Black Swan Theory and Business Valuation Practice
Erdohegyi Gabor , Management Consultant, Hungary, Member
The Black Swan principle and key conclusions of Taleb were not brand new even in 2007 (though he presented it first in form of a theory).
For example it is said that "business valuation is an art and not a science". (Business valuation has a lot to do both with risks, assumptions and forecasting.) Although in developed countries the mathematical and statistical formulas of DCF are widely used to establish a value, in emerging and riskier markets only the so called "build up" discount rate (of DCF) method is proved to be viable (e.g. due to higher probability of Black Swans and to the lack of statistical market data). In my view, the BUDCF, if objective, is much more company-specific and in many cases far more reliable than the statistical DCF which (being "artificial") may misguide buyers. The DCF "buid up" discount rate method has been in use for ages.
As far as the impact of "luck" is concerned: I've also been teaching the importance of fortune factor (ff). I also apply it...