The Black Swan

2020 Special Issue

Photo: muratart/

Black Swan alert! No one saw this coming. Many were not prepared.  These two statements apply equally to the economic and social impacts of the pandemic. We recommend that you read the profound Real Estate Issues article by Hugh F. Kelly, PhD., CRE® published on March 21, 2018 titled “Black Swans – The Original Rara Avis”. We asked Hugh Kelly, Ph.D., CRE®, and Alex Ruggieri, CRE®:

What role are you playing with your clients today? What is their mood? What opportunities do you see arising from this crisis? What areas will experience a total fail?

A Few Reprised Observations from “The Black Swan”

By Hugh F. Kelly, Ph.D., CRE®
Special Advisor | Fordham University Real Estate Institute At Lincoln Center

Beware of speculative pictures of the future, however widely endorsed.

Many “conventional wisdom” expectations of post-9/11 futures turned out to be 180 degrees off. Tall buildings still attracted tenants. Large and dense city centers prospered. Firms based their location choices on maximizing revenues rather than minimizing expenses. Even in the COVID-19 disruption we should not expect knee-jerk re-writing of business practices and strategic principles.

I recently came across an essay I wrote for SIOR Professional Report (Nov.-Dec. 1991) entitled “Are You Kidding? Commitment to Real Estate Investment in the 1990s”.

That piece began, “With the investment community avoiding real estate with the icy disposition of a spurned lover, the early Nineties may seem to be the wrong time to bring up the subject of a long-term commitment.”

It concluded, “A good captain not only needs to work his ship carefully past the shoals threatening his ship today; he must also chart a course for a longer voyage. In that longer view, I see legitimate reasons to believe in the case for real estate investment in 1992 and beyond.”

I dare say that those who adopted and acted on this perspective, even in the depths of the RTC crisis of the 1990s, did rather well in the ensuing decade.

The primary lesson I’ve learned is to maintain independence of judgment, avoid the temptation to leap to conclusions, and be extremely disciplined in analyzing the complex network of cause-and-effect in coming to an assessment of the range of possible future courses of events.

Yes, it’s bad now, far beyond what was considered the “worst case scenario.” Who thought we’d see Great Depression-level job losses inside of four weeks? Nevertheless, there is no merit in passivity and short-term thinking focused on week-to-week, quarter-to-quarter statistical releases. The key questions are:

What can I do to maximize assets and minimize liabilities through the Fall?

And, what can I do to identify opportunities in an economy that is “semi-normal” for the next year or so, and resumes moderate growth (albeit in an altered state) from mid-2021 through (say) 2024?

Be practical, be flexible, and be creative.

Even if you weren’t prepared for this Black Swan, get prepared for the next. Looking forward, it appears that such events can occur with greater frequency and greater amplitude, given the interconnectedness of our complex economy, the speed of technological change that can catch us by surprise, and the systemic risks of so many stresses from climate change to income inequality. In a 2001 essay in Real Estate Review I posited four maxims to guide real estate research: Be Attentive; Be Smart; Be Reasonable; Be Responsible. I suggest posting these on your desk, as Harry Truman posted the reminder, “The Buck Stops Here.”

Balance data and judgment.

In many ways, the key to making good decisions in this crisis (as always) is asking “What is similar in history? And what is different now?” That’s an exercise in open-mindedness.

Seek the insights of others – no one has a monopoly on good ideas. Interestingly, in speaking with executives who have been using technology effectively to manage their staff, the most frequent comment I’ve heard is “I can’t wait to get back to the office, to be with my team.” That’s a tribute to listening to our colleagues.

Distinguish between fruitful innovation (future-oriented changes in approach) and foolish improvisation (making changes just because we are uncomfortable).

Thinking Ahead

I would take the present occasion of metastasis to think and to plan for a post-COVID-19 economy – even allowing for an extended “semi-normal” period of transition – that would recognize the demographic, technological, and social changes which point toward a “decelerated” level of decade-long growth, but still take the current disruption as a “teachable moment.”

We need to think through and plan for the redeployment of the suddenly unemployed, many of whom may face the likelihood of the permanent evaporation of their positions, in a forward-looking infrastructure development and maintenance program aimed at national growth in the 2030 – 2050 period.

We also should reconsider the U.S. role in the global economy; this would not seek to sever economic interdependence, but focus on mutual benefit in growing world markets while preserving key elements of U.S. autonomy. This would involve a degree of “re-shoring” strategic manufacturing, accepting higher costs as an investment in the national interest. We must alter, though not eliminate, the just-in-time inventory control process to maintain emergency flexibility against key supply shortages.

It is important to also re-think stimulus tools beyond the Keynesian model, such that counter-cyclical public spending would be more than a short-run “demand yank” and move in the direction of a steady, long-run expansion of final demand – recognizing the large public benefit of reducing income inequality.

We should re-think the civilian/military relationship, emphasizing the military’s capacity to develop skills that are transferable and deployable when needed across the economy (see the tremendous work being accomplished currently by the Army Corps of Engineers).

Finally, we need to prioritize investing in science, as was done in the NASA programs of the 1950s and 1960s, both in “pure” research, and applied research for programs such as the “telemedicine” now being deployed in the COVID-19 emergency.

Preparing for the Unknown

By Alex Ruggieri, CRE®
Vice President | SVN-Ramshaw Real Estate

According to, a Black Swan is an unpredictable or unforeseen event, typically one with extreme consequences.

How can we then possibly plan for an event that by definition is unforeseen?  I think the answer is a lot simpler than one might imagine.

When I was younger I was a Boy Scout.  Later, I served as an assistant Scout Master when my four sons were involved in the program.  Back then (and still today) the Scout’s teach the Scout Motto.  What is the Motto?  BE PREPARED.

When Lord Baden-Powell was asked, be prepared for what?  His answer was simple, “Why any ole thing.”

In Scouting for Boys in 1908, Baden-Powell wrote that to Be Prepared means “you are always in a state of readiness in mind and body to do your duty.”

I think the point is well taken and can be applied to us and our businesses as well.

Doing something as routine as a S.W.O.T.1 analysis once a year can go a long way for us to plan for the unexpected.  In reality there is a lot we can do to prepare for the unexpected.

We can increase reserves, institute contingency plans and review and update them regularly.

Lowers and Associates International risk mitigation partners recommends the following:

  1. Conduct Scenario-based Planning
  2. Carry Out a Threat Assessment
  3. Prepare a Comprehensive Situation Response2

We may not know what the next “Black Swan” scenario will be or when, but we can enjoy some relative peace of mind knowing that we have put plans for the unexpected in place.

A great man once said, “If you are prepared, you shall not fear”.3


  1. A S.W.O.T. analysis is an exercise where one examines their (or their company’s) Strengths, Weaknesses, Opportunities and Threats.
  3. Joseph Smith, First President of The Church of Jesus Christ of Latter-Day Saints