March 15, 2022

Risk: Black Swans Versus Gray Rhinos with Michele Wucker

by Hacker Valley Studio

Show Notes

Have you ever heard of the term, “Black Swans” or “Gray Rhinos”? Black Swan are events that we never saw coming, while Gray Rhinos are the things we see from a mile away. In this episode, author and strategist Michele Wucker explores the gray rhino and risk fingerprint metaphors and translates big picture trends in ways everyday folks can apply to their lives. 

Sponsor Links: A big thank you to our friends at PlexTrac and Axonius for sponsoring this episode!

Axonius, the first company to solve the cybersecurity asset management problem. Give your team's time back to work by checking out axonius.com/ 

PlexTrac, the proactive cybersecurity management platform, brings red and blue teams together for better collaboration and communication. Check them out at plextrac.com/hackervalley

 

Guest Bio:

Michele Wucker is a strategist and the author of four books including the global bestseller, THE GRAY RHINO: How to Recognize and Act on the Obvious Dangers We Ignore. The metaphor and principles from her book have moved markets, shaped financial policies, and made headlines around the world. It helped to frame the ignored warnings ahead of the COVID-19 pandemic and have even inspired the lyrics of the hit pandemic pop single, “Blue & Grey” by the mega-band BTS. Michele’s 2019 TED Talk has attracted over two million views. 

Additional Links:

Learn more about Michele’s research here.

Connect with Ron Eddings on LinkedIn and Twitter

Connect with Chris Cochran on LinkedIn and Twitter

Purchase a HVS t-shirt at our shop

Continue the conversation by joining our Discord

Check out  Hacker Valley Media and Hacker Valley Studio



Transcript

Who says tech can't be human?

It's a little bit deceptive because it's such a simple question. What's the big thing? What am I doing about it and how can I do it better?

Welcome to the Hacker Valley Studio podcast.

Ron Eddings:

Axonius has crossed the chasm, the first company to solve the cybersecurity asset management problem. Gartner has recognized cyber asset attack surface management chasm as a category in their hype cycle for network security 2021 report. Axonius gives its customers a comprehensive, always up to date asset inventory, helps uncover security gaps, and automates as much of the manual remediation as you want. Take a look at Axonius and give your team's time back to work on the high value cyber initiatives they were trained to do.

Chris Cochran:

What's going on, everybody? You are in the Hacker Valley studio with your host, Ron and Chris.

Ron Eddings

Yes, sir.

Chris Cochran:

Welcome back to the show.

Ron Eddings:

Glad to be back again. Our guest this episode is Michelle Wucker. Michelle is the founder of Gray Rhino and Company, where her team helps decision makers to develop strategies clear from under address risks. Michelle is also the author of the Gray Rhino and a new book that she's titled You are What You Risk. A lot of elements and risk. I'm assuming that's going to be introduced this episode. Michelle, welcome to the podcast.

Michele Wucker:

Delighted to be here with you today.

Chris Cochran:

Michele, I watched your Ted Talk, which has at this point received millions of views, and it's really insightful and powerful when you're thinking about risk, seeing the things that are right in front of you. But for the folks that don't know who you are just yet, would love to hear a little bit about your background and what you're doing today.

Michele Wucker:

Sure. My background is first as a financial journalist and then as a think tank executive. Lots of work in financial crisis and economic policy and turnarounds. I took all of that, brought it together, starting with the question of why Argentina sunk into a terrible debt crisis and Greece had a similar challenge but actually got their act together.

Michele Wucker:

I started asking why do some people see a big, scary thing coming at them and actually deal with it and others don't. That's what led to the Gray Rhino, the big two ton thing with a horn coming at you. That's the big and obvious and dangerous and dynamic. It's gray because as you may have learned like I did in grade school, there are two species of rhinos called black and white, and neither one of them is that color. They're actually both gray.

Michele Wucker:

That is an important part of the metaphor for me because a lot of us assume that if there's something obvious, then well, of course, we're dealing with it or somebody's dealing with it so we don't need to think about it. That becomes very, very dangerous because we often take for granted our ability to deal with the gray rhinos coming at us. I came up with the image as a way to create an emotional connection and help people to think about something abstract and get them to take a fresh look at all of the big, obvious problems they know they have and think about how well they're reacting and why and what they could do better.

