Black swans: Reality bites

Until the late 17th century, Europeans were convinced that all swans were white. That changed in 1697 when Dutch explorer Willem de Vlamingh spotted a black swan in Western Australia. All it took was one black swan to prove that the seemingly impossible was in fact real. Nassim Nicholas Taleb, former Wall Street trader and author of Fooled by Randomness and The Black Swan has turned this observation into a way of describing a particular kind of event. According to Taleb, a black swan has three attributes: it is an outlier; it has extreme impact; and that, despite its outlier status, people will come up with explanations for its occurrence after the fact. Taleb argues that a small number of black swan events explain almost everything in our world, from the success of certain ideas to the dynamics of historical events. The broader point is that we’re often unknowingly limited in our observations and knowledge, and what we consider within the realm of possibility can change rapidly under the right circumstances. Sound familiar? 🐦 [Tweet this!]( 🌐 [View this email on the web]( [Quartz Daily Obsession] Black swans May 06, 2020 When we don’t know what we don’t know --------------------------------------------------------------- Until the late 17th century, Europeans were convinced that all swans were white. That changed in 1697 when Dutch explorer Willem de Vlamingh spotted a black swan in Western Australia. All it took was one black swan to prove that the seemingly impossible was in fact real. Nassim Nicholas Taleb, former Wall Street trader and author of Fooled by Randomness and The Black Swan has turned this observation into a way of describing a particular kind of event. According to Taleb, a black swan has three attributes: it is an outlier; it has extreme impact; and that, despite its outlier status, people will come up with explanations for its occurrence after the fact. Taleb argues that a small number of black swan events explain almost everything in our world, from the success of certain ideas to the dynamics of historical events. The broader point is that we’re often unknowingly limited in our observations and knowledge, and what we consider within the realm of possibility can change rapidly under the right circumstances. Sound familiar? 🐦 [Tweet this!]( 🌐 [View this email on the web]( Giphy By the digits [500,000:]( Global population of black swans, which are native to the Southern hemisphere [$3.8 billion:]( Cost of building the One World Trade Center [$3.3 trillion:]( Estimated economic impact of 9/11 [$1 trillion:]( Google’s market value in January 2020 [22%]( Amount the Dow Jones Industrial Average lost in a single day on “Black Monday” in 1987 (in early March 2020, amid coronavirus fears, the index closed 2,352 points lower, or [9.99%]( [12:]( Publishing houses that rejected Harry Potter and The Philosopher’s Stone, which J.K. Rowling wrote as a clinically depressed single mother [25%:]( Share of black swans that form homosexual pairings [$329 million:]( Worldwide box office of Darren Aronofsky’s grim 2010 ballet drama Black Swan, starring Natalie Portman Million-dollar question Is Covid-19 a black swan? --------------------------------------------------------------- In recent weeks, various [media outlets]( have called the coronavirus pandemic a black swan. The venture capital firm Sequoia Capital issued a memo on March 5 that read: “Coronavirus is the black swan of 2020.” The man who coined the phrase disagrees. “It was not a black swan. It was a white swan. I’m so irritated people would say it is a black swan,” Taleb said in an [interview with Bloomberg](. “We have had black swans, September 11 was definitely a black swan. This was a white swan.” His argument is that despite the monumental size of its impact, the pandemic is not an outlier, because it was foreseeable. And he can cite himself as a source. In his 2007 book The Black Swan, he wrote: “As we travel more on this planet, epidemics will be more acute—we will have a germ population dominated by a few numbers, and the successful killer will spread vastly more effectively. I see risks of a very strange acute virus spreading throughout the planet.” Deadly outbreaks such as Ebola, SARS, and H1N1 have occurred within the past two decades. In 2005, [George W. Bush said]( “If we wait for a pandemic to appear, it will be too late to prepare.” In 2018, the head of the [World Health Organization warned]( “A devastating epidemic could start in any country at any time and kill millions of people because we are still not prepared.” That same year, [Bill Gates said]( he had raised the issue of “pandemic preparedness” with President Trump. Taleb argues that there’s no excuse for large companies and governments to be unprepared for a pandemic. Labeling this crisis as a “black swan” gives policymakers cover for failing to take action earlier, [points out]( commentator and policy analyst Michele Wucker. Membership 👋👀🗞🌍❤️ --------------------------------------------------------------- Enjoying this? Consider supporting our journalism by [becoming a member](. No, we don’t have a tote bag, but we do have [excellent stories]( and loads of [member benefits](. Take a [closer look](. Giphy Quotable “The problem with experts is that they do not know what they do not know.” —[Nassim Nicholas Taleb, Black Swan: The Impact of the Highly Improbable]( Wikimedia Commons pop quiz Which ancient Roman writer used the black swan as a metaphor? MartialJuvenalVirgilOvid Correct. In his Satires, he described a woman as “purer than any Sabine with streaming hair who stopped a war—a rare bird, as strange to the earth as a black swan; who could endure a wife who was such a paragon?” Incorrect. If your inbox doesn’t support this quiz, find the solution at bottom of email. A