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Payday Loan Blog - Surviving a Black Swan Catastrophe

 
 Monday, 05 March 2007

If you caught our post regarding the books we read recently you may remember that one that I read was Fooled by Randomness by Nassim Taleb. In the book, Nassim describes various situations where profitable traders are wiped out by what he refers to as a Cygnus Atratus, or a black swan event. In essence, these are events that are capable of destroying a career's worth of wealth and positive history.

So why am I talking about a book that focuses on randomness/luck, numbers, and trading patterns? Mainly because I see many businesses everyday online that are particularly vulnerable to a Cygnus Atratus. In other words, I think people need to pay more attention into developing defensible traffic. Rather than technique and specifics, I aim to provide a thought process for doing so.

Imagine that you are a small company on the web that receives 90% of its traffic from Google, and of that, 80% comes from the single search phrase, loan. In this simple example, Google dumping your search result is your black swan event. It needn't be a delisting, just a SERP move of a few pages. How do you overcome and survive this Cygnus Atratus? Most will probably say to diversify link text, vary content, yada yada yada, with the end result being a site that ranks for multiple phrases. That gets past the first black swan event, but exposes you to another in the event the site truly is delisted, or is simply penalized due to some scraper activity. Take it further and some will say to develop multiple sites to catch as much of the available search traffic for your industry's taxonomy. Better, but what if your privatized WHOIS fingers you as someone with a network of sites? Or if your dedicated server goes down?

It isn't that solving one event leads to another; in reality, it is very similar to what happens when a manufacturing plant adopts just-in-time procedures. On the surface, it may seem like JIT is creating problems, but all it is really doing is exposing problems that already existed, much like an iceberg becoming more visible if the water around it is drained.

Mentally solving these successive black swan events will force you to examine every conceivable flaw in your business model, to the point where you'll find yourself developing what I like to call nightmare scenarios. As you might imagine, these are scenarios where you pick several black swan events, on paper, and make them all happen. For an example, let's pick that small web company again. This time, let's say they've grown to 10 employees and have 50 sites in a variety of sectors, with a clean non-interlinking structure, getting traffic from a variety of sources (search, PPC, e-mail, word of mouth, etc). It seems much better than the first example, but what happens if a malicious employee modifies the WHOIS e-mail and tries to hijack all the domains, at a time when your e-mail hits a snafu and is no longer white listed, over a weekend where the company credit card is stolen and PPC must be halted? Everything comes to a grinding halt.

This isn't really meant to scare you, only to prepare you. By envisioning nightmare scenarios, chalked full of numerous black swan events, and then solving them to the best of your ability, you will be leagues ahead of your competitors. In terms of likelihood, occam's razor holds true, and the simplest of the scenarios will ensue, in which case you'll already be ready for them with defensible traffic and can take the in-depth knowledge about how your business works, that most people never develop, to the next level.

Good luck!

Your friendly neighborhood Cygnus Atratus,

JoeSinkwitz



Monday, 05 March 2007 07:30:56 (US Mountain Standard Time, UTC-07:00)  #     
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