Random musings of Scott McGregor

Recently I’ve been coaching several people recently on how to get a job in this down economy, and I would like to share them with you as well. The people I have been coaching with these techniques include new college grads and non- grads seeking entry level positions, as well as more experienced candidates ranging from early stage careers in technical roles and marketing to mid level and senior management level positions.

My background as an innovation and disruption expert
If you have followed my work, one of the things you know about what I do is that I look for (and coach others on finding) disruptive innovation product strategies that allow a start up to invent important new and fast growing markets that they become the leader of, or disrupt the balance in existing markets so that they become new leader and drive the incumbents out of the market.

Disruption strategy methods can be applied to every kind of business
While most of the companies that I have personally participated in have been applying these product strategy methods to the Internet, Software and Mobile Industries, I have taught these methods to people in all business sectors, consumer and enterprise, high tech and low tech, products and services, and they have found these methods equally valuable in all those settings.

Applying Disruption Strategy approaches to Job Searching
In fact, I think these methods can be applied to any business or market, and today I’m going to talk about a strategy that comes from applying them to an area that you may never have considered as being open to innovation or disruption. Today, I want to talk about what can happen if we turn those same disruption strategy methods to give an individual job seeker a disruptive advantage in the online job market.

Disruption enabled new job candidates beat experienced job candidates, by getting to jobs before they do.
What does a disruptive job search strategy mean? Think of it this way: If you are a job seeker, today there are many other people out their competing to get the jobs you want. If you have a great resume, cover letter, and interview skills, are the most qualified applicant and are always the first person to get a job offer for any job you apply to through a job site like Monster, Career Builder, or Craigslist, you are the current market leader that other job seekers are losing out too. It is these successful people that other less successful applicants need an new approach that will allow them to disrupt the playing field to their advantage — to find jobs the current leaders can’t — because those jobs aren’t yet advertised on Monster, CareerBuilder or Craigslist and to overcome the advantages they may have in qualifications and a great resume, by creating a new path to hiring managers that doesn’t depend on a better resume. Note that such a strategy is disruptive in another way as well — it creates a new way for recruiters to package candidates and get them in front of hiring managers before their competitors, and especially before Monster, CareerBuilder or Craigslist.

Finding the niche market that the current market leaders don’t serve well
To figure out how to disrupt the traditional online job search market we start by looking for the special situation where some customers are ill served by the existing products. That special situation that we’ll focus on is a job market in which there are lots of highly qualified candidates seeking every job that is advertised. And what makes the current system ill suited to hiring managers in such a hiring climate is the large number of resumes that need to be screened and interviews that need to be held to fill a position.

Our task: find alternative ways to reach overburdened hiring managers
In our disruptive approach we’ll look for an alternative way around that hiring manager problem that allows job seekers who use the disruptive approach to bypass the existing job site channels where they are at a disadvantage by using to alternative paths to hiring managers.

SOLUTION: Two alternative ways to reach hiring managers

A bad economy makes hiring managers hang back from announcing jobs
The current economy makes it necessary for job seekers to take a different strategy than what works when the economy is good, and the ways that might be the way most people have found a job in the past. The key thing to realize is that right now most employers have way too many resumes, and feel overwhelmed and don’t want to see more resumes. In fact they want to see fewer resumes, and zero is just about ideal! So many of these overburdened hiring managers don’t even want to post a formal job opening on their own website or on a paid job site or on Craigslist. They’d rather fill that job through an informal process that avoids having to read a ton of resumes.

Busy Hiring Managers May Wait to Post Jobs Until After They Know Who Will Fill Them
When that happens you obviously can’t find these jobs by looking for job postings. And you can’t assume that because a company doesn’t have a your job title posted that they don’t have that job — even if they have lots of other jobs posted. That’s because it isn’t the company that is overwhelmed, it is the hiring manager that the job would report to who is maybe hanging back from filling out a requisition for a job. In fact, at times like these, many hiring managers won’t even fill out a job requisition, that is “create a job”, until they know they have already identified the candidate they know will fill the job. That way, as soon as the job is posted and the resumes start coming in, the manager can hire the identified candidate and skip reading the rest of ton of resumes that inevitably flood in because they have now already filled the job that was just posted.

