So there is no doubt that the year 2020 has so far, delivered more turbulence than ever before, out-of-control fires, followed by ravaging floods, temperatures above 20 degrees Celsius in Antarctica, droughts, Brexit, the Corona virus, China’s economy and supply chain stalling, retailers closing down, airlines and tourism sectors down, international students from China kept out costing the Australian economy billions, and it has only been 47 days into 2020!
I remember reading Nassim Taleb’s Black Swan years ago where he talked about a ‘black swan’ event as a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight.
We don’t know when a ‘black swan’ event will occur next, but we do have to have the foresight to visualise and model a number of future scenarios to be better prepared for change. More importantly, we have to have the ability to predict situations that are not strictly a ‘black swan’ but with rigour can be somewhat expressed in terms of probability.
But I’m getting off track, though this is a fascinating theme. This article is more about being alert, open to change, and being prepared, operating knowingly in an increasing turbulent environment.
So, what is turbulence?
Turbulence could be described as unpredictable uncertainty that is often as a result of unknown unknowns and rapidly changing environments where there is a lack of clarity into the future.
The elements that contribute to turbulence are therefore ambiguity, complexity, paradox, discontinuity, in turn, creating or leading to surprise, uncertainty, but also opportunity. According to Dr. Colin Benjamin the definition of turbulence is “the experience of something totally unsettling that you cannot predict”.
There is no argument that the world is becoming more and more turbulent, and it will be our capacity to deal with turbulence that will determine success and longevity in business. More importantly, it will be our capacity to deal with complexity and recognise patterns and breaks in those patterns that will lead to innovation and opportunities in the future.
So when investing in a business, look into multiple scenarios, look at the team and their capacity to deal with complexity and uncertainty, look at the way each individual handles turbulence and how the sectors you’re investing in will be impacted in the next 50 years.
Remember, if your answer to our questions is along the lines of “for the foreseeable future…” you had better rethink!
This is a teaser to begin our thinking, and we will follow with a number of articles on this fascinating subject.