Black Swan Theory: The Impact of Rare, Unpredictable Events

Historically derived from the phrase “rara avis in terris nigroque simillima cygno” (a rare bird on earth, most similar to a black swan), Black Swan Theory of Nassim Nicholas Taleb is a 2007 book about the importance for human history of directionless, unexpected events, normally ignored because of their low probability, extremity, and randomness. They are black swans that appear after seeing millions of white swans; they are historical, artistic, and scientific events that happen without our expecting them and change us forever. The internet, Hitler, blitzkriegs, 9/11, works of art, Gangnam Style…

The experience of the world has become so mediated that we feel firsthand the consequences of events that are geographically and culturally foreign to us. Human experience has always been connected by our ultimate belonging to the species, but the current connection goes beyond biological empathy, and just as we benefit from it, we also suffer its disadvantages when a supposedly unexpected event breaks into daily life and forever changes our perspective on things or our understanding of their possibilities.

In modern history, scientific discoveries, Hiroshima, the Holocaust and Nazism, hypercommunication with mobile phones and the internet, attacks and the rise of terrorism, among many other events observed and experienced with astonishment, have left indelible marks on human life. With them, according to the theory's author, we were facing Black Swans.

The Black Swans of Nassim Nicholas Taleb

Nassim Nicholas Taleb is the author of the Black Swan theory, which ridicules the idea of predicting the future based on the argument of the number of black swans one can see relative to the number of white swans. In his book (The Black Swan, 2007, Penguin) he argues that the world is dominated by the impact of rare, unforeseen, random, highly improbable events that nonetheless have an immense influence on the development of humanity. According to this theory, life is the cumulative effect of a handful of shocks, unexpected events, and the importance of the low probabilities of things that develop without our being able to predict them easily.

While the theory's purpose is not to confront these events or predict them, Taleb presents a series of points to identify them. These are the surprising quality of the event for the observer, its great impact (whether on humanity or a company), its ability to be rationalized retrospectively after it occurs, revealing its possibilities and the signs that were not considered. In the book, Taleb takes an epistemological approach that invites counterfactual reasoning when evaluating risk, improving the appreciation of the low expectations that an event has.

As the author himself explains, “I stop and summarize 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 and the elements of our personal lives.”

The main points of the Black Swan theory attempt to explain three particular matters that respond to a worldview of the world's inhabitants. The first point refers to the disproportionate role that certain events, strange to the common course of social life, play. These can occur in any field, whether politics, economics, science, or nature. They are events that break expectations.

The theory also explains the non-computability of the probability of consequential rare events because they are, precisely, too small to occur. The dismissal of small numbers is what makes the eventual impact when they do occur. Finally, the Black Swan refers to the psychological biases that make us ignorant of the role that strange events play in the development of historical affairs. The importance of the theory lies in Taleb indicating that these atypical and extreme events play roles that are collectively greater than regular events.

An Invitation to Discussion

On a personal level, as an epistemological theory, the Black Swan theory still owes a few debates regarding the treatment of topics that cannot be counteracted in space-time and for not closing with some specific method of verifying small improbabilities, also taking into account biased and retrospective information, which is fertile ground for speculation about the causes of a particular event.

Regarding the idea of human unpredictability, what matters to this writer is not the way the event occurs or its characteristics, but the conditions that give rise to its possibilities. We live in a world of possibilities given by physical, psychological, sociological, political, economic reasons, etc., within which are the possibilities of an event unfolding in various ways. Nazism was a black swan according to the author, but anyone could have read Mein Kampf in 1926 and guessed its possibilities. Its impact is beyond discussion, but that is a retrospective reading that does not negate the possibility of a prospective approach that could have warned about the potential of a Holocaust, just as today the objectives of potential attacks are studied.

As Michael Lee says about the Theory, “Science is in greater control of the future than Taleb gives credit for. […] The subjective nature of the Black Swan ideology comes out in the very personal, partial, and rhetorical style of the book's writing, which is full of opinions but not facts.”

In this first reading, the writer understands that the reflection made by the Black Swan theory could be superficial, since it focuses on the impact that an event generates and its particular characteristics. The attack on the Twin Towers, for example, was unique for its singularities in terms of modus operandi, number of victims, geographic location, and more, but ultimately it was an attack that has a political and sociological explanation that exceeds this article.

Perhaps it is a matter of semantics, but when a theory is developed and wants to transcend as more than pop philosophy, there are certain guidelines to follow. What do you think?

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