Entry level jobs yield the most overwhelming stacks of resumes to weed through
The more resumes the hiring manager might get, the more likely the job is actually to be filled like this. And the jobs where the most resumes are likely to come in for will be entry level jobs. So this is very relevant for you and Sean.

More qualified candidates who miss out feel frustrated
Naturally, this is very frustrating for job searchers who think they would have been better job candidates, if they had only known about the job. And some of them probably would have. But each of these job searchers has to make a choice: they can be among the many people who continue to post resumes and wait for companies to search for them, and apply to advertised job openings on website and job search sites — and complain when they miss out on these jobs that aren’t really posted until the person who will be hired is already identified. Or they can be one of the people who deliberately or accidentally stumble into these not yet created job opportunities.

The person who gets hired is the person who solves the current problem first — and the current problem is the huge stack of resumes to review!
If getting a job that’s perfect for you is more important to you, even though other more qualified people may have been ignored, then you there are steps you can go through to deliberately get a job this way. If getting a plum job based on “who you know, and who knows you” even if other more qualified candidates may exist makes you feel guilty, then you might want to stick with posting resumes and applying to blind ads. But keep in mind that doesn’t necessarily mean the best qualified person will get the job, someone else who uses the informal processes that i describe below, with lower qualifications than you, but a willingness to go through the who you know and who knows you network, might get it instead. Because in the end, the best candidate for the job in the hiring manager’s mind is the one that minimizes the manager’s effort in finding and guiding the new hire, and who makes the greatest contributions to solving the hiring managers problems. And right now, problem one is getting some work problem solved without having to read a lot of resumes.

Two ways to find the jobs that have not yet been posted, or even created
When hiring managers are hanging back like this, the way to get the job is to get to the person through an informal process. There are two ways to do that which I know can work.

Strategy 1) YOU find the hiring manager: job networking
The first approach to find jobs that don’t yet exist is often called “job networking”. The trick here is to have a bunch of informal meetings with people. The wrong way to go about informal job networking is to ask people “Do you have a job, or know someone who does?” That won’t find you hidden jobs. It will mostly get you a bunch of “nos“, and you’ll quickly exhaust all those sources of leads. But a slight twist will actually get you more “yeses” and more useful leads.

How to ask for a job networking meeting
Phrase your question this way instead. I’m interested in learning about jobs as a “(your target job title)”. I’d like to talk to someone who does that job now, has done that job in the past, has managed people doing that job, or who has worked with people doing that job. I’d like to speak to them and learn a little bit more about the field, the companies in that field and the typical problems they face in that job as part of my preparation for a job search in this area. Do you know anyone I might speak to about such things?”

Focus on discovering needs, not a job
You don’t want to tell people that the purpose of the meeting is to find out if they have a job or can get you a job — that puts them on the spot if they don’t have one; or even if they do have one, because they don’t know you yet and aren’t prepared to deal with a job discussion until they’ve first screened you. Instead, you tell people that the purpose of the meeting is for you to collect more information about what it is like to work in that field, and what people hiring people in that field currently need. This last word, Need, turns out to be the trick that can make job networking work magic for you. The trick is to focus on understanding individual hiring manager’s needs and offering to help with them.

You aren’t imposing by asking for a meeting — you are offering the person a chance to show off their expertise
Everyone loves to tell people about how they got the job they have, how they succeeded and what they do — it makes them feel important. So when you ask to meet with someone to learn about their experiences in the business, you aren’t wasting their time! People like to have meetings with other people who are interested in hearing all about their successes (and about all the secret booby traps they’ve avoided, or discovered).

