How to Make Better Decisions by Understanding the Gray Rhino and The New Art and Science of Navigating an Uncertain World with Michele Wucker | Partnering Leadership Global Thought Leader

Mahan Tavakoli:

Welcome to Partnering Leadership. I am really excited this week to be welcoming Michele Wucker. Michele is author of several books, including The Gray Rhino: How to Recognize and Act on the Obvious Dangers We Ignore, and most recently, she's written You Are What You Risk: The New Art and Science of Navigating an Uncertain World.

I absolutely love Michele's thinking and believe her kind of thinking and perspective is really important for us as we look to navigate what we'll continue to be a very uncertain world ahead. There are frameworks, there are types of thinking that apply better in a world that we are experiencing now and will continue to experience, which is why I've enjoyed Michele's thinking and really enjoyed the conversation and I'm sure you will, too. 

In addition to that, I love hearing from you. Keep your comments coming, mahan@mahantavakoli.com. There's a microphone icon on PartneringLeadership.com, really enjoy those voice messages. Don't forget to follow the podcast. And finally, those of you that enjoy these on Apple, leave a rating and review when you get a chance, that will help more people find and benefit from the conversations. 

Now, here is my conversation with Michele Wucker.

Mahan Tavakoli: 

Michele Wucker, welcome to Partnering Leadership. I am thrilled to have you in this conversation with me.

Michele Wucker: 

I'm thrilled to be here, so that makes two of us.

Mahan Tavakoli: 

Michele, I loved The Gray Rhino, even before the pandemic when I read it, it resonated differently afterwards. And I really enjoyed You Are What You Risk and can't wait to learn a little bit more from you and share that with the Partnering Leadership community. But first, I would love to know whereabouts you grew up and how your upbringing impacted who you became, Michele?

Michele Wucker: 

Well, we moved quite a bit. And I think that had a lot to do with becoming better at dealing with uncertainty and dealing with all sorts of different people and places. I was born in Kansas City, Missouri. My dad was teaching at a school there and when I was eight, we moved to Racine, Wisconsin to be closer to my relatives who were in the Milwaukee area.

And then when I was 12, this was kind of traumatic. We moved to Waco, Texas, and of course fourth-graders in Waco and you know where they go with that. This was even before the Branch Davidians. So I got there, the day before the first day of school and we drove down, we had our cats in the carriers and a station wagon full of kids and stuff, our furniture wasn't there, we slept in cots.

And we go to school, and coming from Wisconsin to Texas where the accents are a little different, I couldn't understand a word the teachers were saying, and I came home from the first day of school in tears, it's just all this, you know, "ma'am", "sir", "y'all." I didn't know what to do with that. 

So I finished high school there, went to college in Houston at Rice, moved to the Dominican Republic for a year after college, and eventually, moved back to Wisconsin the same time that my family did. Lots and lots of family roots there, which I moved back to the Midwest recently after 23 years in New York City and realized I'm a lot more Midwestern than I ever thought I was.

So I got a little bit of a blend of a lot of places and have spent time living in Europe, in Latin America. So I'm kind of a little bit of everywhere. I never know what to say when people ask where I grew up, I'm like, um, tough question.

Mahan Tavakoli: 

Having grown up in all of those different environments impacted you and in You Are What You Risk, you talk about in essence, the fingerprint or the profile of risk that each individual has. I wonder how this upbringing impacted your perception of risk?

Michele Wucker: 

Well, it's funny. I didn't really start thinking explicitly about risk until the last several years, but one of the things that strikes me is it's not just my own upbringing but generations. When I was in junior high and high school, it was this idea, if you're smart, you're a doctor or you're a lawyer or business, but that was this big vague thing, and you sort of did what was expected of you. 

And I had that experience as an over-achieving kid who graduated high school when I was 16, so I know it wasn't that way for everybody, but the risks at that time were more like not doing what everybody expects you to do, and you weren't encouraged to do the sort of creative thinking about what you want to do and what you want to be.

I had decided that I wanted to be an author at some point, so that kind of worked out okay. But this process was really weird because I was a candy striper, a summer volunteer, at a Veterans Administration Hospital in Waco, Texas, which is a psychiatric hospital. And was very, very interested in psychology part of that, working with some of the patients.