brief history of black swans Reasonable people can have a spirited debate about whether some of these are truly black swans, but they’re all moments that changed the course of history in unpredictable ways. [1637:]( The Dutch tulip market collapses, wiping out fortunes and kicking off a centuries-long debate about its causes and inevitability. [1914:]( The assassination of Austrian archduke Franz Ferdinand by a Serbian nationalist touches off a [cascading failure]( of diplomacy that begins World War I, which ends with [14 million dead]( across 28 countries and a [reshaped world order](. [1929:]( A US stock market crash leads to a worldwide depression, the causes of which economists and historians are still working out. [1933:]( An unemployed bricklayer tries and fails to assassinate president-elect Franklin Roosevelt, whose administration is generally credited with bringing the US out of the Great Depression. [1984:]( A chain of events, including a [translation error]( causes the collapse of Continental Illinois bank, its subsequent bailout, and the rise of the idea “too big to fail.” [1987:]( On Oct. 19, Black Monday, the US stock market suddenly crashed, triggering a global market decline. Taleb made a [$40 million profit]( and realized that chance had more influence than we care to admit. [1996:]( Google is born; Larry Page and Sergey Brin’s idea to rank search results by linking behavior becomes the entryway to the internet, a concept that quickly expands to produce a dominant browser, email service, mapping system, and more. [1998:]( Long-Term Capital Management, a hedge fund famous for its Nobel Prize-winning staffers, loses $4.4 billion in less than a year. [2004:]( The destructive Indian Ocean tsunami is triggered by a fault that was not expected to produce an earthquake of that magnitude. Have a friend who would enjoy our Obsession with Black swans? [ [Forward link to a friend](mailto:?subject=Thought you'd enjoy.&body=Read this Quartz Daily Obsession email – to the email – Giphy Dept. of jargon Animal spirits --------------------------------------------------------------- Beyond black swans and homo economicus, there’s a bestiary of economic and political metaphors. 🐛Butterfly economics: When the economy functions like a living organism, and, as a result, is able to learn and adapt. 🐯Tiger economy: Economy of a country which undergoes rapid economic growth. 🦀Crab mentality: A way of thinking best described by the phrase “if I can’t have it, neither can you.” 🐵Infinite monkey theorem: The idea that a monkey hitting keys at random on a keyboard for an infinite amount of time will almost surely type any given text, such as the complete works of William Shakespeare. 🐾Reverse ferret: A phrase in British media to describe a sudden reversal in an organization’s editorial or political line on a certain issue, usually, without acknowledgement of the prior position. Fun fact! The concept also shows up in philosopher Karl Popper’s theory of “[scientific falsification]( he uses the metaphor to show how scientific ideas can never be proven true, regardless of how many observations appear to support it. But a single controversial result can prove a theory to be false. take me down this 🐰 hole! Why do we not see black swans until after they occur? --------------------------------------------------------------- Part of it is due to the fact that we are hardwired to learn specifics when we should focus more on generalities, according to Taleb. We concentrate on things we already know and time and time again we fail to take into consideration what we don’t know. Taleb points out that the premise of his book is not to predict events which are unpredictable, but to build “robustness” and resilience against negative events, while still benefiting from positive black swan events. The point is to [target areas of vulnerability](. From a certain perspective, a black swan can be a way to [open your mind]( and understand that there is no system of thought that can’t be questioned or simply discarded. For instance, Taleb believes that the [2008 financial crisis]( was a white swan, but it’s [viewed as a black swan]( because so few people saw it coming. [The problem]( was that the system used to analyze risk was defective and could not keep up with the complexity of the impact of the possibility of large deviations. [Read the Quartz Obsession on the Dunning-Kruger effect]( Watch this! Natalia Osipova of the Royal Ballet performs the Black Swan solo from Tchaikovsky’s Swan Lake in 2018. Wikimedia Commons poll Are you prepared for black swans? [Click here to vote]( Yes, I try to build robustness into my professional and personal life.No, it’s hard enough to deal with what I know is wrong.I… don’t know what I don’t know? 💬 let's talk! In yesterday’s poll about [knitting]( 54% of you said that you’ve successfully knit something, 25% of you said you are non-knitters, 12% of you said you start knitting projects and then don’t finish, and 9% of you would rather crochet. 📧 Dennis wrote in to say that at 82 years old he remembers, “days of crocheting as a sailor in US NAVY during times at sea. Ended up with a table cloth. Just hooked the squares together.” 🤔 [What did you think of today’s email?](mailto:obsession%2Bfeedback@qz.com?cc=&subject=Thoughts%20about%20black%20swans%20&body=) 💡 [What should we obsess over next?](mailto:obsession%2Bideas@qz.com?cc=&subject=Obsess%20over%20this%20next.&body=) [🎲]( [Show me a random Obsession]( Today’s email was written by [Michelle Cheng]( edited by [Whet Moser]( and produced by [Tori Smith](. [facebook]( The correct answer to the quiz is Juvenal. Enjoying the Quartz Daily Obsession? [Send this link]( to a friend! Want to advertise in the Quartz Daily Obsession? 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