Give people the permission to complain about their problems
Everyone also has needs — some of which aren’t being well met at any given time. People like to tell other people who are willing to listen all about these needs too — in hopes that other person will know of a solution they had not heard of. A lot of people are reluctant to talk about their problems because they don’t want to come across as complainers. But when you ask, well that’s a different story! Also, when you speak to someone working in that field, tell them up front that you are happy to share any useful information you might learn from your meetings, or to provide them similar leads if some day they are looking for a new opportunity.

Shifting gears: become a solutions provider
So you want to find out the needs of people who hire for the job you want. You want to find out about those needs from potential hiring managers, or from the other people who work for them. Contrary to what you said when you first started asking for these meetings to prepare your job search, once you have this knowledge, you don’t go into job search mode — you go into solutions provider mode!

That’s what turns out to be the trick to getting these jobs that don’t exist yet. People are reluctant to give you their valuable time if they think you are going to ask them for a job they haven’t created. But they are eager to give you their time if they think you might tell them about solutions to the problems they have.

Don’t ask for a job, let them propose a job in order to capture your solutions skills.
The strange thing is, that in telling them some of the solutions to their problems you are also indirectly telling them that you know how to solve those problems. When they know that you know how to solve these problems, you personally also become a solution for them. Not only would hiring you mean their current problems could be resolved and they could focus on something else, but you could solve similar problems for them in the as well in the future. Once they have that realization, that’s when THEY are suddenly going to think about creating that job just for you, and the ability to skip having to interview other people will be a big plus!

Company problems vs. Hiring Manager Problems and Generic Problems vs. Peculiar problems
Note that you can’t shortcut the previous steps by looking at the job description, or what the job title is. Those are generic problems. They are usually problems that hiring companies have. But companies don’t actually hire — it is the hiring managers inside the companies who actually make the decisions.

The hiring manager that is going to make the decision does have those generic problems, and they might be the first ones they think of when writing a job posting. But they aren’t what the hiring manager is thinking about when they are making a hiring decision. All the candidates whose resumes passed the first screening, and solve those generic problems. What makes the hiring manager choose a specific person out of the set of multiple qualified candidates is their ability to solve the manager’s immediate short term problems that are peculiar to this manager at this moment.

Imagine the job you are seeking is “web designer”. When the hiring manager is describing the job, they may be thinking about someone who already knows JavaScript and has created interactive webpages before — so they can start right to work. So that’s the generic problem or skills the manager puts on their job description.

But what the hiring manager is thinking about when making a hiring decision are the peculiar problems that they have right now. Maybe they lost their previous web designer because the job required the web designer to work without some off shore graphics developers in Malaysia who sometimes don’t seem to follow directions in english that well. The previous web designer found that frustrating and quit. So, the peculiar problem isn’t just getting interactive web pages working, but getting them working with beautiful graphics that having been coming from this offshore group.

There might be many alternative solutions to the peculiar problem.

A web designer who is also a talented graphic designer might do both web design and graphic design well and thereby make the offshore group unnecessary.

Alternatively, A web designer who speaks Malaysian, might communicate more effectively so this problem doesn’t reoccur.

The manager may not be attached to which way the peculiar solution solves the problem, but they sure want to be certain that the peculiar problem will be solved.

Be the solution to the peculiar problem
And if one candidate seems to appreciate that peculiar problem and shows the manager they have a solution, that candidate immediately become the least risky selection for the manager to make. And given that the manager doesn’t want to spend more time reading resumes and interviewing people, the first known solution to the peculiar problem is likely to result in a quick end of the job search and a quick job offer. There is no need to keep searching for candidates with alternative solutions — it is time to implement the first one and get back to productivity now.