And so I decided, I said, I want to be part of this. But there was this hierarchy, it's like the M.D. Psychiatrist at the top, and then there was the psychologist who I was working with in the middle, and then there were the social workers who everybody kicked around and I was like, okay, I'm going to be the doctor. 

But hadn't really thought through, this is a really big risk that in hindsight, makes me laugh. I pass out when I see blood and I was planning to go, I started college as pre-med and I was planning to go to medical school. So I was like, I really wasn't thinking about risks pretty seriously when I was growing up.

Mahan Tavakoli: 

That's a wonderful way of putting it though, because we all have to take that into consideration when we are assessing risk. How did you come up with the concept of Gray Rhino?

Michele Wucker: 

I had started my career as a financial journalist and was writing about Argentina as it was leading up to its financial collapse, 2000, 2001. And lots of people saw that coming. There was a proposal to do a preemptive restructuring, to write down some of the debt to avoid the chaos that happened. Nobody followed it. 

In fact, a friend of mine was writing a lot about it for the wires and was getting practically death threats for saying what everybody knew but didn't want to say in public. From there, I went to writing books and into the think tank world. And so in 2011, I was running a think tank but still thinking a lot about these debt issues and saw Greece going through something very, very similar.

And so I wrote a paper saying, Hey, Greece learned from Argentina. Don't do what Argentina did and miss your chance to avoid chaos. And at the time, the Euro hung in the balance. And that got picked up by CNBC and other places, it got a lot of attention. It was one of the early calls for preemptive restructuring in Greece.

The next spring, 2012, Greece and its creditors came to an agreement and it wasn't easy but it would have been a lot worse if they didn't come to an agreement. And about that time, I was personally thinking about, I'd been running an organization for a while at like a level of intensity and work that wasn't sustainable and I hadn't been writing. 

And the thing that I loved about think tanks was helping younger journalists and writers and thinkers to learn all this stuff I wish someone had told me that I'd had to figure out myself. And I thought I can't do that if I'm not writing, and I was too burned out to write. So I said, I'm going to write again. 

And this was the question that occurred to me, it was like, why did Greece and Argentina both see a big, scary thing coming at them? That's where the horn of the rhinoceros’ image came from. And one of them did something, and the other one didn't. What makes the difference? So that was the central question. 

And the rhino image popped into my head because I was trying to find a way to talk about this question in a much bigger way that didn't involve geeky, sovereign credit risk questions. And 'cause I knew it was applicable to all sorts of corporate and policy questions. And after the gray rhino came out, I found out that people were using it for their personal lives, even though it was a policy and business book.

And so this rhino image was clear. And I was in my office with a friend, a corporate lawyer, talking about it and he made a sort of a joke about that black swan, the image that came up during the great financial crisis of the thing that's so improbable, unforeseeable, unimaginable, it doesn't even come into your head.

So he made a joke about, "Oh, you could call it a black rhino." And I went to the zoo when I was in grade school and I thought, wait, there is such thing as a black rhino but isn't there also a white rhino? Let me go to Wikipedia because I don't know. And that's when I found this strange fact that black rhinos are gray, white rhinos are gray, but do we call them gray? No. 

And so it seemed to me to be a great metaphor for just how much more likely we are than we want to admit to ignore obvious things, but to say we're not condemned to do it. A gray rhino is more likely than you think to be ignored, but it's not by definition, ignored. That's the elephant in the room that normalizes it. 

And I was saying, no, this is something that's coming at you. It's giving you a choice. You can get trampled, you can get out of the way, or you can harness its strength for something good. So that was summer of 2012, I introduced the concept in January of 2013 at the World Economic Forum in Davos, and the book came out in spring of 2016.

Mahan Tavakoli: 

And what you talk about, Michele, I think is absolutely critical both on a societal level, which we will touch on, and also for leaders of organizations, in that one of the frustrations I have is I love Nassim Taleb's writing, I love Black Swan. A lot of things are attributed to black swans because then therefore we can't control it, right? It's a black swan. Part of the point that you make brilliantly in Gray Rhino is that there are threats we can see coming, and there are things we can do about them, including for example, on a societal level, what we just have been facing over with the pandemic.

Michele Wucker: 

Yeah, absolutely. And, Taleb himself wrote about the possibility of a pandemic in the Black Swan. And I certainly don't think he intended the concept to be as badly misused as it was. I think that it urged people to open their imaginations, to think about resilience in broader ways, but if you can't see the outlines of something, it's really, really, really hard to prepare for it. 