Ron Eddings:

This is a perfect analogy for things in the world. This is even really great for folks in technology and cybersecurity because we deal with gray rhinos all the time. But every once in a while, the news puts out the information about this black swan like you talk about in your Ted Talk. What is the difference between the black swan and the gray rhino?

Michele Wucker:

The black swan is a concept that came out right at the beginning of the financial crisis. It came out in 2007 and of course, the financial crisis really blew up in 2008. The idea is that a bunch of Europeans only ever saw white swans and so they went to Australia and they saw black swans and they freaked out. They said, "We never even thought of this." A black swan is the thing that's so unforeseeable and unimaginable that you can't get your head around it. It's really an argument for broadening your imagination, but also for helping you to realize that the world's a lot more uncertain than you realize it is.

Michele Wucker:

Because the subprime crisis and all of the dominoes that fell after it in the financial markets were a surprise to a lot of people, the concept really resonated, but it got misused as a cop out. People would say, "Oh, black swan. Nobody could have seen coming." When in fact, a lot of us did. I had an apartment on the upper west side of Manhattan that nearly doubled in value in four years. It was a first apartment and I sold it. It was pretty clear to me that this was not going to last.

Michele Wucker:

The other part about the black swan is I think people were really reaching for a way to anticipate things. They would say, "What's the next black swan?" When by definition, you can't predict what the next black swan is. I often say that behind every black swan is a crash of gray rhinos, a crash being the zoologically correct word for a herd. Part of my point is that if you don't deal with the obvious things that you know need dealing with, it's much more likely that a bunch of these obvious things are going to fall apart and make each other worse. They'll all fall apart at the same time and that certainly is some of what happened in 2008.

Chris Cochran:

This analogy of black swans and gray rhinos almost reminds me of when people say addressing the elephant in the room. A lot of the times you'll say that, "Hey, this black Swan is... We wouldn't know about it. It's unforeseen, unavoidable." But what you're describing is it probably isn't and it's been there for a while and it's a big moving object. What are some of these examples of gray rhinos that you've experienced in your work? What is a story behind finding a gray rhino that's right in front of us and also avoiding it.

Michele Wucker:

Sure. I'm so glad that you picked up on this important part about it, that it's moving. Of course, the elephant in the room is also a very large gray thing, but it normalizes doing and saying nothing. It's something that's embarrassing that everybody knows about and by definition, they don't talk about it. That's not what I want to do. I want to get people to realize that even when you're talking about something, you might not be dealing with it very well. The concept when I first started thinking about it, I had dinner with all my friends and asked them, "What's an obvious problem that either got dealt with really well or didn't?" Climate change, huge one. There are a lot of people out there talking and doing and trying to solve the problem, but there also are a lot of people who aren't.

Michele Wucker:

Financial crisis obviously is where the concept came from, but it's much more broadly applied, not just in policy or finance, but to business strategy, to things that are very common like say succession planning or industry disruption, particularly digital technologies or safety issues. Then what really surprised me was that as I was on book tour all around the world for the Gray Rhino, at almost every single event, someone would say, "How do I apply this to my personal life?" I've actually used it with friends and family. A friend who was years behind on turning in his tax returns. I'm like, "Hey, didn't you read my book?" He actually went and sat with the accountant and got a couple of years. The rest of them are still waiting, but it was a start or, "What do you mean? You've got all these respiratory problems. Why didn't you go to the ENT doctor? Didn't you read my book?"

Michele Wucker:

In a weird way, it often would work. It was a real surprise because I don't really write about self-help things. But I realized very quickly that if you're the kind of person who doesn't pay attention to things in your day to day life, you're also much more likely to let things go in your professional life. Even if you're focused on a professional problem, understanding how well you deal with the gray rhinos coming at you or not is really, really important because there's some parts you can't change. But there are other parts of your life that you can like the people you surround you with, the habits that you have, your environment, even what you eat for lunch or the temperature in the room or the tempo of the music can affect how likely you are to pay attention to a big problem and to do something about it.