Show off your ability to solve their problem
Because the hiring manager hasn’t gone through the formal steps to get a new job requisition filled out, they might not know if they will be able to get the budget for such a new job, or get it approved, if it requires higher level approval. But they probably have the authority to invite you in for a day to see if you can help with a peculiar problem they have. Ask them if they would like you to do that. If they seem concerned about the cost, tell them you appreciate that they took so much time with you, and the opportunity to get to know more about their company, their department and what it is like to work for them. Tell them, that you won’t charge them for the 1 day of work, but that what you ask in exchange is that if at the end of the day they like what you did that they agree to write you a short testimonial and introduce you to other people in the industry who might hire someone like you. It is a rare hiring manager who will say no to that offer. And think about this: when it comes time to make a hiring decision, would you want to do that based on a resume or interview or would you rather make a decision base on observing the person at work for a day? Seeing is Believing!

Ask for a Testimonial and a referral: If this manager can’t hire you now, get them to help you find the manager who will!
At the end of the day, if you’ve made some progress on the hiring manager’s peculiar problem, ask for that testimonial and referral. Tell them that while you understand they don’t have approval to hire a person for this job on a full time basis, that you like them, and that if they want your continued help on an knocking off the peculiar problems that have been troubling them, you are willing to do that on a consulting and part time basis while you look for the full time job. Tell them, that if an opening should be approved while you are searching you would love to consider it, because now you have had the experience of working with them for a day. Now you aren’t a job seeker — you are the problem solver that they are wanting.

Need more help on getting meetings with potential managers using this approach?
Get more information on how to create these problem solver images in the minds of managers, click on the following link to get a copy of Anthony Parinello’s excellent book “Selling To VITO (Very Important Top Officers).”

More jobs are being filled through networking that through job sites.
My friends in the recruiting industry are telling me that 60-80% of all jobs are being filled this way right now — and it is the way I have filled most of my jobs over my career. Often I just have a name of someone I got from a friend of a friend. The purpose of the meeting is very informal, just to find out more about their job, their company in general, and their views about what is happening in the industry.

In asking about their job, I often ask them about what their current problems are. Then I usually say something like this, “I have some ideas about how to solve some of the problems you mentioned, that I would be happy to share with you”. I also ask, “are these kinds of problems widespread in your industry?” and “Do you know other colleagues who might have these problems, because I have skills at solving these problems and might be able to help that colleague.”

Usually, if they really don’t have the budget or can’t hire me now, they will introduce me to other people who have similar problems. They’ll win brownie points with that other person, and may be able to hire me later and would like me to feel they are a great manager. Or if they can swing the budget, they’ll say “Well, I didn’t have an opening when we started the talk, but if you can solve that problem, I might be able to get approval to hire you.”

Ultimately I’ll find myself in front of some colleague who will say to me: “Really? you can solve this particular (and peculiar) problem for me? Can I hire you temporarily as a part time consultant to solve this problem?”

And I say sure. Then I solve their problem, and they get to know me and I get to know about other problems that I can help with. If I like working with them, I’ll tell them about the other things I can help with when i am done with my current project, and if they also like me this has always led to a full time job. If we don’t like each other we found out quickly and cheaply for both of us.

Strategy 2) The hiring manager finds YOU!
That brings me to the second way to get a hiring manager who is hanging back to find YOU! If they are busy, shorthanded and overwhelmed (and avoiding the idea of thinking about being even more overwhelmed by more resumes!) they aren’t going to be searching craigslist or monster to find you. Maybe they should be. But they aren’t going to be.

The manager who isn’t seeking people to do jobs, is searching for HOW TO solve their peculiar and general problems
What the hiring manager is thinking about is how to solve that problem without hiring someone, since going through all the steps to get approved for hiring someone and then doing all the resume reading and interviewing is such a hassle. . And to find solutions, they are likely to likely to do an Internet Search for published advice on how to solve their problem. That’s the hook in this startegy. Since they aren’t looking for your resume, but are looking for a solution, you post a solution for them to find. Then you let them realize that hiring you to solve their problem is even less work than learning HOW TO solve the problem is even less effort on their part than spending their own time (as a busy distracted newbie manager) trying to apply that new knowledge expertly.