And I think that a lot of people were using black swans in this whole sort of armchair black swan spotting industry of people saying, "The next black swan is..." when that contradicts the definition, like by definition, you can't see what it is. So it's already not a black swan if you can see it. 

But I think the reason that people misused it in that way was because we needed a concept like the gray rhino, and some people say the gray rhino was a reaction to the black swan, but the truth is that it came up separately, and the color connection was an accident.  

The metaphor means something very, very different and it's not derivative. But the truth is that when people come out and say, "Oh, this is a black swan, nobody could have seen it coming." You need a rejoinder, you need to say "no", a lot of people could have and did, but I really want people to use the gray rhino to look ahead. 

It drives me a little baddy sometimes when people say, "Was that a black swan or a gray rhino?" And I'm like, look in front of you, because people can only talk about black swans in hindsight because you can't see them ahead. So I've been trying to wrestle with this a little bit. You know what I'm saying? Don't say "was", " is" what's in front of us.

Mahan Tavakoli: 

I think they are two brilliant complimentary concepts in that from a Black Swan perspective, you want systems to become more resilient because there could be black swans, things that are unforeseen. With Gray Rhino, it's more the fact that you need to be aware and keep your ear to the signals to be able to see potential gray rhinos coming.

It is not an unexpected event, as you've also mentioned, whether it was Bill Gates talking about the potential for a pandemic and lots of other people before this. So with respect to Gray Rhino, I just want everyone to understand that there are signals out there that can be picked up, which is very different than a Black Swan, which is totally unforeseen events.

Michele Wucker: 

Absolutely. And one of the things people tell me is they say, "Well yeah, the stock market's going to go down, but you can't predict exactly how many points on exactly which day, in which hour, and which minute. So you can't possibly predict that." And there is a lot of, if you will, gray area in gray rhino spotting. 

It's like, do you know exactly when the next hurricane is going to hit and how intense it's going to be because climate change has made it more intense? No, I mean, actually to be a great rhino spotter, you've got to be comfortable with a certain amount of uncertainty, and also with this feedback loop that risk  management in some ways is like Schrodinger's cat. 

That the very act of observing it changes the status of the situation. And so the very act of observing a risk and acknowledging it actually makes you more powerful and more likely to be able to head it off and actually decreases the possibility of the risk. 

And that becomes very hard for humans because we don't deal well with counterfactuals. We don't reward people for calling out a risk, and doing something, and the worst case scenario not happening. Instead, we call them Cassandra's, we're like, "Oh, you said that was going to happen and it didn't. So, booboo on you." And that's exactly the wrong thing that we need to be doing. We need to be looking at highly probable situations and threats and looking at the people who are doing something about it, and celebrating them.

Mahan Tavakoli: 

And that's actually what I wonder about, Michele, is that organizations, whether in planning or spending, focusing on things to avoid aren't celebrated. A lot of times, leaders are recognized for turning around messy situations. They are not celebrated for avoiding them. 

So how can organizations and organizational leaders think about these gray rhinos and build in a combination of incentive structures and thinking structures to make sure that the organization is able to see some of the gray rhinos and then adjust accordingly? 

Michele Wucker: 

There's so many great tools. I think scenario planning is a fantastic one, making sure that you're including the worst case scenario. I often encourage people to do a pre-mortem. Imagine your company has gone bankrupt. Why? What led to that? 

You talked about incentives, look at the key performance indicators for your company. Big, huge problem is that in so many cases, the KPIs are short-term tied. There's not enough attention to long-term value, which is, for many companies, the lion's share of their value does come from those long-term investments. 

I use a five stage framework that I developed with The Gray Rhino because people would say, "Why don't we deal with it?" And at different stages of a gray rhino crisis, there are different reasons why you're not dealing with something. The first one is denial, just like Elisabeth Kübler-Ross and that's what it sounds like, usually by the time people are talking to me,  they're not in denial anymore.

Although there is a thing such as what they call it manufactured denial, is that when someone is benefiting from the status quo from a problem that's on its way or benefiting from people not solving it, fossil fuel industry or for many years, the tobacco industry, so there is that and people should be aware of when someone is preying on this natural human instinct to denial. 