Ron Eddings:

What is the mechanism behind that? Because it almost sounds like there's a subconscious wish that if you don't give voice to a problem, if you don't act on a problem, then maybe it would just go away and get swept under the rug. Why do people do that? Why do people stare at big problems and do nothing?

Michele Wucker:

That's a great question, and it's important for people to realize that they shouldn't be ashamed that they do this. It's a supernatural biological response, that sometimes when something is so big, if you really let yourself absorb the entirety of it, you can get paralyzed or collapse because it's too much. Our brains are set up to let information in bits at a time. A death in the family or death of a friend, people respond differently, but I'm the kind who's really numb at the beginning. I don't cry until I've prepared myself and can let that go. We do absorb things slowly.

Michele Wucker:

Also, if we don't feel we have the power to fix a situation, then it doesn't do a whole lot of good to freak out about it because you've got all sorts of things that you do feel you can deal with, that your attention is better used for. But often, we don't realize how much power we have to deal with situations. There are lots and lots of psychological blocks on individuals and then also in groups. Nobody wants to be the one who is sitting around the table and says, "Hey, watch out for this," because nobody wants to hear it. These problems are tough for each one of us, but then when you're together with a bunch of people, particularly if everybody's very similar to you, you are much less likely to be able to stand up and articulate the big thing that's coming at you, much less do something about it.

Chris Cochran:

It almost sounds like sometimes these things are hidden in plain sight, but other times we try to turn a blind eye to addressing these gray rhinos. I would love to hear what are some of the most common situations. I know that you're helping a lot of entrepreneurs and businesses avoid risks, but you've also mentioned that it can be used for your personal life. When was the last time you experienced one of these gray rhinos? What was the workflow here? How'd you find it and what'd you do about it and how to change things ultimately?

Michele Wucker:

It's funny. People tend to think about this. They really want to focus on the "It's right in front of you, but you can't really see it and it's kind of mysterious." It's very simple. Ask yourself. Sometimes close your eyes. Picture a giant gray rhino coming at you and then think, "Okay, what are the big problems in my life that I need to deal with?" Just that moment of looking at the really obvious things is so simple but so powerful. I ask people to ask themselves, "What's my gray rhino?"

Michele Wucker:

Whether it's personal, whether it's for your business, whether it's in your community or globally, it's "What's the big thing that I'm worried about?" That's really all you need to do to see it is just focus a little bit and say it out loud. That lets you think about the next step, which is, "Okay, how am I dealing with this? Why? Who are the other people who need to deal with this? How are they dealing with this and why and how can we do better?"

Michele Wucker:

When I delved in deeper to why people don't deal with things, I realized that there are different stages of reactions. Very much like Elisabeth Kübler-Ross Five Stages of Grief, starting with denial and going to acceptance. This starts with denial and goes to action. There are different obstacles at each one of these five stages and therefore different strategies that you can adopt to move closer to action. A lot of risk analysis focuses on making lists of all these risks and then maybe do a heat map of how probable it is and how impactful it's going to be and trying to guesstimate the probabilities. But most of these exercises don't put enough emphasis on the response, "What am I doing about it and how is that response affecting the likelihood that this is going to go really far south really fast?" It's a very, very important part of risk analysis, whether professionally or personally, and it's a little bit deceptive because it's such a simple question. "What's the big thing? What am I doing about it, and how can I do it better?"

Ron Eddings:

The complexity of cloud infrastructure means every organization's security challenges are unique. Whether your challenge is threat hunting, policy management, cloud workload protection or all of the above, Uptycs helps you quickly identify and eliminate observability gaps in your security program. That's Uptycs, analytics for the modern attack surface, observability for the modern defender. Check out Uptycs by visiting uptycs.com. That's Uptycs.com. Thank you, Uptycs, for sponsoring this episode.