Make search engines like Google help managers seeking solutions find yours!
This is where you can make the power of the internet search engines work for you, so that the hiring manager finds YOU and not competing candidates for the job. Since these are hiring mangers who aren’t looking for job candidates, they won’t be searching Craigslist, Monster or Careerbuilder. And they won’t find the people who could compete with you for a job and who might even look more qualified based on the resume on those sites.

Instead, you’ll post your solutions are going to be on the non job sites that Google will find. Places like public blogs (syndicated with RSS), or Audio podcasts on iTunes, or videos on YouTube. Those solutions will also contain a pointer to your web page. And that web page won’t just be a resume, it will be a portfolio site showcasing other How To solutions you have authored, as well as your past successes and testimonials from people you have benefited.

When they find your solution, they have also found you!
Now, when these managers are looking for solutions to their problems, they will also find you in the course of searching for those solutions.

How do you get started, and become findable?

Create How To Tips
The trick is to just start creating content about various generic and peculiar problems that you have solved before and give some simple HOW TO tips on solving them. The form of this content (text, audio, or video) isn’t as important as that your HOW TO solutions are published on the web and found by search engines. You can write these tips in text such as a blog, or facebook page, or email newsletter that you syndicate through RSS. Or you can just talk your way through them in audio in a podcast. Or you create a short animation and save it as a You Tube video. Any way you do that you, you’ll wind up listed in an internet search engine. Now when the hiring manager goes looking to find a SOLUTION to one of their problems, they are likely to find YOUR How To tips.. And through your how to tips, they will discover YOU! And now, while they might not have searched for your resume, they know you are a potential source of solutions for the job they haven’t yet created! (and they still don’t know about, or have the time or interest to discover other candidates resumes on Craigslist, Monster or Career Builder.

Short is can be sweet!
These content pieces don’t have to be long — in fact short and sweet (2-3 paragraphs or 10 steps in text, or 2 minutes of Audio or Video are often preferable. Let people experience several descriptions of simple but common problems, so they see the breadth of what you know. If their problem is deeper, let them ask for consulting help.

If this still sounds complicated and daunting, do not despair. Click on the following link to get David Wood’s book “Get Paid for Who You Are” which does an excellent job of taking you step by step through how to do just this kind of way in a quick and easy way. If you want even more help, David’s Get Paid University site provides a wealth of support.

Sidebar: Why are we getting spammed when we post our resumes on job sites and what to do about it.

Why we post on job sites like Monster, CareerBuilder and Craigslist
We post our resumes on a public job site in order to let all potential employers know that we are looking for a job. This way, we don’t have to know which employers we want to work for; we let them find us. It is very low effort on our part.

When posting on job sites actually generates useful calls from employers
Posting our resume in a general job site mostly only works when there are too few active job seekers for the number of job openings employers want to fill. When that happens, employers must go looking for additional potential employees, and that’s when they are willing to spend time searching for people like us, and when it is cost effective to pay the fees that paid sites like Monster and CareerBuilder charge.

Why employers are responding to our resumes on Monster, CareerBuilder and Craigslist right now.
When there are a great many job candidates applying for each only job opening, like in today’s economy, it isn’t sensible for a company to do such paid searches. Since right now employer sare already getting more resumes than they want to review for each opening — and that’s just counting the resumes that are coming in unsolicited via their company’s own job pages on its own web site. With so many resumes, employers don’t want to spend the time to do an external search for additional potential employees, and they certainly don’t want to pay for information that they can are already getting for free when people apply through their own company website.

Even if cost were not the issue, it is less work to just review and select from the resumes you are already getting through your own web site.

This is why you and I will probably not get very many useful contacts from employers simply by putting our resumes on these sites. Instead, we will have to identify potential employers and apply on their sites.

So, who does want to purchase our information from job sites?
But if employers don’t find it cost effective to pay for contact info from extra potential employees, then who DOES find it cost effective to pay for your contact information — people with jobs that NO ONE wants to apply to, and people who are selling a service– such as a college. These are people who can’t get your information more cheaply another way, and are willing to pay for your information (either in actual dollars on a paid job site, or in time and effort on a free site like Facebook or Craigslist).