And because our brains protect ourselves, if there's too much bad information, we just shut it out automatically, and it's human. A lot of people in the West, particularly Americans, get very defensive. Like, "What do you mean? I'm not paying attention to the obvious thing?" I'm like, no, it's okay. It's okay. You're not a bad person if you're not paying attention to it because it's something that happens to everyone. I'm saying, it's okay. But once you recognize that, it gives you the power to do something about it.

The second stage is muddling. That's when you're not denying it. You know it's there, you're kicking the can down the road. You have a thousand reasons why you can't deal with it. The third stage is diagnosing and that's when you switch from why you can't deal with it to what does it take to deal with it? And a lot of that involves an analysis of the stakeholders in which of these five stages they are in.

The fourth one is panic or I'm hoping in many cases, it's urgency. If you can create urgency without a sense of panic, that's really good. That's a time when everyone's screaming and saying, "Do something! Do something! Anybody just do something, anything!" You're more likely to do something, but you're also more likely to do the wrong thing if you haven't got a good plan in place. 

And even those good plans, you look at the pandemic, there were a number of plans in place and those still didn't get used. You look at hurricane Katrina, there'd been a scenario planning exercise weeks before, those recommendations weren't used. 

And that brings me to the final stage, action. What are you doing about it? And often, people will do something and they'll say, "Okay, I solved the problem", but they forget to check in and ask, is this working? Is this working the way I want? Do I need to adjust? Or, this happens to me with health, this sort of overworking to the stage of burnout thing. I get through one of them and I think, okay, I'm fine. And then I gradually forget, and then I have to go back and relearn the same thing again. 

So that action stage involves tracking, and adjusting, and checking back in. So there are lots and lots of tools and other tools related to these that companies can use to do a better job of really focusing in on their gray rhinos and systematically dealing with them.

Mahan Tavakoli: 

And you described these really well. I also especially love the fact that you say the problem isn't the initial denial, it's how long you stay there. So in many instances, leaders are afraid to even admit it. And then denial is not wrong, but it depends on how long you end up denying it. 

Now I wonder, Michele, your book also had tremendous success. First week release in China, sold over 30,000 copies. Xi Jinping had it displaying behind him. Are there cultural elements that come into play in a Western mindset, not wanting to clue in to those longer term trends and gray rhinos while a Eastern, in this instance, Chinese mindset, embraces that longer term thinking more?

Michele Wucker: 

That's such a great question and it's actually one of the things that led me to write You Are What You Risk, because there was a little bit of pushback when the Gray Rhino came out in the United States, I think partly from defensiveness, I think partly because a lot of people were making money off of volatility and black swans, and wanted to have this excuse for losing their client's money. 

And also the timing, it came out during the 2016 election campaign, so like nobody could get any airtime at all. And in China, people just got what I was talking about immediately. And I asked them and I said, "What's going on with this?" and they said, "You gave us a way to talk about something that we were really worried about." 

But this Asian versus Western, long-term versus short-term thinking is definitely a big part of it. In fact, in You Are What You Risk, I talk about different cultures and countries, and there's actually some research around language. There's some languages that use future tense and longer-term thinking. 

And the language that you speak actually shapes whether you are more prudent with say, your financial decisions or whatever, whether you put money away for a rainy day or not. So there's something about the language that you speak.

There's something about agency and the system of government in that democracies, for better or for worse, often are very, very slow to deal with problems. And in China, if the government recognizes a problem, they can deal with it right away, but also people expect them to deal with it right away. 

And in the States, people expect the government to be dysfunctional and not work very well,  and that's actually a grey rhino in it of itself. And so, different systems of government, of dealing with the problem, different attitudes, there's a lot of research also that I wrote about in You Are What You Risk about collectivist versus individualist societies, and some of those conclusions are not what you might think. 

Since I've been spending lots and lots of time in China, the last five years or so, I've found that a lot of the stereotypes that I didn't even know I had absorbed, as a Westerner, as an American, were not in keeping with reality. And so I think it's really worth a rethinking of each country's, each society's own ideas about what our relationship is with risk, and also other countries, 'cause a lot of the things that we assume probably are completely wrong.

Mahan Tavakoli: 

And human heuristics go along with that. A lot of what we assume culturally is wrong, but also as humans, we have biases that impact our perception of risk.

