Build plans with slack for outcomes outside your model
Reserve capacity for events that are not in your risk model — because the most damaging events usually aren’t.
Key takeaways
- What it is: Reserve capacity for events that are not in your risk model — because the most damaging events usually aren’t.
- Why it works: Standard risk management lists known risks and allocates contingency to them. But Taleb’s argument — consistent with historical evidence on financial crises, pandemics, and technological disruption — is that the events that cause the most damage are typically outside the pre-crisis model entirely. Building in general slack (financial reserves, timeline buffers, optionality) that can be deployed for unknown unknowns rather than only pre-specified risks is the practical correction.
- Evidence: Backed by observational / correlational evidence.
- Avoid: Treating the unknown-unknown budget as a waste when it isn’t used for several years and eliminating it to optimize efficiency — exactly when it is most needed.
Why it works
Standard risk management lists known risks and allocates contingency to them. But Taleb’s argument — consistent with historical evidence on financial crises, pandemics, and technological disruption — is that the events that cause the most damage are typically outside the pre-crisis model entirely. Building in general slack (financial reserves, timeline buffers, optionality) that can be deployed for unknown unknowns rather than only pre-specified risks is the practical correction.
How to do it
- 1After listing your known risks and contingencies, add a separate budget for "unknown unknown" events.
- 2Size this as a percentage of total capacity, not as a response to any specific scenario.
- 3Resist the pressure to specify what the slack is for — the point is that it can’t be specified in advance.
What the evidence says
ObservationalConsistent with planning fallacy research and with post-crisis analysis of failures across finance, medicine, and infrastructure: models that only account for known risks systematically underestimate total risk. Taleb documents this historically in The Black Swan.
Honest caveat: The scale of slack needed depends heavily on domain volatility; there is no universal percentage. This is a direction, not a formula.
Common mistake
Treating the unknown-unknown budget as a waste when it isn’t used for several years and eliminating it to optimize efficiency — exactly when it is most needed.
IX Coach builds a general slack buffer into project and life plans, separate from identified contingencies, so that unprecedented events have resources rather than finding you fully committed.
Practice this with IX Coach →