Why we are getting spammed when we publish our phone and emails on Job sites
The people who most are most willing to buy your information are people who want to sell you something that you aren’t searching for. That could someone who wants to sell you a college degree, or someone who wants to sell you on a job that NO ONE is applying for. Or it could have nothing to do with jobs at all.

How to avoid getting spammed
To avoid getting spammed like this, the best way is to do our own research to identify prospective employers we want to work for, and apply on their own web sites, rather than wait for them to come to us. Better yet, use networking to find a path directly to the hiring managers (even the ones who don’t at present have a job req) and let them know about your problem solving skills! Since companies don’t want to share your information with competitors, targeted contacts like this usually won’t result in your information being shared with anyone else.

Good luck job seekers!

This post may be freely reproduced in whole or in part for non-commerical purposes when printed with attribution or a link to the www.smcgregor.com/blog website under a creative commons license. For commercial use, please contact the author for permission.

Opportunities and threats in improbable events

I loved Nassim Nicholas Taleb’s earlier book Fooled by Randomness, and I am really loving The Black Swan as well. It has much of the charm of Malcolm Gladwell’s current NYT best seller, Outliers. — But while Gladwell leaves us with merely the understanding that the success of various prominent individuals such as Bill Gates or Steve Jobs is due largely to the “luck” of being born in the right place and at the right time, he gives us no greater insight into how a better understanding of luck (in the form of randomness and improbability forces at work upon us) might better guide us in choosing national and international policies or even actively choosing our life paths taking into consideration the improbable events such as birth date and birth place work that for our success as well as those that against it.

In contrast, Taleb’s The Black Swan sets its sights on providing us a theory and method to make such decisions in a way that better recognizes the role of randomness in our lives. Even more, it also shows us that any theory which simplifies real world complexity enough for us to see patterns also inherently blinds us to the risks hidden in the messy real world complexity which we have now simplified out.

Gladwell tells us that random chance defines our opportunities and the threats we will face; Taleb tells us how to seize the random opportunities that might occur in our lifetimes, and how to prepare for the improbable but catastrophic events that surely will happen someday and often change our lives in unimaginable ways.

To fully appreciate the Black Swan, it is useful to see how it builds upon insights set out in Taleb’s previous book, Fooled by Randomness.

Fooled by Randomness highlighted the failures of Wall Street market makers who mistook the correctness of their string of predictions as a sign of their own genius, rather than just random chance — at least until the financial markets changed and suddenly their predictions were consistently wrong and their were suddenly hoisted on their on petards. In Fooled by Randomness, Taleb points out an old investment scam where an investment advisor sends out 2^12 (4096) free investment newsletters predicting that the market will be up next month, and sends out another 2^12 free newsletters to other people predicting that the market will be down next month. Let’s say the market is down. Now the broker removes all the people he sent the (wrong) up prediction from his list. But he takes the four thousand plus people to whom he sent the (correct) down prediction newsletters into two parts and he send half another down prediction, and the other half an up prediction. A month later the market is up — and over two thousand people have seen this investment advisor make the right pick twice. So now he divides that group that got the two right picks into two halves and sends 1024 people an up prediction and the other 1024 the down prediction. Every month he drops off the half of his mailing list that got the bad pick that month , but the remaining half has seen him make one right pick after another! At the end of a year he has one newsletter recipient who has seen him make 12 correct picks in a row. That investors knows the probability of 12 correct picks in a row is very low (1 / 2^12) so they conclude that it isn’t chance alone that makes him a great stock picker — they conclude he is a genius, so they invest a bunch of money with him, and tell all their friends to as well.