Michele Wucker: 

Absolutely. There're all kinds of things that come from a set of influences. Going back to this sort of risk fingerprint idea, there's some things that you can't change. It's like the whirls and the arcs, the shapes on your finger, you can't change them and that's why all the detectives in the detective movies use those and in real-life detectives, too.

But there are some things that can change that. Someone who's got calluses on their hands from manual labor is gonna have a very different fingerprint from someone who uses lotion. Someone who cut their finger is going to have a very different fingerprint. Someone who is super nervous and sweaty is going to have a little blurry fingerprint, and not to take the metaphor too far, although it's so rich, you can do so much with it.

But risk is like that, your experiences change the way you see risks. Your status in life, there's something that social scientists call the "White Male Effect", and if you're a wealthy, white, older man who's got a lot of resources, who's got a lot of privilege, you're going to see less risk in a particular situation because you know that you've got a cushion.

If you are a woman in a non-gender traditional role, you are going to be penalized more if you make a mistake than a man does. Interestingly, I sent a beta copy of the book to a friend of mine and he read the gender chapter and he said, "This really resonates with some of my experiences." And that actually became a part of the book because he's not a sort of typical male bluster through, doesn't ask for directions kind of a person. 

So, gender and experience make a big difference. Habits make a big difference. Self-awareness makes a big difference. Practice, risk is like a muscle. The more risks you take, the better you get at it, and actually the better you get a dealing with uncertainty. 

The financial definition of risk is different from uncertainty. Risk is quantifiable and uncertainty is not. But in real life, most of us don't separate those two at all; and so, when you get better at risk, it actually means you're getting better at dealing with uncertainty. Most people don't deal with probabilities in the same way that financial quant geniuses do. 

So there's all sorts of influences that go into that and there's also the policy environment. I was giving a talk in Milwaukee and a woman in the audience, it was the nurse, was talking about how the debate that was going on at that time about healthcare and what was going to happen, was actually leading a lot of patients to come in with new stress and mental health disorders because they were worried so much about their health. 

And so you can't separate some of these very personal experiences from the bigger societal experience, from values, and then again, from the culture of the organizations where they work. So huge, huge, huge lessons here for business cultures, whether it comes to employees or customers or investors, because all of these groups have very, very different risk fingerprints, and even within each group, there's a lot of variation. And we're not paying enough attention to this, but once you start looking through this risk lens, it explains pretty much everything.

Mahan Tavakoli:

It does and again, you lay out great framework for us to think about our own risk profile and our own risk fingerprint as individuals and leaders in You Are What You Risk. So many of the leaders I deal with, they lead senior leadership teams and have to then think about the team's understanding of risk within the culture of that organization and guiding the organization.

So from your perspective, Michele, and experience, what would be best practices and thoughts in making sure the team, again, assesses risk properly and has the right fingerprint profile of the right types of people around the table to be able to guide the organization well?

Michele Wucker: 

Such a great question. That's where a concept that I call "risk empathy" comes in. It really helps to be aware of your own risk fingerprint, but when you take that to the next level, you're looking at the risk fingerprints of the people around you, you understand why they're making the risk decisions that they are, and you're understanding what makes them more comfortable or better equipped to make the right decisions, and then you take that to a group level and it becomes fascinating. 

There's already a lot of work on board diversity, which has focused explicitly on gender, ethnicity, age, demographics, a little bit on areas of expertise, not enough yet explicitly looking at risk attitudes. Although there are some tools, there's something called the "risk type compass" that I write about in chapter three and which I'm absolutely obsessed with. 

Now, there's a big debate about psychometric tests and that used wrong, they're not great, but used right, they're I think very powerful tools and this is one of them. And this looks at, through a series of questions about behaviors, what would you do in this situation or that situation? What's your preference? How methodical or impulsive you are when you deal with risks and how anxious or calm. 

It was developed by a company called Psychological Consultancy in the UK, and it is absolutely fascinating. I am mildly intense which I just, I love that it's oxymoron, because it also measures how strongly you adhere to one of the personalities or not. I'm what they call an axial, like you're in the middle of the axis, which means you can see other people's risk types and you can relate, which I think is pretty appropriate given what I do. 

But they've done some work with boards and Geoff Trickey, the founder, told me that it's amazing when you survey the whole board and you see what their risk types are, you realize that people with similar risk types sit together in the room, like without even knowing, it just happens that way. 

