Black Swan or Red Herring?

1. Low Frequency/ High Severity Incidents: BlackSwanorRedHerring?

2. Instructor Introduction • Randy Templeton (MA, CEM, MCP, MEP, MFF) • Business Continuity and Emergency Management Coordinator • Texas Dept. of Family and Protective Services • Randy.templeton@dfps.state.tx.us

3. What is My Purpose Today? To have a discussion of perspectives and viewpoints for considering preparation and planning for LF/HS incidents Not really here to teach you anything—I’d rather stimulate your thinking!

4. Part 1: Defining the Problem “The first responsibility for any leader is to define reality” –John Maxwell

5. Risk Management Matrix: Q1 Incidents • Q1 incidents, though severe, are also frequent. The implications of frequency are that organizations are likely to have devoted substantial resources to address the problem; and, by reason of practice, personnel are typically skilled in making corrections quickly to restore function. High + S E V E R I T Y Q2 (+,-) Q1 (+,+) Impact Q4 (-,+) Q3 (-,-) - + High Low F R E Q U E N C Y Q1 Severity Frequency

6. Q2 Incidents • Q2 incidents are infrequent and severe--a dangerous combination. The lack of frequency often means that protocols, tools & equipment, procedures may not be in place, & personnel may not have developed KSAs. These reasons make Q2-type incidents the ideal models for training and exercise. High + S E V E R I T Y Q2 (+,-) Q1 (+,+) Q4 (-,+) Q3 (-,-) Impact - + High Low F R E Q U E N C Y Severity Q2 Frequency

7. High + S E V E R I T Y Q2 (+,-) Q1 (+,+) Q4 (-,+) Q3 (-,-) - + High Low F R E Q U E N C Y Q3 Incidents • Q3 incidents are neither severe nor frequent, and rise only to the level of "occasional nuisance." Few resources or attention should be devoted to Q3 problems. Impact Severity Q3 Frequency

8. High + S E V E R I T Y Q2 (+,-) Q1 (+,+) Q4 (-,+) Q3 (-,-) - + High Low F R E Q U E N C Y Q4 Incidents • Q4 issues are not severe, though frequent. These often justify improvement/mitigation projects to decrease frequency of occurrence, thus converting them to Q3 occasional nuisances. Impact Severity Q4 Frequency

9. Q5 Incidents These are “Wild Card” or “Black Swan” incidents. Whether local or global, these incidents are profoundly severe in some aspect of their nature that they change the society, the culture, or even the course of human life/history. Q5 Impact Severity Frequency

10. Q6 Incidents These incidents are not severe or frequent, but they are impactful—typically cultural or attitudinal. (Example: Kennedy assassination, Woodstock, moon landing, etc.) Q6 Impact Severity Frequency

11. What are “Black Swan” and “Wildcard” Incidents? “Low probability, high impact [incidents] that, were they to occur, would severely impact the human condition” (John Peterson, “Out of the Blue”); “…An [incident] that is believed to be of low probability of materializing but if it does…will produce a harm so great and sudden as to seem discontinuous with the flow of events that preceded it” (Richard A. Posner, “Catastrophe”;

12. What are you saying? When we say “Low probability…” we typically add the qualifying elliptical clauses, “…in my lifetime” and/or “…in my experience;” Catastrophes on a global scale are an established part of earth’s history; “Low probability” is more appropriately “Unknown probability” in many cases.

13. LF/HS Incident Characteristics (Usually) Sudden onset May be foreseeable or not, warning or not Solutions (if any) are often complex Difficult to visualize; Hard to imagine response Punctuations in the system Can originate anywhere, but effect everywhere Can be driven by perceptions Can be either/both positive and negative Difficult to convince others

14. LF/HS Incident Characteristics (Cont’d) Can catalyze or have synergistic effects on other wildcards We are inventing the possibility of new wildcards Some wildcards are “too big to let happen” Challenge conventional wisdom, the “official future” Are game-changers in the biggest sense

15. Four Rules for W/BS: If you don’t think about wildcards before they happen, all of the value of thinking about them is lost! Understanding how to think about problems is as important (or more!) than solving all problems. Accessing and understanding information beforehand is key! Extraordinary events require extraordinary approaches.

16. Part 2: Understanding the Obstacles The Law of Apocalyptic Limitation: “No prediction of doomsday can be accurate except the last one.”

17. Why Do We Fail to Prepare for Wildcard (Q2/Q5) Incidents? • The nature of human cognition • Shared mental models of how the world works • Difficulty of discounting the value of events that will take place in the indeterminate future • Poor or missing incentives to prepare • Hedging against the future is costly • Long-term payoff vs. immediate comfort • Institutional barriers • Solutions require collective action where there is no basis for trust • No theory of sharing the load, pooling resources or decision-making authority

18. 17 Reasons… 4. Imagination costs: mental exertion to think about what we have not experienced 5. Induction fallacy (“I’ve never seen a black swan, therefore they do not exist”) 6. Optimism bias/technological optimism 7. Short-sighted world view (20thvs. 21st century) 8. Short-term world view (“Not in my lifetime…” 9. Confusing “frequency” and “probability” 10. Chicken Little Syndrome (“doomsters”)

19. 17 Reasons…(cont’d) 11. Full plates: tyranny of the urgent 12. Resource scarcity 13. Cultural Conditioning (e.g., “science fiction,” optimism backlash) 14. “One Risk at a time” fallacy (Either/Or thinking) 15. Dominant risk fallacy: “If risk A is > B, no attention should be paid to B.” 16. “Probability Neglect”—inability to respond rationally to very-low-probability risks. 17. Collective action difficulties

20. What do you think? “A related distinction to bear in mind is between notional and motivational belief. It is possible to affirm a proposition on which one would never act, simply because the proposition was not felt deeply enough to impel action. Everyone knows that he or she will die someday, but a great many people do not act as if they know it.”