Chris Cochran:

I just watched a movie over the break called, Don't Look Up. I don't know if you've seen it, but it sounds-

Michele Wucker:

I am dying to watch that. I've heard so much about it. The funny thing is I was just involved in a conference recently where we talked about asteroids and predicting rare events and what are you going to do about it? It was very interesting. An asteroid expert told us that about 60% of the asteroids out there are unlikely to hit soon, but the rest of them, they have absolutely no idea at all. It's a mix of, "Okay, there's some in the future that we can think about. We're going to try these experiments of shooting things into space to try to break them up." But we have no idea about which bigger ones are going to hit us. The truth is a really, really big one, we don't have the capacity to deal with. In that case, what's the point of worrying about it if there's nothing you can do about it?

Chris Cochran:

Right? If you watch that movie, I'd be interested. Definitely message me after you watch it, because I feel like they took your book and they turned it on its head and made a satire of it. Because it sounds like all of the same things that you're talking about with all these other gray rhinos, this was a huge gray rhino that a lot of people saw coming, but a lot of folks turned a blind eye to it. They were a little delusional and maybe even trying to profit off it. I don't want to give a lot of it away, but let's talk a little bit about the second part to this. You wrote Gray Rhinos, which is the first part, but you have an additional book. Tell us a little bit about what a risk fingerprint is for the average individual.

Michele Wucker:

Yeah. The new book is You Are What You Risk. It came out very much as a sequel to the Gray Rhino. The Gray Rhino focuses a lot more at the event that is unfolding and your responses at that point. You Are What You Risk focuses on why each one of us responds the way that we do to gray rhinos. Some people are quite good at it and other people, not so much. They tend to get flattened. There are three sets of influences on these, which go together to create what I call a risk fingerprint, which is very much like an actual fingerprint is a biometric identifier. My point is that the risks you take tell the world who you are, what's important to you, what you're willing to lose, how you make your risk choices, whether it's impulsive or methodical.

Michele Wucker:

By understanding all of the different elements of your risk fingerprint, you can become more self aware, make better decisions and to take smarter risks with hopefully better outcomes. Both your physical fingerprint and your risk fingerprint have three parts. The first is innate. It's genetic. It's the whirls and arches and loops on your finger are something that your genetics create. It's why it's such a good marker because it's unique to you and your innate personality is very much like that. I work with a tool called the risk type compass, which draws from psychometric analysis, which is controversial. I don't really have a horse of that race. I think all of these tests are useful as long as you understand their limitations. That looks at how cautious or how impulsive you are, how methodical or impulsive you are in dealing with something and how calm or how anxious. Those elements combine into eight different risk types, which describe the way that you respond. Those are things that you can't change. That's the whirls and the arches and the loops, is your risk type.

Michele Wucker:

The second part is your experiences, your upbringing, the risks that you've taken that have worked out, the ones that didn't work out so well, the unexpected shocks and surprises and all of these elements, which also are external to you. You couldn't really choose them. Although going forward, you have some influence on the experiences that you make yourself vulnerable to. But that's like if you cut your finger or if you burn your finger on a flame, you'll have a scar or an imprint on your physical fingerprint and those experiences indelibly change your risk fingerprint.

Michele Wucker:

The third part is what you can think of as whether you do manual labor and have callouses or use lots of nice, soft smelling lotion and have very, very soft pliable hands or whether you spend too much time in the bathtub and so on. That's your environment and your habits and your processes. In terms of risk fingerprints, that's the people you surround yourself with. It's whether you look for the right information that will help you to make good decisions. But it also, bizarrely, is your physical environment. There are a lot of research showing that if it's cold, you're likely to be more risk seeking.

Michele Wucker:

If you have spicy food for lunch, whether you like it or not, you are going to be more risk seeking and more risk tolerant for a few hours after lunch. The tempo of the music you're listening to, all of these things affect the stress chemicals in your body and your heart rate and all of these physical indicators that also affect your risk choices. Self-awareness, to me, is the most important of all of the elements in this third group of influences, is that once you are aware of what makes you more comfortable or less comfortable taking risks, if you are a very impulsive person who tends to leap before you look, or if you go on and on and on and have to ask many people and you wait so long that you can't even make a decision, those are things that you can offset by picking the right people around you, setting up the right processes.

