Black swans and unknowns in public organisations

The Bridge
  • Published Date: 17 June 2022

 

An article in Public Administration Review discusses the concepts of ‘black swans’ (unpredictable events) and ‘unknowns’ (gaps in knowledge), Using the Challenger Space Shuttle disaster, 9/11 and the international withdrawal from Afghanistan, the paper:

  • examines how black swans arise in public sector organisations
  • provides recommendations on how organisations can uncover unknowns before they can go on to become black swans.

What are black swans and unknowns?

The idea of black swans is closely associated with Nassim Taleb and his 2007 book, The Black Swan. These are consequential shocks that come as a significant surprise. The idea of unknowns is most closely associated with former US Secretary of Defense, Donald Rumsfeld when he said in 2002:

“There are known knowns, things we know that we know; and there are known unknowns, things that we know we don't know. But there are also unknown unknowns-  the ones we don’t know we don't know.”

There is however considerable diversity in how these terms are interpreted. For example, while Taleb portrays 9/11 as a black swan, others have described it as a predictable surprise and knowable unknown. The diversity of meanings hinders understanding and can lead to very difference and incompatible policy conclusions.

A typology of black swans and unknowns

There are four key features of black swans:

  1. They presuppose earlier unknowns. While most unknowns do not lead to a black swan, facing an unknown is a necessary condition to experiencing one.
  2. Black swans are subjective. While the event concerned may be surprising for some people, it is not necessarily so for all people.
  3. Black swan events may have a high objective probability.
  4. Black swans may have positive consequences such as companies benefiting from the unimagined consequences of COVID-19.

An unknown is simply a gap in our knowledge, something we do not know. We are often aware of having a gap in our knowledge where we face what is called a known unknown. However, there are situations where we may not know that we have a gap in knowledge which is what is referred to as an ‘unknown unknown’.

How can public organisations reduce their exposure to black swans?

In an emergent world with rapid and discontinuous change, it is inevitable that public organisations will sometimes experience unexpected events. However, this exposure can be ameliorated.

One way is through reducing organisational myopia. Sources of myopia include:

  1. Psychological barriers: these are cognitive shortcomings which leave individuals and teams in organisations blind to certain events. For example, confirmation bias and groupthink are often responsible for individuals’ and teams’ tunnel vision which leads to unexpected surprises.
  2. Organisational barriers: These are organisational level constraints that hinder the effective gathering, sharing, integration and use of information.

The table below outlines causes and examples for four types of black swans.

Black swan type

Example

Cause

Imagined but deemed possible or unlikely to dismiss

Space shuttle Challenger disaster

Psychological and organisational barriers

Imagined but never pursued

9/11

Organisational barriers

Unimagined, unknown is known

Taliban rise to power

Psychological barriers

Unimagined, unknown is unknown

Danish cartoon controversy and boycott of Danish products by Muslim countries

Organisational barriers

Remedies

Potential remedies for the four types of black swans are as follows:

Black swan type

Remedy

Imagined but deemed possible or unlikely to dismiss

De-biasing techniques to improve decision making.

Embed processed and practices to challenge routine thinking

Imagined but never pursued

Facilitate information flows

Cross functional teams, social networks, technology improvement

Create a culture that values information sharing and use

Unimagined, unknown is known

Techniques to help individual and teams broaden their thinking

Counterfactual thinking, futures thinking

Unimagined, unknown is unknown

Techniques to help organisations explore alternative futures and scan the periphery

Foresight techniques, scenario planning

The bottom line

Unknowns and black swans have gained traction in public management. There are measures available to public organisations to help reduce the number of unknowns and therefore potential black swans they face.

These measures could be brought into existing risk management practices. The aim would be to embrace a more dynamic, forward-looking approach to uncertainty management.

Want to read more?

Unknowns, Black Swans, and Bounded Rationality in Public Organizations - Alberto Feduzi, Jochen Runde and Gary Schwarz, Public Administration Review, May 2022

The original article is available via individual subscription to the journal or institutional access through a library service such as a university library, state library or government library.

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