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this book for you.

      ‘Our world is dominated by the extreme, the unknown, and the very improbable … and all the while we spend our time engaged in small talk, focusing on the known and the repeated.’

      Nicholas Nassim Taleb

      So what is this famed and metaphorical creature more precisely? A Black Swan, according to Taleb, has three attributes. Before it occurs, it is considered extremely unlikely, to the extent we grant it for possible at all. When it occurs, its consequences are massive. After it has occurred, it makes perfect sense to us that something like that could happen. The last attribute is due to our brains being awesome ‘explanation machines’ that crave coherence. Dots will be ambitiously connected until coherence is established. The world inhabited by these Black Swans is characterized by uncertainty that is ‘wild’ rather than benign, meaning that there is always a potential for great dislocations and non‐linearities. Even when we manage to bring our focus to the tail end of the distribution, we frequently find that it is in flux, with events greatly surpassing anything we have seen or heard before.

      The impact of the Black Swan idea has been substantial. While it may not have trickled down into popular culture just yet, the educated public seems largely aware of it, whether or not they have actually read the book. Admittedly, Taleb has drawn a fair amount of criticism for his work. Often, the target has been his abrasive and self‐aggrandizing style of writing and the use of fictional characters (the Tonys and the Valerias). Critics also claim to have found more than a few inconsistencies in his web of ideas. I do not wish to dwell on such trivial matters here. Instead, I would like to point to a habit among takers of the Black Swan concept to render it synonymous with low‐probability high‐impact events (usually disastrous ones). We certainly did not need a risk philosopher, somebody might go on to say, to point out the existence of that. In this view, Taleb just popularized what we already knew.

      The main ambition of this book, however, is to place the Black Swan framework in a corporate context and explore its ramifications for business strategy. Taleb, motivated as he is by the grand sweep of history and civilization, and the philosophical underpinnings of randomness, does not take more than a fleeting interest in the firm as an institution. Yet, if we accept the premises of the Black Swan framework, we should ask what the implications are for how businesses are to be run. Businesses, after all, are stewards of a large part of humanity's resources, and innumerable people depend on them for their livelihood as well as the hope of making it big. Extreme uncertainty may deliver great risk but also holds out the promise of great opportunity.

      As it turns out, firms are peculiar entities in several ways. To begin with, they operate under a mandate to maximize value, which introduces a focus on cost minimization that hugely shapes the corporate attention span for extreme events. There are also interesting features like separation between ownership and control, limited liability and multiple layers of stakeholders with different viewpoints. All these features profoundly influence how we should process the fact that uncertainty is wild rather than benign, and this book is about exploring them. How are massive consequences to be understood when we take the vantage point of a firm? When is it justifiable to spend corporate resources in preparation for highly improbable catastrophes? When should we have a strategy for Black Swan events? When and how can we make wild uncertainty work for us rather than against?

      We start out, however, by recapping some of the core themes in the Black Swan framework (Chapter 1, ‘The Swans Revisited’). In this chapter, we take a fresh look at the question of what constitutes a Black Swan. We also revisit the issue of what kind of randomness we face as decision‐makers in the real world, as well as the crucial role of expectations. We establish the relative nature of Swans: players in the same industry can have very diverging expectations and are therefore likely to display different levels of preparation and vulnerability.

      In Chapter 3 (‘The Black Swan Problem’), we dive deeper into the question of how risk, and tail risk more specifically, relates to firm value. The risk of wipeout and strategy disruption provide economic arguments in favour of managing tail risk. Ultimately, though, we want to be able to demonstrate that managing

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