Michele Wucker:

If you're going to send that email telling someone where they can go have a habit to save it and then you'll send it to your best friend and delete it, the things that you can do to change how you're making risk decisions or other people. For example, if you're asking your boss for a raise and you're totally stressed about it, go to that Thai restaurant down the street, order the spiciest thing on the menu, ask them to crank the temperature down low and to put on some upbeat music. That'll get you all set to take this risk of asking for the raise.

Ron Eddings:

Love it. I'm definitely going to use those techniques to really motivate myself when I need to take risks. It also makes me think when other people are taking risks. I've been around a lot of risk takers. I'm sure we all have been. Some people, I don't like the risks that they take. I can't relate to it. I can't understand it, but I know that you've been introducing another term risk empathy. I would love to hear what goes into that and what exactly is it?

Michele Wucker:

Risk empathy starts with understanding your own risk fingerprint and then seeking to understand why other people have the risk fingerprints that they do. This can start a conversation that helps you to understand their motivations, what they care about and what makes them more or less comfortable taking a risk that you want them to take. It can also help to ease conflicts. My favorite example is you're on a business trip and tight expense account, you've got to share the cab to the airport with your business colleague. One of you likes to leave lots of time to get to the gate and the other one likes to rush up to the gate and see how close you can come to missing the airplane. What are you going to do? How are the two of you going to decide what time to get to the airport?

Michele Wucker:

When you look at that through your different risk fingerprints, it becomes not just, "Oh, my coworker is an idiot," but you've got a basis for understanding why the other person is making the choice that they are and seeing if you can come up with a choice that works better for both of you. This sort of thinking is so powerful in relationships, in teams, in investment decisions. I spoke with and interviewed in the book, he's quoted, a trading coach who talked about one of the teams that he worked with where one of the guys was this super aggressive leap-before-you-look type and the other person was more methodical. By working together, by applying each of their strengths and offsetting their weaknesses, that's how they became one of the very best performing teams.

Michele Wucker:

There's some other cases where... Like my family when we're trying to figure out what time to go to church. My parents ended up taking two different cars because they just couldn't agree on it. Sometimes you just got to agree to disagree. But it's hugely important also if you're dealing with a client as a financial advisor, as a technical advisor, cyber security advisor, understanding what's going to make your client take a risk, pursue an opportunity or avoid the risks that you take by ignoring risk signals, this passive risk, the risk by doing nothing.

Michele Wucker:

Understanding that about your client or about your teammates or your investors is so powerful. It's powerful for marketing in understanding how to sell your products, understanding the safety standards you need. Volvo did a great job with this. If you're selling your products in another country, for example, you need to know that we all think that products from other countries are much more likely to be less safe than the ones from our own country. Unless it's somebody like Volvo, who's done such a great job with their safety image or Qantas Airlines.

Chris Cochran:

It's so interesting that you're talking about this, this dynamic between almost two extremes when you're talking about the person that wants to push it to the last minute. Maybe they don't want to risk wasting their time so that's why they go to the airport so late. The person that wants to go early is they don't want to risk missing out on money loss if they missed the flight. But if you bring them together and they're able to have this song and dance and find the balance, you almost get the best of both worlds because you don't waste each other's time, but then you also don't miss the flight ultimately.

Chris Cochran:

I think about this in terms of my business partner and best friend, Ron Eddings. We have a lot that's similar between the two of us, but there's also a lot that's different. He's very methodical. He's very detail oriented where I'm not. I'm more visionary, big picture, big thing. But we balance each other out because he pushes me to be a little bit more methodical and be a little bit more explanatory around the visions that I have and vice versa. I ask him to bring all of the ingenuity and innovation in his mind out to the forefront. Is this really where the benefits come from, from having this song and dance about risk or is it something else?

Michele Wucker:

It's such an important conversation to have. There's a couple of business partners, Barb and Mark, who I interviewed in the book, and it was very, very similar. If one person can help to create a sense of security, then it allows the other person to do the big dreaming, to come up with the big ideas that can really move you forward. It's also worth thinking about if you've got a team of all lawyers or all engineers, you might not be making the best risk decisions because a lot of people tend to cluster by career depending on their risk type in the first place. I had a very interesting conversation with a guy in Chicago, a lawyer by training, who at one point was both chief council and head of marketing, which are two completely different kinds of brains. We joked about him having perhaps a split personality to deal with the different kinds of risk dynamics inherent to each position.

