One of my all time favourite risk management books is The Black Swan by Nassim Taleb. Whilst you’d hardly call the book light reading and it normally resides in the libraries of traders, bankers and of course risk nerds (like me), there is an incredibly relatable story that Taleb outlines in the book that is useful to just about anyone running their own business – the case of the Thanksgiving turkey.
The story of the Thanksgiving turkey highlights the dangers of relying too much on past experience in any setting as a guide to what will happen in the future. In Taleb’s words:
“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.”
This brief parable, which pretty much summarises the central theme of the book, teaches us an important lesson in avoiding the trap of inductive thinking (or more simply put, forgetting we can’t predict tomorrow’s future from today’s experience).
In a business context this rings true every time we see once thriving businesses (or entire industries) all but disappear after being blind-sided by innovation, disruption or other unforeseen events. Think Blockbuster after Netflix and Hulu, or Borders after Amazon.
Today more than any other time in history, entrepreneurs need to keep a finger on the pulse of what is happening in their businesses and industries, keep an eye on the horizon, and be agile in their response to change.
Hope for the best, prepare for the worst and don’t be the turkey!
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