Welcome to the Black Swan Orange podcast where we explore how to prepare for encounters with rare and unpredictable events or situations that can produce potentially severe or dramatic impacts. And, in this episode, I’m thrilled to introduce the topic of Positive Black Swans, also known as Black Swan Opportunities. I’m Joe Kornowski.

I deferred discussing Positive Black Swans so far in this podcast because of human nature. You see, we are all neurologically wired to fight back, run away, or stay perfectly still in the face of overwhelming fear or danger — the fight, flight, freeze response. It’s not even a conscious response. Recall the phrase “playing possum” for the instinctive behavior of possums to play dead when faced with an extreme threat since they are neither ferocious nor fast-moving. I recently watched a porcupine do the same thing while I tried to gently “nudge” it down a wooden walkway. Just the lightest touch of my broom on its posterior caused its body to tense, to freeze,   thereby raising its spines.

The point here is just that fear is a great motivator of immediate response … in the short-term. Just like the London air-raid sirens of World War II, today’s smartphone public safety or emergency alerts usually do the job in getting our immediate attention, dumping adrenaline and cortisol into our bodies and readying us for focused awareness and action NOW.

Given that Black Swans are rare, unexpected, and unpredictable, we benefit by having a so-called healthy fear of the negative ones to help break us out of our usual day-dream bubble of a mostly calm and predictable daily life. 

Just as a quick review, recall that Nassim Nicholas Taleb, in his book “The Black Swan: The Impact of the Highly Improbable,” tells us that what distinguishes Black Swan Events are their extreme rarity, severe impact, and the subsequent widespread insistence that the event was obvious in hindsight. 

We commonly refer to positive unexpected events and situations as opportunities. In fact, Taleb talks quite a bit about such opportunities, what he calls Positive Black Swans. 

He writes: "Seize any opportunity, or anything that looks like opportunity. They are rare, much rarer than you think."

Now, Nassim Taleb is not the only smart and wealthy guy who believes and advocates this strategy.  Warren Buffett developed 7 rules of investing.  Rule Number 7 is: “Big opportunities have to be seized. You have to grab them when they come because you’re not going to get 500 great opportunities.”

Both Taleb and Buffett agree that, when you recognize a golden opportunity, you MUST SHOW UP and ACT ON THEM!

Taleb goes further and says that if you hope to catch a positive Black Swan, your first step is to expose yourself to them. 

Most of us know about LinkedIn. That’s definitely an opportunity network, a Positive Black Swan gathering place. I post a link to every episode of this podcast there.

A curious thing that Taleb notes is that Many people do not realize that they are getting a lucky break in life when they get it. 

My father had a habit of responding to any proposed change in his life that could signal an opportunity with a reactive, “No!” Sometimes followed up with “Why would I want to do that?” It was a rhetorical question for him rather than innate curiosity.

Fortunately, I paid attention to dad’s reactive resistance to any life change and how he missed out on what could have been. Also, I had the good fortune to work for an appellate court judge who, himself, encountered a Positive Black Swan while I was working for him. He had worked his way up from the city attorney’s office in a Hispanic L.A. suburb to municipal court judge, then superior court judge and now as an appellate court judge. 

One day he called me into his office and told me he wanted me to know that he was being considered for appointment to the state supreme court, and he wanted to give me a heads up since my own position might be affected, one way or another. He confided to me that he knew he was not the most brilliant legal mind and that plenty of others might be more qualified in one way or another… BUT, he said with a proverbial twinkle in his eye, “these opportunities really are about being in the right place, at the right time, with all wind conditions being perfect.” I was not surprised when a few weeks later, he again called me into his office to announce that the governor had just appointed him to be the next justice of the state supreme court. 

So, flash forward many years later in the early days of the dot-com boom. One day a business acquaintance called me up out of the blue and told me that he just signed on to a new online start-up within an established global publisher. They were interested in selling online slices of their publications, and maybe adding a mobile component. He remembered the small mobile app for professionals I had developed. I had shown it to him in my office the last time I’d seen him. He told the head of the project about me, and his boss asked if I could get on a plane that week to New Jersey — I was in Los Angeles working at a non-profit at the time.

That call from a person I barely knew, and my heeding that call, turned out to be one of the greatest opportunities of my life. I’ll come back to that in a moment, but first let’s turn to some of the attributes of Positive Black Swans.

In his book Antifragile, Taleb writes that, “A central feature of positive Black Swans is that the upsides are what he calls “unbounded” — not like a lottery ticket, for example, which is worth a defined maximum amount. A Positive Black Swan has unknown upsides while the potential losses from mistakes and miscalculations are limited and known.

As a corollary, he notes that, “Positive Black Swans are more unpredictable than negative ones.”

Another attribute is that, In general, Positive Black Swans take time to show their effects while negative ones happen very quickly because it is much easier and faster to destroy than to build.

