Taming The Unwieldy VUCA ...

VUCA after Taleb’s ‘Black Swans’ and Sornette’s ‘Dragon Kings’

V = Volatility – speed of change in the market

U = Uncertainty – uncertainty about the future

C = Complexity – myriad of factors, and their interrelationships

A = Ambiguity – difficulty in interpreting the situation

Note: VUCA is an acronym attributed to leadership theories by Warren Bennis and Burt Nanus, the US Military appropriated the term (source: Wikipedia)

Comments –

Everything is in continual flux of change – this should not be a surprise to you.

‘We both step and do not step in the same rivers. We are and are not’? Attributed to Heraclitus (530-470BC).

This is a truism that needs to be considered when constructing assumptions. The rationalist with linear predictions (forecasts) should also prepare for the unexpected. This leads to uncertainty about the future. There are problems with making predictions about the future based on historical data and events.

This is where Nassim Nicolas Taleb (‘Black Swans’) and Didier Sornette (‘Dragon Kings’) come into play – in the sphere of risk analysis. There are ‘unknown unknowns’ which are difficult, if not impossible, to anticipate.

Our modelling of the world is always lacking. There is simply too much to account for, too much information, too many objects and their interrelationships, in space and time. The humbling truth is we don’t have sufficient brain power to apprehend everything. This is the basis of complexity.

And even if we try to embrace the all, we’re likely to fall into the realm of confusion, where ambiguity and chaos rule.

So here’s an approach to taming the unwieldy VUCA (because it cannot be vanquished):

1.      Build a simple map of the territory – show various aspects like physical properties, functional and structural, etc

2.      Include entities (objects with features) and show their relations (where and how they interact) – these need to be simplified

3.      Show how entities move and interact in time – this is a process

4.      Outline your assumptions

5.      Look for points of greatest leverage – you can only find these by testing and tweaking with small, isolated changes

6.      Learn from what reality tells you, especially if it disagrees with your assumptions and map – modify the map as you go

7.      Be humble – recognise the limits of your knowledge about how things really are – reality is always stranger than our imagination

8.      Don’t assume that history is the only predictor of future events – it is only one of many factors