Management blindness leading to black swan events: An analysis of decision-making styles of key decision-makers in the Pike River coal mining disaster

This research investigates decision-making under uncertainty, and the possible reasons decision-makers fail to foresee, or are blind to the potential for black swan events, that is consequential surprise events. Three types of blindness were identified: the illusion of certainty; inductive cognitive biases; and a single unquestioned top-down reference narrative.

The research ties all these different threads together in two ways, First, by developing an uncertainty spectrum chart, which describes the different ways of understanding the uncertainty spectrum of the physical environment, through existing frameworks, such as the Snowden’s Cynefin framework and the states of knowing. The second thread focuses on understanding the two broad types of decision-makers, and this is done through the use of Tetlock’s fox/hedgehog framework. In using this framework, emphasis is placed on the different fox/hedgehog attitudes to uncertainty are highlighted or emphasized. Hedgehog cognitive thinkers focus predominantly on the known and certain. This makes them very susceptible to being blindsided by Taleb’s black swan events when dealing with complexity and uncertainty. By contrast, Kay and King believe foxes have greater awareness of their lack of knowledge in situations of high uncertainty, where they prepare for the unexpected by having multiple options of the future.

The case setting examined in this study is the New Zealand 2010 Pike River coal mine explosion. This was selected from historical Royal Commission inquiries that had national and local significance, high degrees of complexity and uncertainty. The Pike River explosion resulted in the loss of 29 lives and all funds invested in the mine (being over $300m). The primary source of information for the case study was documents aligned to the subsequent Royal Commission of Inquiry, and the case analysis undertaken was qualitative in nature, using a variety of complementary lenses and methodological approaches.

The weaving of many methodological practices used in this complex case study can be viewed as bricolage or quilt making, using whatever strategies, methods, empirical materials that were available. Throughout the case study, the ex-ante public statements and attitudes of three key decision-makers (i.e., board chair, CEO, and General-Manager Mines, supported by the ‘in-group’) were compared to the actor-critics, whose views only became public at the RCI hearings.

Overall, the research found that Pike River Coal Ltd’s three key decision-makers (and supporting in-group) had adopted the overconfident attitudes reflective of a hedgehog cognitive thinking style. This included underestimating and oversimplifying the inherent uncertainty; oversimplifying the inherent complexity, through the use of inductive cognitive biases; and strongly defending their collective reference narrative, which they believed was compelling and robust, from actor-critics who unsuccessfully challenged it. These behaviours limited Pike’s collective intelligence to the small in-group at a time when opportunity was available to increase Pike’s collective intelligence by drawing on the intelligence of other actors.

The hedgehog cognitive thinking style and reference narrative of Pike’s three key decision-makers was in hindsight, flawed. That thinking style was not appropriate for a complex situation of radical uncertainty where they experienced one unexpected surprise after another, leading up to the methane explosion(s) that they didn’t believe was likely to happen. It was a black swan event for the key decision-makers and all those who relied on them, such as workers, shareholders and the general community.

This study makes theoretical, methodological and practical contributions, for example, by: developing a new conceptual framework and related perspective; by providing new insights into the Pike River coal mine disaster as a black swan event; and it provides a new framework for managers to use; and for Commissions of Inquiry to use ex-ante or ex-post, when dealing with potential black swan situations that are highly uncertain and complex.