There are some events that you can see coming your way. You can gauge their speed and predict the effect they would have on your lives. Accordingly, you can prepare to adapt to the change they bring. But there are some rare events you don’t see coming that can turn your lives upside down. They are called Black Swans.
Popularised by Nicolas Nassim Taleb, a black swan is an event that strays from the path of what you’d call normal and is extremely difficult to predict. In his book, The Black Swan, he says, “What we call here a Black Swan (and capitalise it) is an event with the following three attributes.
First, it is an outlier, as it lies outside the realm of regular expectations because nothing in the past can convincingly point to its possibility. Second, it carries an extreme ‘impact’. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.
I stop and summarise the triplet: rarity, extreme ‘impact’, and retrospective (though not prospective) predictability. A small number of Black Swans explains almost everything in our world, from the success of ideas and religions to the dynamics of historical events, to elements of our own personal lives.”
What makes black swans particularly important is the fact that we have no time to prepare for them. They expose our weaknesses to catastrophic changes and what comes out of it is a system strong enough to face other such events. While you cannot see them coming, in hindsight we have witnessed a lot of black swans that define us today.
In April 1912 when the RMS Titanic sank in the Atlantic Ocean, it sent ripples across the world. It was called the unsinkable ship until catastrophe struck. No one expected it to hit an iceberg in the middle of the sea and that event led to the formation of organisations to strengthen the security of ships at sea.
The First World War which changed international politics was expected by many. It was seen as a threat looming on the horizon like a dark cloud but the assassination of Archduke Franz Ferdinand, the event which actually started the war was a black swan.
When the housing market crashed in 2008 and set off the Global Financial Crisis, stock markets across the world went into a frenzy. The 2008 crisis is one of the most significant financial black swans of the 21st century; barring a handful of people, no one predicted its occurrence. When the bubble burst, it exposed a number of loopholes of the American markets that only made it stronger. True, the financial crisis caused an unimaginable loss to the economy and all those connected with it, but it also created a system much more robust than its predecessor.
Not everything in our lives will be predictable. Some of these black swans will bring pain and despair while some will bring joy, but either way, it will only change our lives for the good. Is there any way to predict them? I don’t think so. But that doesn’t mean we can’t look back and join the dots. Hindsight can always be used to make sense of how we reached where we did. As to how one can deal with black swans? Like you would with a literal black swan. Sit tight and watch it unfurl, while it will make no sense at the moment, it will teach life lessons in the time to come.