by Michael Arbow, MBA
Partner, RSD Solutions Inc.
In 2007 Nassiam Nicholas Taleb had his book “The Black Swan – The Impact of the highly improbable” published and with it brought to the fore the term “black swan event”. As defined by Mr. Taleb it is an event that is either never considered or considered extremely unlikely to occur, but when it does occur it is not surprising and usually easily comprehendible (we should have seen it coming). The book goes onto explain many examples of black swan events such as 9/11 and Microsoft and events which the mass media feel are black swan events but are not – typically stock market gyrations. This later use of the term is now being applied to large-scale global IT projects (in excess of $170 million USD) where “it found that while most projects ran less than 30% over budget, a sixth ended up costing on average three times (!!!) as much. The study also raised concerns about the adequacy of traditional risk-modeling systems to cope with IT projects, with large-scale computer spending found to be 20 times more likely to spiral out of control than expected." Clearly these over-runs are not a black swan event in the more pure definition.
This situation beckons a lot of questions surrounding risk modeling, the varied expertise that forecast costs and management seeing an anomaly and not recognizing it as the trend (fact?). As the world settles into a new century with new paradigms and new risks, does your firm still consider (hope) that the rare is still rare and not the signs of a trend?
For more on IT’s Black Swans check out this BBC news story: http://tinyurl.com/3ruj4yf
For more on Mr. Taleb’s excellent seminal work follow the link: http://tinyurl.com/3h64jdl
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