking News, please use the form below to login. When completed you will immeditely be directed to post a comment.

Forgot your password?

Not Registered?

You must be registered to post a comment. Click here to register.

Blog Archive

The Other Auto Insurance Telematics Shoe Drops

Progressive's decision to charge Snapshot drivers more if their driving data indicates higher risk has started the industry down a road of data-driven adverse selection.

Core Transformation – Configuring in the Rain

The whole point of core transformation is that changes at the micro level can be used as a stimulus for changes at the macro level.

6 Ways to Develop a Productive IT-Business Dialog

Relationship management 101 for keeping IT and business on the same page.

Unified Digital Strategy: Succeeding in the Digital Revolution

A unified digital strategy recognizes that all business strategies and technologies touch the customer in some way and that a one-size-fits-all channel model is obsolete.

Agile and Continuous Delivery in a Regulated Environment

Just because a development team is doing continuous delivery or packaging releases into two-week sprints doesn’t mean that code is being moved to production.

Dealing with the COBOL Brain Drain

Documentation on aging systems often is akin to tribal knowledge, and the potential for things to go bump in the night increases as these environments face generational transition.