But I think that in much more explicit attention to risk-taking, to why we make the risk decisions that we do whether it's an intake, it's in the process of decision-making itself within the risk committee on the board, what's the biggest risk you've ever taken? How risky do you see this? Do you take big risks in your personal life, finances, health, business decisions? Because those are all related, they're not always the same. 

And once you start understanding this about people, you can understand where they're coming from and you can also take steps to either really use your strengths or make up for your weaknesses. Like, if you know that, someone says, "Let's go sky diving" and you're like, "Yay! Not me, I'm a risk taker in other areas." You can have someone who pulls you back and says, "Well, maybe that's not a great idea. You live in a third floor walkup, maybe you don't want to risk breaking your leg." 

And then if you're too timid, then get people around you who can help lead you forward, who've got the information, the experience, the social network that helps you to feel more comfortable going forward, so you can kind of optimize your risk taking. 

And organizations are the same way, you've got a big, huge corporation that's been around for years and years and years, where everybody's done everything the same way. In fact, when you hear people saying, "Well, that's how we do it", you know that maybe it's not a really innovative or creative or risk comfortable company.

And then you get these startups, they move fast and break things, and maybe they could use a grownup in the room. And that company culture is so closely tied to what you're trying to do, whether you are pursuing the sort of opportunities, the good risks, or whether you are bumbling into the dangerous, bad risks.

Mahan Tavakoli: 

Now, with respect to those risks, Michele, you also mentioned how you think about risk depends on how much you have to lose, and that makes me reflect on organizations, the Kodak's of the world, the Blockbuster's of the world, where they did have a lot to lose by taking a risk. 

In instance with Kodak, they invented digital photography but it was going to be a huge risk to pursue digital, losing all the revenues they were getting from film. So how do you then assess risk in the organization when there is the potential of huge loss that comes along with strategic decisions?

Michele Wucker: 

Also a great question, so many great questions. I think organizations, just like people, have certain biases when they approach risks. Some of us think of risk and we think about losing a lot of money or terrible things happening, we have an automatic negative experience in mind. 

And some people say, "Let's pile on the risk assets." I mean, you hear this in the markets right now going, "You need to put on more risks!", without balancing that there's really two sides to risk. And I think understanding whether the organizational culture supports good risk-taking, whether it allows failure, but also when your risk calculations are happening, are you also looking at opportunity cost?

In You Are What You Risk, I interviewed a 40-something CEO of a family conglomerate in Central America and nearly a hundred-year-old company, and they had lost everything during the civil wars in the 80s—not everything, but a lot, enough that it- for all practical purposes, it was everything. 

And so he's taking and over leadership of the company and they were working on strategic direction, and the younger generations are all really worried that the company is going to become obsolete, just going to dribble off into nothing, that they're not going to take advantage of opportunities. And the older generations are so focused on preservation of capital, and family harmony even though this pursuit of preservation and harmony, above all, was actually creating discord. 

And so I asked him when he told me he had done like a survey of everyone, what are the priorities? And it became very, very clear everybody had very different priorities, which is another way of saying everybody saw risk differently. And I asked him, have you talked about what's behind those? Why does the older generation want to preserve capital? 

Well, it's so that they have something to leave to the younger generation. Then, maybe  they should pay a little more attention to what the younger generation wants. And so it's very, very interesting once you have an open conversation about risk decisions, and about the contributions of experiences and other emotions and calculations, two different people's positions, you can actually start moving forward. 

There's a wonderful example of risk empathy in You Are What You Risk, a travel writer, specialized in aviation. So it was after the Boeing 737 Max crisis was beginning, before they were grounded, and he'd read all the studies and he knew all the information and the statistics and everything. And he personally was comfortable flying one of them, but his family didn't have any of that information. 

They were freaked out and he changed his flight because even though he was comfortable, he wanted his family to be comfortable. And I just love that story, I thought it was just really, really beautiful, a great example of risk empathy, and realizing that you don't always have to do exactly what you would do yourself, but that there's actually a risk in you not making the people around you comfortable. 

You don't want to take that too far either. But really looking at the culture, opening a discussion about it, and understanding the why behind the risk decisions, it says exactly who you are as a company, as an individual, as a country.

