The unexpected emergence of the coronavirus and its uncertain consequences remind us of four things that we should have known, or that we knew but did not apply about the environment in which we live: the unpredictability of the future, the difference between risk and uncertainty, the non-linearity of the evolution of the world, and the social construction of surprises.
1) The unpredictability of the future.
Remember it was only three months ago, the beginning of the year and the experts’ forecasts for 2020. Every year it’s the same thing. The economy, society, everything goes through it, and every year it’s the same thing: an event happens that belies all the predictions. What was predicted does not happen, and what happens was not predicted. We know that, but we continue to produce forecasts and to believe them and act on them. As long as we continue to make decisions based on a predictive paradigm, we will remain fragile; in other words, it will be enough for the forecasts on which we base our decisions to turn out to be wrong, which is often the case, for those decisions to have catastrophic consequences for us.
2) The difference between risk and uncertainty.
Should we be afraid of this virus? This is, of course, the question that each of us is asking ourselves, torn between the anxiety of not taking seriously what could turn out to be the epidemic of the Century and the fear of giving in to panic if its impact proves to be only modest, as Éric Caumes, head of the infectious diseases department of the Pitié-Salpêtrière, recently declared: “If you are not afraid of the flu (up to 10.000 deaths/year in France), why are you afraid of the coronavirus?” This seems to be common sense, and yet the comparison is not legitimate, because it ignores a very important distinction, that between risk and uncertainty, which a decision-maker must absolutely understand. Influenza is a recurring and known event; it is a risk, i.e. it is manageable; the coronavirus is novel, and its impact is unpredictable at this stage. It is uncertain and therefore less manageable, particularly because it can suddenly become lethal. The mere fact that the experts are at the time of writing arguing over whether or not to take drastic measures is quite typical of a complex, uncertain problem: we cannot even agree on an assessment of its seriousness!
3) The non-linearity of the evolution of the world.
Epidemics are nothing new; they have always been part of human life. The plague killed about a third of the European population in the 14th century, and the Spanish flu killed at least fifty million people in 1918-1919. More generally, most of the change in our environment takes place in sudden jumps, not continuously. The world does not change much for long enough, and then suddenly something happens that brings about a profound change. In his eponymous book, Nassim Taleb uses the expression “Black Swan” to characterize such an event. The coronavirus, like the 2008 crisis, the Arab Spring, the war in Syria or Brexit, are typical examples of Black Swans among many others. The longer the phase of slow evolution has been, the more we have become accustomed to slow change, and the more abrupt change can surprise us and have consequences. We have come to think that the state of the world we know will last forever and the Black Swan is the end of that illusion.
4) Surprises are socially constructed.
A Black Swan is defined as an event of low probability but high impact. If these events are considered low probability when evaluated, it is because the model we build of reality leads us to this conclusion. A Black Swan is never a surprise in itself, it is only a surprise because our model assigns a low probability to the event under consideration (assuming it is considered). In other words, we build our surprises from our mental models, which will make us very efficient in some areas, and completely blind in others. Since these mental models are constitutive of our identity, what we are surprised by therefore depends on who we are. This explains why an event may be a complete surprise to some, and not to others. For example, Bill Gates, founder of Microsoft, who is now very involved in philanthropy, especially against diseases such as Malaria, had long warned of the danger of a massive epidemic, without being listened to by governments. In a world of surprise, it is therefore essential to systematically and regularly examine one’s deep beliefs, which are the basis of his mental models, by asking oneself the following question: “What do I believe that (perhaps) has become false?”
Despite the succession of massive surprises of all kinds that we have experienced at least in the last fifteen years, we are still training our future leaders on a predictive paradigm around the notion of calculable risk, when all that really matters is neither predictable nor calculable. There is something depressing about the fact that no lessons have been learned from the massive failures of this paradigm, whether in finance, economics, politics or other fields. The effects of this failure are considerable. In a world such as ours, it is essential that decision-makers in any field acquire a genuine culture of uncertainty, both in anticipating and in managing new events.
To learn more about what the coronavirus tells us about the difference between risk and uncertainty, read my previous article: What the coronavirus tells us about uncertainty. The idea that strategic surprises are socially constructed is developed in my book Constructing Cassandra: Reframing Intelligence Failure at the CIA, 1947-2001, co-authored with Milo Jones.