While the sham newsletter is a well known scam, in Fooled by Randomness, Taleb points out it doesn’t require such an actively deceptive strategy to make 12 correct guesses in a row. Given enough investment advisors independently guessing each month’s market direction at random, say some number greater than 8096, one or two will surely make 12 lucky guesses in a row. And in fact, when we say they make their predictions randomly, we don’t mean that they don’t have a method — maybe they read tea leaves, counted sun spots or compared the month’s average temperature in Jackson Hole, Wyoming versus than the average for the month over the last 20 years. As long as these methods are independent, distributed widely, and uncorrelated with the actual factors that drive the market, there will still be a few lucky winners who will get it right. But now their results will be shown in Morningstar or Consumer Reports, and people will think that given their past track record was so good, so will their future be equally good! But because actually these were just random correlations, their futures aren’t always so rosy.

The point of Fooled by Randomness is that these investment advisors not only fooled unsophisticated small investors into thinking that they were brilliant (rather than just lucky and later unlucky), but they fooled their superiors at the trading firms, the financial press, and themselves as well. So all of these people were unprepared when the wheel of chance turned again — this time against them. This sets the stage for the Black Swan — not merely should we realize that we are prisoners of a chaotic environment full of randomness, but we should also realize that we actors in this environment and can use our improved appreciation of uncertainty to better shape our destinies.

In The Black Swan, Taleb tackles how to take advantage of the deliberately take advantage of improbable, but not impossible events, not by being smarter about when they will happen, but simply by embracing randomness and the impossibility of making the right prediction in the next moment but also the certainty that ultimately the unlikely even will happen. He draws on a wide range of historical events that seemed unpredictable in advance — from the world of war, to big finance, to individual career decisions to illustrate the breadth of application of this theory.

Taleb’s appreciation of this theory and how to apply it goes much deeper than typical applications of this theory in business and economics.

For instance, we are all familiar with one major financial industry built on a probabilistic understanding of an event which is unlikely in the next moment, but which in the long run becomes increasingly certain: namely Life Insurance. When we buy life insurance we are essentially making a bet — we are betting that we will die so much sooner than our remaining life expectancy that our estate will make a bigger return on paying our premium to the insurance company and collecting the value at our death, compared to what we could earn if we just put that same amount of money into some other investment (e.g. an S&P index fund) and watching it grow ourselves. Of course the Insurance company uses actuarial charts and its expectations of future investment returns to calculate a premium that will be sufficient to earn it a healthy profit over time. Yes, the Black Swan underlies this business, but the beauty of Taleb’s analysis of the Black Swan is to see that this thought process can be applied to other things as well. Should you work at a “stable” middle of the road salary job for you life? Or should you take a high risk series of high risk / high reward jobs in the hope of hitting it big?

If you live in California, should you stockpile emergency supplies in San Francisco and LA to sell immediately to unprepared homeowners after the next big earthquake hits? How about stockpiling goods in Miami for unprepared Florida coast homeowners hit by the next hurricane?

Thinking about the Black Swan can give you some insight into some of these questions, but they can also give you some insight about the eventual failure of most any institution built to profit on them too. What are your estimates of frequency/probability and magnitude of the catastrophe or subsequent profit opportunity based on? Their frequencies and magnitudes in the past? If so, how much do they reflect all the uncertain ways that the past might be different from the future.

What if global climate change occurs, and the homes you were prepared to supply after a hurricane are now permanently abandoned and under water due to rising sea levels? Or what if a small asteroid hits the Pacific plate off the California coast: instantly releasing the pressure along the entire San Andreas fault — but also creating a huge Tsunami that wipes out the large portions of San Francisco and Los Angeles. Did your model take these unlikely events into consideration? What other possible events are missing from our oversimplified models?

For all of the above reasons, I find The Black Swan a book of timeless value. But ironically it is also a book of very timely value.