Michele Wucker:

I think it's important in recruiting, in assigning teams, in promoting people to understand how they deal with risk. One more thing about the going to the airport is there are two parts of risk. There's one, how sensitive you are to the risk and then there's how risky you think that it is. You can be really stressed about risk, but you might judge a particular risk to be much riskier or less. Those go together into your behaviors.

Michele Wucker:

What's interesting about the person who wants to get to the gate at the last minute is it's possible that they are just as stressed about missing the plane as the person who responds by getting their super early, but it's their way of asserting control over the situation. There's some research about risk perceptions that says that the more control you feel over a situation, the more risk you're willing to take, the more risk that you are comfortable with. It's quite possible that these two business colleagues, even though they've got very different approaches, both are really freaked out about possibly losing the plane. Understanding the motivations, that part of the risk fingerprint is really, really important in making any decisions in cooperating and collaborating.

Ron Eddings:

Michelle, I'm sure there's someone that's listening right now that's hearing this and everything is making sense, but there's still a little bit of concern about the risks in their work, the risks in life, the risk in the world, there's always so much going on. What is that one piece of advice you would have for someone to step into these decisions, these situations with more confidence using some of the knowledge that you've gleaned over your entire career?

Michele Wucker:

I think the most important thing is to understand what's most important to you, what you are not willing to risk. I think back to when I was in my 20s and I from early on had a big workaholic problem. I pushed really, really hard, too hard to the point of getting myself sick. I was diagnosed with chronic fatigue syndrome and had to take a six-week medical leave from work. When I was coming back... Well, certainly when I was gone, I did a lot of reflecting and I got back to my job, which was super interesting and challenging, but I had realized that it wasn't what I was "supposed to be doing." That it wasn't the best use of my talents.

Michele Wucker:

I could have gone back to the financially stable job or I could quit and write my first book. I had this feeling that if I went back to the job that I wasn't supposed to be in, I would get sick again. Even though my career and professional life was very important to me, at that moment, my health was more important because if I didn't pay attention to that, then I wouldn't have the health or the job. I think a lot of people have been making that kind of calculus over the past year. We're seeing record numbers of people leaving their jobs. I just read yesterday that something like 47 or 48% of Americans were thinking about leaving their jobs in the past few months. Every month, we've got another record number of people leaving.

Some people say, "Oh, well, they're willing to take more risks because of the pandemic." That goes back to risk perception and priorities. My thought is they've reorganized their priorities of what they're willing to lose or risk or not. People are really reaching out to this sense of purpose and satisfaction and making a contribution and being treated and paid what you're worth. That's why they're making some of these changes. In many of these cases, it's a really good risk for them personally and for the economy because they're going and doing something that's going to be a lot more productive.

Michele Wucker:

It's not that they are doing something riskier by quitting their jobs. I think that they've realized in many cases that the bigger risk is to stay in a job that's not a good fit. That really goes down to this central point of what you're willing to lose, what you're willing to risk is basically who you are. That decision about what you're going to do with your life tells everyone who you are just as much as your fingerprint on that glass at the airport with global entry tells people who you are.

Ron Eddings:

Wow. That is super insightful. Michelle, thank you so much for taking the time to hop on the mics with us. For the folks that want to stay up to date with you, your research, your books and all the great things that you have going on in your world, what are the best ways that people can do that?

Michele Wucker:

Please come visit my website, thegrayrhino.com. Gray with an A, although the E will get you there too. You can find me on LinkedIn, Michelle Wucker, or on Twitter @Wucker, and I love meeting new people and engaging on social media so really encourage all of you to connect if this resonates with you.

Chris Cochran:

Yes, we would highly recommend everyone to connect. Check out the book. We'll also drop the link to the resources that Michelle just listed in the show notes for everyone to stay up to date with all the great things he's working on. With that, we'll see everyone next time.

Ron Eddings:

If you found value in this content, it would mean the world to us if you shared it on social media, sent it to a friend or talked about it over coffee.

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