In Nassim Nicholas Taleb’s book The Black Swan, he has the example of the Thanksgiving turkey that leads a comfortable life for about 999 days, eating and ranging around a small patch of grass. The turkey becomes comfortable and assumes this cycle of eat-relax-sleep will continue on indefinitely. But on the thousandth day, Taleb’s Thanksgiving turkey finds his head on the chopping block and the good times come to an abrupt end.
Black swans are unexpected and unpredictable rare events. Taleb asks how can we know the future, given our knowledge of the past; or, more generally, how can we “figure out properties of the (infinite) unknown based on the (finite) known? The turkey problem, he says can be generalised to any situation where “the same hand that feeds you can be the one that rings your neck”. “Something that has worked in the past, until – well, its unexpectedly no longer does, and what we have learned from the past turns out to be at least irrelevant or false, at worse viciously misleading.”
The worst mistake that you can make small business plan, developing your idea from scratch, is to make assumptions. Assumptions include projecting sales and profits that are unrealistic. But behind this is demand. This is where the biggest mistake of all can be made – too optimistically estimating demand and realising too late that your erroneous thinking has chopped the head off your brilliant idea for a small venture.
That’s why it is vitally important to check your assumptions before you take the leap with your product or service or small venture. What is it that you are overlooking? What could go wrong?
This is why it’s important to test your assumptions in the real world. Before you launch a new product or service you need to go test your assumptions through a pilot, market test or demand trial. You do this by manufacturing or producing up basic prototype of your product or service, good enough to make the cut, but check how many people will open their wallets or purses to buy your product or service. It’s no use getting so-called “feedback” which is really just an intention to buy rather than an actual purchase decision made by a real life customer.
Be wary of misleading advertising and schemes from business advisers that will tell you that they have the perfect thing. In the story of Hansel and Grettel, by Jacob and Wilhelm Grimm, the witch locked Hansel in a cage and kept fattening him up. But every morning when the old woman crept out to the cage and shouted that Hansel stick out his fingers so she could feel the if he was fat yet, Hansel stuck out a little bone, and the old woman, who had bad eyes and could not see the bone, thought it was Hansel’s finger and she wondered why he didn’t get fat. Hansel had figured out why the witch was fattening him up and so we learn that scepticism is a good weapon against trusting others blindly.
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