As we watch the unfolding aftermath of a global credit crisis that even former Federal Reserve Chairman, Alan Greenspan, admits that he never thought possible, the Black Swan theory is a great guide: It was not the stupidity of regulators and central bankers, nor the greed of bankers, investors, and prospective homeowners that caused such a precipitous turn of events — rather it was our reliance on models that simplify complex processes enough that we can understand them and predict them MOST of the time — and our failure to distinguish MOST of the time from ALL of the time. In particular, investors and regulators failed to anticipate the risks of the Credit Default Swap market and subprime mortgage crisis can be tied to an unreasoning belief in the power of DIVERSIFICATION in the standard investment MODEL to eliminate major risks. Diversification works MOST of the time, because most of the time institutions and individuals default on loans for reasons that are largely individual, or that at worst affect only a local or regional economy or just one industrial sector of an economy. That is, these defaults are mostly independent of each other. So at any given time some subgroup is affected and default rates in that group might be higher than normal, but some other region or sector is growing and default rates there are lower — therefore if you diversify widely enough, the standard investment risk models says you should be safe from large swings in the average value of your portfolio.

That is of course only true as long as the assumption or model is based upon — that failures and loan defaults are INDEPENDENT of each other — is still true.

And historically, independence of events has been a pretty good assumption to make. In 1900, if a shipper of grain in China lost a ship full of rice due to a severe storm at sea while it was on its way to Japan, his loss might affect the farmers that grew the grain in China, the merchants who were going to sell the rice in Japan, and perhaps even the fishermen who were going to buy and eat the rice in Japan. But that loss was almost assuredly independent of whether a shipload of leather sent by train from cattle ranches in Wyoming reached shoemakers in Boston.

But the world of finance and commerce today is very different. There are multinational corporations with revenues that exceed the Domestic National Product of more than 100 countries. There are multinational financial institutions which finance and insure these companies, and their are investors who seek to diversify their risk worldwide by investing outside their own native countries. There are financial institutions that have lent so much money to so many companies around the world that if they were to pull their loans in millions of jobs would be lost overnight, And they have also borrowed so much of this money from other financial institutions that if they were to become bankrupt overnight, then 100s of of lenders would no longer be solvent either.

With all this interconnected borrowing and lending, buying and selling, saving and investing among people all around the world — all connected by fiber cable trading systems that literally work at the speed of light, we have become more INTERDEPENDENT, not INDEPENDENT. And because of that interdependence, there is a greater possibility that some large shock could suddenly affect players all around the globe and in all kinds of industries, thereby undermining our assumption of independence. So instead of being like random waves where crests colide with troughs, and troughs with crests dampening the magnitude of each and cancelling each other out, these impulses become synchronized waves whose crests intersect with crests, and troughs with troughs to amplify themselves to even larger crests and troughs like a tsunami. Soon the entire world’s financial structure and economies are at risk of a simultaneous shutdown.

The occurrence of such an alignment may be infrequent and its likelihood improbably, but the magnitude when it does hit can be devastating, and all the more so because we failed to distinguish the improbable (the Black Swan) from the impossible and so we did not prepare for it at all.

If we all better understood the theory of the Black Swan, as well as its application to our own daily life choices, we could all profit more from unlikely events, and better prepare for the dangerous Black Swans that threaten to wipe us out.

Taleb deserves great credit, as a philosopher (his preferred vocation), psychologist, sociologist, financier, economist, mathematician and engaging author for establishing a powerful highly explanatory model, and a language and framework for further analysis. This is not merely an epistemological model of what we can know and what we cannot. It is a powerful model of how we can identify what we cannot know, and the how the means we use to systematize what we know blind us to risks from what we do not know.

Judged as a work of philosophy it surely will rank with both Wittgenstein’s earlier work (Tractatus Logico-Philosophicus) and his later (Philosophical Investigations) in terms of a crystallization of how our models of the world define us and limit us in what we allow ourselves to perceive; but as a work of literature he does this with far more wit, charm, entertainment and erudition.

Kudos to Nassim Nicholas Taleb on another insighfult book, for his exceptional view into randomness how it forms mankind’s greatest capabilities and greatest limitations, and for his ability to explain so much complexity so simply, in a way accessible to us all.