21. What Do You Think? “Imaginative thinking must also be able to cope with issues that are possible but are also, by their nature, unthinkable. Perhaps their consequences would be horrible…[perhaps] not so bad anyway. Hope vacates judgment. The faster we get over denial, the sooner we can deal with the issue.”

22. Part 3: Understanding Our Options You know, there aresome things that youjust never think of... Like Mt. Rushmore from the Canadian side: “In theory, there is no difference between theory and practice. In practice there is.” --Yogi Berra

23. The Role of Agency Mission The more critical your organization’s mission to life, health and well-being, the more time, resources and variety of your Q2 planning. In a crisis, should your agency do more, or less, or the same? Is there ever a time when it is appropriate/ acceptable to turn out the lights and go home? (BOKYAG Principle)

24. Response 1: Environmental Scanning Purposeful/Intentional monitoring of the internal and external environments. Reaching out to individuals and sources from multiple disciplines who think differently and use a variety of filters to make sense of information (open source fusion). Used for detecting early signs of both opportunities and threats.

25. Environmental Scanning Frameworks • Three Questions: • What are the three most important wildcards for me, my family, community, society or organization? • Can they be anticipated? • Is there anything we can do to prepare? • STEEP Model: social, technological, environmental, economic and political. • “Scenario thinking” • “Choice Structuring”

26. Response 2: Be Imaginative and Systematic • Deal with the paradox. • EMs should routinely examine themselves: “What am I not seeing?” • Practice changing before you have to. • Allot/Guard some wildcard reflection and planning time. • Ashby’s Law of Requisite Variety: “The capacity to accommodate environmental change depends on the variety available inside the organization.”

27. Response 3: Be Open-Minded Wildcards are by their nature “unthinkable.” EMs should guard against blinders that affect others EMs should develop strategies for making a case for some form of wildcard planning “Eyes wide open” because we do not know from where the next threat will come.

28. Response 4: Strategic Resilience • Ability to survive in the long-term; bending without breaking; “ evolvable.” • Capability to turn threats into opportunities prior to their becoming either. • Defining dimensions are resourcefulness, robustness, and adaptiveness • Resourcefulness: “Work-arounds” for technology • Robustness: Redundancy and diversification • Adaptiveness: “Big Chief tablets and fat pencils” • “Resilience Gap” Analysis: Fault Tree • “The world becoming more turbulent faster than we can build our resilience.” • “The essence of being resilient is to learn without experience.”

29. 5 Requisites of a Resilient Org Imaginative thinking Resource-scarce innovation Robust design Adaptive fitness Sisu(collective toughness, inner strength—scrapiness!)

30. Resource Requirements: What Do We Need to Function? Resource Requirements: What Do We Need to Function? AND AND Circumstances Factors Circumstances Factors People Factors People Factors Tools Factors Tools Factors Performance Factors (How Well/To What Degree) Performance Factors (How Well/To What Degree) AND AND AND AND AND AND AND AND • Computer/Internet vs. Paper Record(s) • Telephone/Cell Phone • Vehicle Appropriate for the Circumstance • Shields/Barriers Available • Facilities/Office Space • Access to System Records (secondary) • Stocked Resources (diapers, formula, car seats, walking canes, etc.) • Computer/Internet vs. Paper Record(s) • Telephone/Cell Phone • Vehicle Appropriate for the Circumstance • Shields/Barriers Available • Facilities/Office Space • Access to System Records (secondary) • Stocked Resources (diapers, formula, car seats, walking canes, etc.) • Training/Specialty/Certification • Appropriate Authority/Licensure • Number Sufficiency • Training/Specialty/Certification • Appropriate Authority/ Licensure • Number Sufficiency • Safety/Health/Nature of Threat • Mobility/Access Dependent • Communication Dependent • Client/Customer Centeredness (e.g., clients present vs. evacuated) • Administrative Support Dependant • Urgency/Danger to Clients • Task Volume/Calls for Service • Adversarial/Non-Adversarial/Regulatory • Public/Transparency of Government • Safety/Health/Nature of Threat • Mobility/Access Dependent • Communication Dependent • Client/Customer Centeredness (e.g., clients present vs. evacuated) • Administrative Support Dependant • Urgency/Danger to Clients • Task Volume/Calls for Service • Adversarial/Non-Adversarial/Regulatory • Public/Transparency of Government • State and Federal Statutory Mandate • Mission Essential Functions • Business Continuity Plans and Measures • Necessary to "Safeguard Life and Health" • Favorable Public Opinion • State and Federal Statutory Mandate • Mission Essential Functions • Business Continuity Plans and Measures • Necessary to "Safeguard Life and Health" • Favorable Public Opinion

31. What do you think? “The more varied and intense the challenges that the organization can cope with, the more robust it is. Robustness is the capacity to accommodate multiple, different futures.” LiisaValikangas

32. Questions? References: Peterson, John L., Out of the Blue Posner, Richard A., Catastrophe: Risk and Response Taleb, N., The Black Swan: The Impact of the Highly Improbable That’s All Folks!!!