Getting laid off suddenly. Taking up a new job that doesn’t work out. Starting a business only to find three months in that you can’t pay the bills.
Failure. It’s tough. It’s also a far more common experience than success.
In Black Swan, author Nassim Taleb argues surprising events, like the appearance of black swans in Western Australia, the rise of the internet and World War I, radically impact on us. Then, we compound their effects through our tendency to rationalise these events in hindsight.
Taleb then offers strategies to prepare for such unforeseen or unexpected events and avoid hindsight bias.
The Barbell Strategy
“Instead of having medium risk, you have high risk on one side and no risk on the other. The average will be medium risk but constitutes a positive exposure to the Black Swan.” — Nassim Taleb
The barbell strategy involves taking an extremely defensive attitude and excessively aggressive attitude at the same time. Hold no middle-ground!
Protect your resources and assets from uncertainty but allocate a small proportion to high-risk strategies.
For example, if you’re an investor, you could place up to 90% of your portfolio in traditionally safe investment vehicles like an index fund, government bonds or savings certificates.
Then you could place the remaining 5% to 10% in much more risky investments. This way, if your investment fails you won’t go bankrupt, but you also stands a small chance of paying off spectacularly.
You can apply the barbell strategy to business too. For example, you could spend 90% of your business’s revenue stream growing sales of your top product. Then you spend the remaining 10% of your resources on a more risky, but profitable, revenue stream like 1:1 coaching.
Know What You Don’t Know
“When you develop your opinions on the basis of weak evidence, you will have difficulty interpreting subsequent information that contradicts these opinions, even if this new information is obviously more accurate.”
Taleb writes about our capacity to form strong opinions on flimsy evidence.
I wish I’d learned this lesson years ago.
Back then, I was struggling as a journalist, and I imagined I was built for working in public relations. A stable job. A good salary. A prestigious career. These were rewards I saw working in PR.
I spent two years applying for public relations roles without success.
Eventually, I became frustrated and emailed several public relations executives from my journalism days asking for career advice. A partner in a PR company invited me into his office for coffee.
There, he explained exactly what public relations involves, the kind of hours he worked, and what he demanded from employees.
After 20 minute of conversation, I realized I didn’t want a career in public relations after all. I immediately stopped applying for PR jobs. If I’d taken that step at the start of my job search I would have saved myself hours of time and frustration.
So before you reach a big decision about your career or business, find someone who knows more than you and figure out what you’ve got to gain — or lose.
Take Responsible Risks
“People are often ashamed of losses, so they engage in strategies that produce very little volatility but contain the risk of a large loss — like collecting nickels in front of steamrollers.”
Taleb cites the example of IBM employees laid off in the 1990s. They’d worked for one company so long that they found it all but impossible to find work elsewhere. They were unemployable, which is a risk many long-term workers face.
But leaving a career you’ve spent years building is a huge risk too. So, if you’re not ready to leave just yet and want to mitigate this risk, hone a new skill outside of work. I worked with one website content manager who taught herself how to code on the side.
Perhaps you could take a small but responsible risk by investing some of your wages into building a side business.
This way, you can hone your employable skills without having to worry about paying the billsor the unemployment line.
Disaster has a funny way of striking from the side or behind, when we least expect it. Thankfully, Taleb’s strategies can help you prepare for, if not prevent, such unpredictable events.