Black swans, grey swans, and white swans

July 25, 2022

There are a lot of swans out there, in today’s world, which is filled with risks. And I’m not referring to birds here. I’m referring to the different types of risks – some may be predictable, and others are not predictable at all – but all have the capability of bringing an organization down to its knees.
A black swan is a highly improbable event with three principal characteristics: it is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was (c.f. Nassim Taleb – mathematical statistician and risk analyst). An example of a black swan was the global financial crisis of 2008 which was completely unexpected and had a devastating impact throughout the world.
A grey swan is an event that has a low probability of occurring but could have an important cascading impact if they did. Since the threat is quite low, companies and people tend to ignore these risks or provide limited resources for their occurrence. An example of a grey swan is the 9/11 attack on U.S. soil as it has an extremely important cascading impact, though warning signs were ignored. This was a true picture of what it meant to always stay alert, and things have never been the same in terms of security in the US.
A white swan is a highly predictable event that can easily be anticipated, and its size or importance can easily be estimated too. Some say that the COVID-19 pandemic is a white swan as it was relatively inevitable to occur at some point in time because of the structure of the modern world; and its economic consequences will be even more serious as a result of today’s increasing interconnectedness.
The lineup of “swans with an impact” is long … and is growing. No matter what the color of the swan is – black, grey or white – it’s the damage these risks cause what matters, and how they can be anticipated, addressed or even avoided in the future.