# Predicting Black Swans – Part II

In the earlier post we dealt with the concept of predicting a ‘black swan‘.

In this post, I intend to explore the concept a bit more: what exactly we monitor to notice a ‘black swan’ in time?

In doing so we would be forced to consider the natural response of a system.

The starting point of our exploration would be to understand how any system, as a whole, whether natural or engineered, would disturbed by a ‘black swan’.  A system is disturbed in three possible ways, which are as follows:

a) A system loses energy till it reaches a tipping point

b) A system gains more and more energy till it crosses the point of system resilience

c) A part of a system emits more energy than it is normally supposed to, that is going beyond the linear response of the part.

So the natural way to watch a system to expect a ‘black swan’ in time, is to keep a tab on the ‘energy’ of a system in the following ways:

a) Monitor the entropy of a system. As a system functions the entropy of a system gradually rises till it hits a threshold limit indicating the appearance of a ‘black swan’ or an outlier.

b) Monitor the energy gain of a system till it crosses the ‘resilience’ point to give birth to a ‘black swan’, outlier or a ‘wicked problem’.

c) Monitor critical parts of a system for excess emission of energy till it goes beyond the linear response of a part.

It is useful to remember that energy is transferred in ‘quanta‘ or in packets of energy. Therefore, it is natural to expect jumps of energy levels as we record by capturing the different manifestation of energy levels on monitoring trend charts. So when a ‘jump’ is big enough to cross a threshold limit or resilience point or linear response level indicated by its presence outside the Gaussian distribution range  we can be quite sure that a ‘black swan’ or an outlier or a ‘wicked problem’ would soon arrive on the scene. We call such an indicator as a signal.

Therefore, the central idea is to capture such signals in time, just before a ‘black swan’ makes it way to appear on the scene to dominate and change the system.

However, the question is how early can we detect that signal to effectively deal with the inherent ‘black swan’ in a system, which is yet to appear on the scene?

That would be explored in the next post.

# What Happens When We Fail to Notice?

This is an excellent story of what happens when big players fail to notice the potential of small niche innovators in the market

Arie Goldshlager (@ariegoldshlager) tweeted at 10:35 PM on Sat, Mar 30, 2013: The Blockbuster Innovator’s Dilemma http://t.co/EvFafsUD8L #innovation (https://twitter.com/ariegoldshlager/status/318046359682945024)

A number of things might happen:

1. While you are ignoring; the niche market player might develop the market under your very eyes to the ‘tipping point’ which might topple the Goliath.

2. The attitude of ignoring might serve as an authentic constraint for the small players to innovate as nobody’s business against authentic constraints. Authentic Constraints never pose a dilemma for innovators. It usually makes them better.

3. The very act of not noticing informs innovators about the assumptions the big players are relying upon to work and the emerging patterns they are missing out since they devote more time consolidating  leadership positions in an uncertain market.

Are their any more advantage for innovators?