Mahan Tavakoli: 

I absolutely love the way you frame that, Michele, in that a lot of times when risk is viewed, it's viewed as a risk of action rather than also looking at the risk of inaction. So whether it's with Kodak and other examples, the reason I mentioned Kodak is everyone's familiar with it, everyone views it as the risk of and they viewed it as the risk of going and pursuing digital technology, but not viewing the flip risk, the risk of, as you say, and the opportunity cost of not pursuing it and the risk of maintaining the same course as they were on before. So there are two sides to that risk. 

Now I absolutely love this story you open, You Are What You Risk with of Annie Edson Taylor. I had not heard that story, but I think it has so many different elements of risk profile and the individual's risk profile captured in that story.

Michele Wucker: 

She was, she's just amazing. It's just incredible. For those who don't know, she was the first person to go over Niagara Falls in a barrel, a pickle barrel, like souped up pickle barrel.

Mahan Tavakoli: 

Not something I would do either.

Michele Wucker: 

No, no, definitely not. But you know, it's very interesting, she'd come from a fairly well off family so there was this sort of sense of privilege. There are a lot of people who will take bigger risks because they feel they've got a safety net. And she traveled a lot and a lot of really interesting things. 

She had a couple of big losses, her father died when she was young, her husband had died, and loss can really change your attitude. But by this time in her life, she was almost 64, she did the jump on her 64th birthday. She was kind of running low on funds and wanted to get rich quickly, but reasonably honestly, and she got this idea, "Why don't I do this?" And she thought she could have a speaking career.

And anyway, she went over the barrel. She'd hired this publicist manager type who had her lie about her age to be 20 years younger than she was. And she went over the barrel, she tested it, she sent her beloved kitty cat over the, over the falls. [Inaudible] the cat survived.

Afterwards, so she thought she could have this speaking career. Well, but the manager found some woman who was the same age that they'd been saying that she was and stole the pickle barrel and went, and they made a ton of money. And she also apparently had not thought about the fact that her speaking style and stage presence weren't quite as dramatic as the events that she'd had in her life, to put it kind of politely. 

And so that part of it, the whole business venture didn't work out very well. And it was a time where there was a lot of social upheaval, it was political, we'd had an assassination and it was, you know, some things were actually not that different from what we've been experiencing recently, which goes to say that your environment, the zeitgeist is part of the risk decisions that you make. 

And so I just, I really loved her story. I actually talked to my editor.  The book was going to come out six months earlier, but because of all the COVID stuff, some of my foreign publishers wanted more COVID stuff and obviously, for good reason. So I ended up doing a lot more reporting in the book. 

And I'd asked my editor, I said, "I don't know what to do. I love this story but should I put some of the COVID stuff earlier on to make it more timely?", and she's like, "Do not change that." Luckily, I'm so glad you love it as much as she loved it and as much as I love it 'cause this story is just really amazing. 

It encapsulates all of these influences, the people around you, your experiences, your privilege and  there actually is a lot there about risk privilege. A lot of us might think that refugees are taking a "big risk" by taking a rickety boat, but if they're choosing between almost certain death and possible death at the stormy seas, well, that's actually a pretty good calculation if you ask me. 

And so the risk has so much to do with privilege. There are some times when we have a choice, I mean, a risk is a choice and we don't always have it, and having people behind you actually objectively reduces the risk. But on the other hand, you're having fewer choices in a certain way, reduces the risk tolerance, like how much extra risk you're taking by doing the really risky thing.

So you start going into this and it becomes this big room full of fun house mirrors. A lot of risk experts spend a lot of time quantifying risk as something that you can price and trade. But once you start looking at it, it becomes very, very, very slippery, depending on who's perceiving it, depending on all of the circumstances and it's not as easy to calculate as a lot of us might think.

Mahan Tavakoli:

It isn't, but one of the things I found of great value in reading your books, Michele, and I urge all leaders to do, is that a lot of times asking the questions and thinking it through, whether it's for the individual's risk profile or their entire team, by itself helps move the conversation along. 

So sometimes it's just the questions and struggling to wrap your head around the issue. Now, I also love the fact that you touch on leadership and purpose, and the fact that purpose-driven leaders can reframe risks as they are leading their organizations with greater interest for all stakeholders, not just for shareholders.

Michele Wucker: 

Absolutely. Some of the debate in the press about the new statement of purpose that the business round table came out with is that, oh, well, it's shareholders or stakeholders and it's not mutually exclusive at all. And I talk in the book with people like Lisa MacCallum, who used to be at Nike, who says that if you've got a clear purpose, if your actions are consistent with that purpose, then if you make a misstep, then your customers are going to give you a lot more leeway than they would have otherwise. So it's a really good risk management strategy. 

