Xevents and Uncertainty
Xevents are shocks, extreme events that change our environment, such as the fall of the Berlin Wall, the financial meltdown of 2008, and the outbreak of the swine flu pandemic.
Surprises aren’t so surprising anymore
The increasing complexity of interconnected global systems is changing the nature of shocks in our society. Established trends can be challenged almost overnight causing previously successful policies and strategies to lose their applicability and traditional planning methods to fail. Rules of game change forever.
But the very interconnectivity and global information flows that appear to increase the probability of extreme events (or xevents, for short) also generate new types of signals that may be read to gain insight into upcoming “attractions”. An opportunity now exists for developing new tools and methods for anticipation, prediction and planning. Read more (Manifesto)
Distribution Graph – Fat Tail
What Are X-Events?
Events that are: rare, surprising, and with large social impact
Examples from Nature: Earthquakes, hurricanes, asteroid impacts, ice age
Examples from Human Causes: Pandemic, nuclear holocaust, collapse of power grid
How to deal with xevents?
Global system is full of surprises and sudden shifts in well know trends. Decision makers can apply two different main strategies in this situation. The decision maker may invest in an anticipation system and try to detect early signs of these risks as early as possible. Or decision makers can surrender to increasing uncertainties and invest in resilience. The former strategy is the right one for risks that we have identified already, the latter is the only way to be prepared for the true surprises; extreme events that have a low perceived probability but potentially high impact. The systemic nature of both of the global environment and the global social system, generate surprises that you cannot manage with traditional risk management methods.
We have identified in our projects some generic features that increase resilience of a national economy or an organizations.
How to plan for xevents?
The future will be driven mainly by megatrends and trends, so use the most of the available resources (time or money) for analysis of the trends. BUT in order to be prepared to deal with sudden surprises (discontinuities of trends) we advise you to dedicate at least 20% of the resources for planning for uncertainty.
There are three ways to go beyond trends and megatrends.
- Challenge the basic assumptions of existing strategies with game changers (What if the price of energy is only 1/10 of the current price? What if western economies fall into 15-years of stagnation?).
- Use a systematic process to study uncertainties. Some examples you will find here.. Read More
- Target to concrete actions, instead of abstract elaborations, the aim of the process is to help decision makers, not to run an interesting discussion.
During the last years we have analyzed quite a number of potential extreme events and their potential implications.
What happens if Internet is collapsing in Finland Read More?
What happens to the Food and Drink sector of Scotland if a set of game changers attack. Read More?
Theory of surprise
What we actually see is always a combination of context and chance. The context sets the possibilities for what could theoretically occur, while the chance component, the trigger, fixes which of the possibilities is actually realized. Since by definition a “random” trigger has no pattern and thus cannot be predicted, a theory of surprise must focus on the context. In general, social processes follow the steps outlined in the following diagram:
Here we see Trends coming to an end via the process of complexity overload/mismatch in the interacting social systems. A random catalyst then triggers an extreme event (“X-event”) that leads to short-term social disruption and destruction. That destruction then opens up new “eco-niches” for resilient organizations to exploit in establishing a new trend and then process of rebirth takes place establishing its own trend. At this point, the cycle begins again.
A proper scientific theory of surprise would entail a conceptual paradigm for each of the boxes and arrows in this diagram, together with new methodologies for forecasting and understanding the flow from one trend to its successor.