Tag Archives: Fooled by Randomness

Black Swan Events and Cloud Computing

Planners, strategists and consultants are talking about black swan events. What is a black swan event? These are events that occur rarely, but create serious consequences to the organisation. Very little is known about these events as they occur rarely, and as a result, preparing to meet the contingencies resulting from this type of event is very difficult. Yet, these events (For instance, the 9/11 event or the rise of the Internet) occur, and organisations must be prepared for them.

The Black Swan theory was popularised by Nassim Nichoas Taleb in his book of the title “Fooled by Randomness”. The book contends that since all swans are white, a black swan is considered to be a theoretical impossibility. Similarly, events which have never been encountered are considered to be non-existent or impossible to predict. The occurrence of the event, therefore, comes as a surprise. It creates a major impact and leaves the people claiming that they expected the event in hindsight.

Taleb’s book does not predict black swan events. It urges organisations and individuals to build a robustness against any possible events of this kind, and to exploit positive events constructively. He is critical of the normal distribution model that is used as the basis for calculating risks and of decision theories that used a fixed universe model for predicting events and outcomes. He accepts that other distributions are equally imprecise, but can be used descriptively to generate awareness and temper expectations.

Taleb pointed out that the rise of the Internet was a black swan event. While there were many skeptics who did not subscribe to the view that cloud computing would be adopted in a big way, hindsight indicates that the cloud was on the cards, and was all set to rock the world of commerce. It was a black swan event of magnitude that became a reality unbeknown to large parts of the world—quietly, aggressively making inroads into organisations, demanding attention and getting it. But, this was a positive event that destroyed the status quo and shifted the entire paradigm of business. It made business global, scalable, flexible and agile overnight. It was a revelation.

Today, cloud computing is more than just an insurance against disaster. It is the very medium of conducting business. It is a way of reaching out to distant markets, gaining the loyalty of customers, generating business leads, and working towards creating a secure business environment with guarantees of high availability, scalability, agility, and flexibility.

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