This blog post was written by Howie Chan, Business Analyst at TechAlliance.
I recently read “the Black Swan” by Nassim Taleb and it opened my eyes to how I should perceive random events. Applying this to entrepreneurship, there is an interesting lesson in the Black Swan on how to tackle risk associated with launching your next product or app.
First off, the book has nothing to do with Natalie Portman or ballet. Instead, it references a historic observation-error where scientists assumed all swans were white – up until the first black swan was discovered. The sight of this black swan baffled scientists.
To deal with extremely random events, Taleb offers some words of wisdom. He suggests that we build robustness towards negative events while being prepared to take advantage of positive ones. We can relate these events back to entrepreneurship as either raving success or traumatic failure.
As an example, let’s take a look at Candy Crush Saga, a game created by King Digital, an estimated $7 billion company. The core elements of the puzzle game are not unique; anyone can spot similarities between Candy Crush and games like Bejeweled (originally released in 2001). Why didn’t Bejeweled become a $7 billion dollar company? Did the creators of Candy Crush know they would be successful?
There’s no accurate way of predicting an app’s success or failure. It’s a random event – a Black Swan. What resonates with users today could shift from candies to jewels, to birds that flap.
How do you make the next Candy Crush? One suggestion – launch multiple titles of the same game engine using different combinations of themes, colors and names.
The reusability of apps is a great example of ways to hedge against negative effects. By re-skinning and re-launching different titles, you’re essentially re-rolling the dice for a chance at a series of events that will lead your app to the top of the charts.
It isn’t clear how many times you need to re-roll before you ultimately succeed or fail. The idea of an optimal number of rolls would imply that a computable probability exists. Extreme events are completely random.
The Black Swan can be applied to many aspects of entrepreneurship and product design. Similar to motivational phrases like “If at first you don’t succeed, try, try again,” we stand to benefit the most from implementing iterative change to our designs and business models.