Black Swans, uncertainty and city government

Not as rare as you might think

So I’ve been reading The Black Swan by Nassim Nicholas Taleb because Chuck Marohn of Strong Towns has been saying good stuff about it – Taleb is the “Patron Saint of Strong Towns Thinking” and the author’s subsequent book Antifragile – both dealing with understanding and managing difficult-to-predict events – the so-called Black Swans. Since I’m impressed at how Strong Towns has put the conservative money issues together with the (supposedly) liberal smart growth ideas, I’m always interested in what Chuck recommends.

Unfortunately, most of the book reminds me of academic types who attempt to showcase their own intelligence and accomplishments by clever disdain; the cutting remarks are supposed to be funny and controversial, but are simply tiresome after the first chapter.  Slinging many disparate examples along with dismissive criticism tends to make me suspicious that the guy is working way way outside his area of expertise (he’s a quant but having dissed all the experts, he’d probably think that was a good thing). Perhaps I’ve just attended too many parties with too many academics.

Fortunately, the last bit (Chapter 13) is interesting and potentially useful (moral: this should have been a tidy article, not an entire book) so I’ve forgiven Chuck for wasting my time.

So, accepting these Black Swan ideas:

  1. Human beings tend to use induction to make predictions (this is very old news – see Hume and Kant) or, another way, confuse correlation with causation (done regularly whenever, say, coffee is correlated with longer or shorter life) or, another way, predict the future based on past performance.
  2. We deal with unanticipated events poorly, because they are (at least seemingly) anomalous, so we don’t know how to plan for them, explain them, or be able to accommodate them within our plans.
  3. We like certainty and are often willing to rely on explanatory models offering sure answers, even when the model explains only a narrow band of experience or depends on dubious assumptions.

In city planning and budgeting, what should we do to improve risk management, planning activities, and investment if black swans may swoop in at any moment?

  1. Take the risks on the low cost, but possibly high return projects; hedge all bets on the high cost, uncertain return projects.  If the return on investment is based on projections which rest on assumptions of growth rates and business models from the past extended years or decades into the future, be especially careful before spending public money.  Spending small amounts on projects which increase productivity, connectivity, quality of life, etc. can be a really good deal.
  2. Be ready for opportunities.  The numbers indicate relatively few large companies relocate so putting all the tax dollars into building the infrastructure in the hope the holy grail of a large manufacturing enterprise (based on projections of certain kinds of growth) to come to Northfield is unwise.  However, being ready for business by ensuring the regulatory tools are flexible, the processes efficient and the most cost effective infrastructure extensions have been planned is smart.
  3. Aim for broad, flexible success rather than pinpointedly precise solutions.  This is common sense of the cliche variety: don’t put all your eggs in any one basket, but plan for fuzziness and imprecision.
  4. “How we’ve always done it” is not a good justification for action or continued action.  In budget terms, I’ve been advocating for something beyond the “tinker with the entitlements” approach and really look at how we have developed land, budgets, and policies to see if we can make changes which will be sustainable in the long-term.

If Taleb and The Black Swan succeeds in shaking people up a bit so they ask more questions about how to make government more resilient, less dependent on models based on past performance, and better able to respond positively to change then it’s a good enough thing – those are the Strong Towns messages applied to land use, community and economic development, after all.  Not really patron saint material, however.