R&D Portfolio Management and the Black Swan
I recently read The Black Swan by Nassim Nicholas Taleb and found the book’s central tenets relevant to R&D portfolio management. I recommend you pick up a copy yourself, but until you do, I hope the following thoughts hit the mark for you as they did for me.
What is a “Black Swan?”
According to Taleb, a Black Swan is an event with three characteristics: 1) It has a low probability of occurrence; 2) It has remarkable (positive or negative) consequences; and 3) It creates an irresistible urge to retrospectively concoct a story explaining why the event happened and how it could easily have been predicted. The problem with Black Swans, says Taleb, is that they are far more common than those in the prediction business will admit, and that they have profound implications for the value of forecasting and sound decision making in a wide variety of disciplines.