And similarly, you look at millennials and gen Z in the job market, they are more and more saying that they want a company that is not doing horrible stuff. They want their work to have meaning. And a lot of people are worried that this is just a way to get away with paying them less. 

And you definitely don't want that to happen, but if you have someone who believes they're doing meaningful work, that is contributing to the world, they're going to be more productive and they're going to be more loyal. And you look at how much is lost in employee turnover, and it's actually a very, very good investment in human capital to be doing something that matters. 

So I don't think that it's incompatible at all to look at your other stakeholders, and I think that's good for shareholders in the end. It's not at all incompatible and I think that the people who argue that it is don't know what they're talking about.

Mahan Tavakoli: 

Absolutely. Now, Michele, there always gray rhinos to be mindful of and you also mentioned that the smartest leaders and organizations can see gray rhinos as an anti-fragile opportunity, as an opportunity to do better as a result of the gray rhinos. What are some great rhinos at this point that you think leaders need to be mindful of as they guide their organizations for the years to come?

Michele Wucker: 

I spent a lot of time thinking about these sort of big 30,000 foot macro gray rhinos and that the top three that are all tied together in my mind are inequality. It's so important for every business. If not everybody in the economy can afford your products, then that's a big problem. It's not sustainable. 

So you have inequality, you have financial fragilities. Right now, we have these very toppy markets, that changes from day to day. You have a lot of corporate debt, lots and lots of financial fragilities, you have a lot of retail investors who've been pouring into the market and historically, at times when there are lots of retail investors is also often right before a crash. The institutional investors bring the little minnows in to get eaten before they do, dumb things. So that worries me a lot. 

And then you have climate change, which is so closely tied to both inequality and financial fragilities. And with climate change, the people who are producing most greenhouse gases are not the people who are affected most by it. And the people who are producing the most greenhouse gases are the ones who can afford to protect themselves from it, and that's a big problem. 

Mahan Tavakoli: 

So those are definitely gray rhinos that we know are ahead of us so we can adjust as leaders, as organizations, as a society to do the right things. So a couple of years from now, we don't say, well, that was a black swan, we had no control. We do have control over all of these. 

Now, we touched on just the surface of your brilliant book, The Gray Rhino, You Are What You Risk, Michele. In addition to those books, I know you had written a couple before that, where would you send the audience both in the show notes and in general, to connect with you and find out more about your writing and your work?

Michele Wucker: 

There's a lot more at thegrayrhino.com, G-R-A-Y, although you can get there with G-R-E-Y, but it is the American spelling, which I kind of regret now knowing how big it's been in international communities, but there's a lot more information there. I have guest posts on the site from people who write really interesting things, different perspectives on gray rhinos, because I always say, I'm not the one to spot them all.

It's different from everyone's perspective, and so I encourage people to spot them on their own. I write a regular blog there, there's some media, there's information about my speaking and workshops. I also write a column on LinkedIn, so you can find Michele Wucker on LinkedIn, pretty easy to find. And I also write occasionally for strategy and business magazines.

Mahan Tavakoli: 

I really appreciate that and I have to tell you Michele, one of the most significant things you have done  is great writing in these books, but in defining a gray rhino by itself, has helped me and I'm sure has helped countless people around the globe and will continue helping leaders understand the risks around us and be able to respond to it. 

A lot of times we need terminology to be able to start seeing things that we didn't see in our environment around us. So I think with your definition of gray rhino, you have added to the flip side of the coin of a black swan, and the beauty of the gray rhino perspective is that there are these things that we can act on.

It is not washing our hands and saying, "We cannot do anything about this." That's why I absolutely love the concepts, the thinking and truly appreciate what you have brought to both society in general and leaders as they try to lead their organizations through many more disruptions and challenges ahead.

Michele Wucker: 

Thank you so much. I think my head is going to get bigger and bigger after those kind words.

Mahan Tavakoli: 

You very well-deserved it, Michele. Thank you so much for joining me (in) Partnering Leadership.

You've been listening to Partnering Leadership with your host Mahan Tavakoli. For additional leadership insights and bonus content, visit us at PartneringLeadership.com.