Black Swans in our Supply Chain IV

 

Summary of the Book ‘The Black Swan” by Nassim Nicholas Taleb

1. "Black swans" are highly consequential but unlikely events that are easily explainable – but only in retrospect. 
   
2. Black swans have shaped the history of technology, science, business and culture.
   
3. As the world gets more connected, black swans are becoming more consequential.
   
4. The human mind is subject to numerous blind spots, illusions and biases.
   
5. One of the most pernicious biases is misusing standard statistical tools, such as the “bell curve,” that ignore black swans.
   
6. Other statistical tools, such as the "power-law distribution," are far better at modeling many important phenomena.
   
7. Expert advice is often useless.
   
8. Most forecasting is pseudoscience.
   
9. You can retrain yourself to overcome your cognitive biases and to appreciate randomness. But it's not easy. 
   
10. You can hedge against negative black swans while benefiting from positive ones.

Frederick Winslow Taylor (The father of scientific management)

Taylor’s ideas appear to be rejected by business managers of today. Yet, even today, efficiency everywhere is the norm. A resource standing idle is still considered to be a major waste – by management and workers alike. Managers detest resources that are not producing – if they have nothing to do they will find them something to do! Workers are afraid to be idle because being not needed risks being fired – so workers make sure they always at least look as though they are busy.

Common practice is to not waste resources – everything should be working. On the other hand Pareto and Goldratt have shown that only 1 resource needs to be working flat out – the weakest link, the constraint, the bottleneck. If everyone must always be working just imagine how much inventory will pile up – the limiting factor will not be able to keep up. Fortunately space and the dictates of cash flow will prevent companies from going way too far. Nevertheless are they not going far beyond the necessary? Shouldn’t most resources be idle, at least part of the time? Shouldn’t most resources have spare capacity so that they can guarantee the limiting factor is in fact able to produce at 100%?

It seems Taylor's ideas are important – but only at the limiting factor – the constraint or the .1%. Traditional Taylorism cannot help us find a Black Swan – it will most likely prevent us from consciously seeking the Black Swan.

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