In the example of my out-of-the-blue job offer, my wife and I had to pick up and move from California to New Jersey within 30 days, leaving our families, friends, and professional network (no online communities back then). We did have the good sense to rent rather than buy a place to live in Jersey because this was a completely innovative venture within a legacy multi-national publisher. Also, I had cousins in New Jersey, so we were not without any support from family.

Given all that, going in, it seemed that the potential upside was “unbounded” to use Taleb’s term while the losses from unforeseen pitfalls likely were limited to the whole thing simply imploding and our returning to our old life in California — a prospect which would have been more than fine with my wife.

And our adventure certainly presented some unpredictable challenges. The first was that everyone came to see that the mobile application part of this new online business was too far out in the future than anyone had suspected — except me, actually. But my new boss recognized that, given my experience creating one of the first websites for a large professional non-profit, I would be the perfect choice to head up a small legacy bookstore as it migrated to web and ecommerce. What made it a golden opportunity for me was that it was already making money.

Unfortunately, a pretty significant setback occurred in the first year when my boss got caught up in a scandal. His enemies back in the brick-and-mortar business were not unhappy to see the company’s new bright shiny online object lose some luster … and its golden boy. And that doomed most of the project’s young team, some of whom HAD already bought homes, unfortunately. But I had spent enough time managing the online store migration to avoid that same fate. Also, I had a friend in the company that I’d known for several years as the rep to the non-profit where I’d worked for over a decade. And I’d made a friend or two on the assessment team that came in to gut the project. 

Just as happened with my judge mentor, I recognized that I was in the right place, at the right time, and all wind conditions were perfect for my Positive Black Swan to keep flying. That flight lasted 14 years and exposed me to people, places, other opportunities, and experiences I could never have imagined.

Taleb writes about how he sometimes was “shocked at how little people realize that these opportunities do not grow on trees.” He advises to, “Collect as many free nonlottery tickets (those with open-ended payoffs) as you can, and, once they start paying off, do not discard them.” Instead, he says, “Work hard, not in grunt work, but in chasing such opportunities and maximizing your exposure to them.”

For Taleb, it’s all about increasing the odds of serendipitous encounters to gain exposure to what he calls “the envelope of serendipity.”

So, the larger question is how do you maximize your exposure to this envelope of serendipity to increase your opportunities, your Positive Black Swans, while minimizing your exposure to negative Black Swans and their damaging effects?

Taleb says we need to learn to distinguish between positive contingencies and negative ones, between those human undertakings in which the lack of predictability can be (or has been) extremely beneficial and those where the failure to understand the future caused harm.

He recommends what he calls “the ‘barbell” strategy of stepping out into maximum exposure to the positive Black Swans while remaining paranoid about the negative ones. For your exposure to the Positive Black Swan, he says, you don’t need to have any precise understanding of the structure of uncertainty. It’s more important, when you have a very limited risk of loss, to get as aggressive, as speculative, and sometimes as “unreasonable” as you can be.

Now, I will confess that when my wife and I set off for our new life in the Garden State, I felt pretty sure that the hook that got me the job – a mobile app for the kind of content created by this publisher that wanted to stake its claim to the web and ecommerce – would likely turn out to be ahead of its time. 

I’ll further confide that I’m the type of person that when I set off on a long road trip, I want to have made hotel reservations at logical stopping places all along the way. Worrying over the risk of having to hunt around for a hotel room at night after a full day of driving, and possibly sharing a bed with creepy-crawlers, just made no sense when I could spend 5 minutes making a few reservations, getting my triple A discount, etc.

But something about my Positive Black Swan moment made me feel that kind of aggressive and speculative — though not quite reckless — attitude about the new adventure. I really didn’t have much to lose and potentially quite a bit to gain.

My Positive Black Swan wasn’t perfect by any means, of course. But it didn’t have to be. And I had to do some scrambling, which included a proof of concept and a pilot project. But even the idea of getting paid to tinker with what had been my hobbyist idea as part of a mega-publisher’s experimental investment — I mean, the blame for failure to monetize it would never fall on me, personally. Just hitching a ride on the company’s eagerness to claim its “web” and “ecommerce” cred was the equivalent of the hitchers on today’s AI goldrush. I was a pioneer, a scout for the future. Just being part of it was MY cred. And that helped me parlay a more traditional product job back at the brick-and-mortar headquarters later, with its own challenges and opportunities.

We’ll talk more about Black Swan Opportunities in future episodes …. 

For now, just remember — 

1.    Make yourself open and vulnerable to the envelope of serendipity for Positive Black Swans.

2.    At the same time, use the barbell approach and retain a little healthy paranoia about negative Black Swans, using tools like awareness, acceptance and action, to spot them and reduce their downside risks.

3.    There might well be gold in them there Large Language Models — even if you have no clear idea what kind of gold that might be. You don’t NEED to know.

4.    Finally, always keep in mind that YOU are a Black Swan!