The black swan is probably the most widely misunderstood philosophical term of this century. I tend to find it being thrown around to refer to anything surprising and negative. But that’s not how Taleb defined it.
Taleb defined it very simply as any high impact surprise event. Of course, the definition of surprise is relative to the observer. To the lunatics at the NYT who push bilge about continuing American primacy, a meteoric decline in America’s standing (probably emerging from some of the fragilities I have identified in the global economic fabric) would be a black swan. It would also be a black swan to the sorry swathes of individuals who believe what they hear in the mainstream media, and from the lips of politicians (both Romney and Obama have recently paid lip service to the idea that America is far from decline). Such an event would not really be a black swan to me; I believe America and her allies will at best be a solid second in the global pecking order — behind the ASEAN group — by 2025, simply because ASEAN make a giant swathe of what we consume (and not vice verse), and producers have a historical tendency to assert authority over consumers.
But black swans are not just events. They can also be non-events. To Harold Camping and his messianic followers who confidently predicted the apocalypse on the 21st of May 2011 (and every other true-believing false prophet) the non-event was a black swan. Surprising (to them at least) and high impact, because it surely changed the entire trajectory of their lives. (Camping still lives on Earth, rather than in Heaven as he supposedly expected).
To true-believing environmentalists who warn of Malthusian catastrophe (i.e. crises triggered by overpopulation or resource depletion), history is studded with these black swan non-events.
From the Economist:
Forecasters of scarcity and doom are not only invariably wrong, they think that being wrong proves them right.
In 1798 Thomas Robert Malthus inaugurated a grand tradition of environmentalism with his best-selling pamphlet on population. Malthus argued with impeccable logic but distinctly peccable premises that since population tended to increase geometrically (1,2,4,8 ) and food supply to increase arithmetically (1,2,3,4 ), the starvation of Great Britain was inevitable and imminent. Almost everybody thought he was right. He was wrong.
In 1865 an influential book by Stanley Jevons argued with equally good logic and equally flawed premises that Britain would run out of coal in a few short years’ time. In 1914, the United States Bureau of Mines predicted that American oil reserves would last ten years. In 1939 and again in 1951, the Department of the Interior said American oil would last 13 years. Wrong, wrong, wrong and wrong.
Predictions of ecological doom, including recent ones, have such a terrible track record that people should take them with pinches of salt instead of lapping them up with relish. For reasons of their own, pressure groups, journalists and fame-seekers will no doubt continue to peddle ecological catastrophes at an undiminishing speed. These people, oddly, appear to think that having been invariably wrong in the past makes them more likely to be right in the future. The rest of us might do better to recall, when warned of the next doomsday, what ever became of the last one.
Critics will note that Malthusians only have to be right once to provoke dire consequences; deaths, famines, plagues. Of course, that is the same logic that has led governments to spend trillions, and trample the constitutional rights of millions of people in fighting amateurish jihadis, when in reality more Americans — yes including the deaths from 9/11 — are crushed to death by furniture than are killed by Islamic terrorism.
But it is true, the scope of the threat posed by Malthusian catastrophe is probably an order of magnitude greater than by jihadis with beards in caves. And of course, groups like the Club of Rome and individuals like Paul Ehrlich will keep spewing out projections of imminent catastrophe.
So what were the real threats to humanity following Malthus’ predictions? Was it overpopulation? Nope. Imperial warfare killed far, far more than any famine or resource crisis in the 20th Century. To the overwhelming majority of the population, World War I — both in its origins (the assassination of an obscure archduke), its scope, its death toll, and its final ramifications (i.e. the Treaty of Versailles, the rise of Nazim and World War II) was the great black swan event, the great killer, the great menace.
Black swan events defined the 20th Century; the black swan non-events of Malthus did not. The true story of the early 20th Century was the decline of a heavily indebted, consumptive and overstretched imperial power (Britain), and the dangers to peace and international commerce as its productive and expansionistic rivals (especially Germany, but also America) rose and challenged her (in vastly different ways).
There are some real environmental concerns like the dangers posed by nuclear meltdowns, runaway global warming (although I believe a little global warming is probably a good thing, as it will keep us out of any prospective future ice age), tectonic activity, or an exotic solar event like an X-flare, but we have no clue what will hit us, when it will hit, and its branching tree of consequences. We don’t have a full view of the risks. In spite of what unsophisticated mathematician pseudo-scientists in the tradition of Galton and Quetelet may tell us, we cannot even model reality to the extent of being able to accurately foretell tomorrow’s weather.
But once again a heavily consumptive, indebted and overstretched imperial power (America) is coming to terms with the problem of decreasing power in the face of productive and expansionistic rivals (particularly China). That parallel tends to lead me to believe that imperialist warfare will be the greatest menace of the 21st Century, too. But that’s the problem with predicting the future: we simply don’t know what black swan events and non-events nature will deliver (although it would be wise not too place too much trust in politicians or the establishment media, who simply blow their own trumpet and hope for the best).
So what are we to do?
Well, I think it’s important that businesses, governments and individuals think about Malthusian concerns. Malthus’ incorrect theorising touched upon the most significant of human concerns. Quite simply, without food, water and energy we weak and fragile humans are imperilled. It’s important that governments (particularly of importer nations) devise strategies to cope with (for example) breakdowns in the international trade system. Individuals, families, businesses and communities should be aware of where their food, energy and water come from, and of alternatives in case the line of supply is cut. Keeping backups (e.g. solar panels, batteries, wind turbines, storable food and water) is a sensible precaution for all citizens. There will be shocks in the future, just as there have been in the past. We should be prepared for shocks, whatever they may be.
And we should learn to love such volatility. Nature will always deliver it. We evolved and developed with it. It is only in modernity that we have adopted systems procedures and methodologies to subdue volatility. And — as we are slowly learning via the disastrous consequences of every single failed experiment in central planning — volatility suppressed is like a coiled spring.


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agriculture?
Exactly. War requires that a sucker be born every minute. Banking requires than 9 suckers be entered into the system because that is how many times a current sucker's money is leveraged. Does this dude really think that we would have had the same advancements in technology, arts, philosophy, science etc. with the population levels of 10,000 B.C. when the entire world had a population of around 1 mil all of whom were devoted to food procurement (except maybe a few medicine men)? To use a less extreme example, part of the technological gains seen in the 20th century have to be attributable to the fact that there are more minds working on the same problem. . or that the chances of a genius being born somewhere where he can effect things on an international scale is greater. The law of diminishing returns certainly applies here, but there have been benefits to increases in the world's population.
South Africa better load up on Asians, Indians, Eastern Europeans.....like Canada is doing ! Those immigrants bring their skills and plenty of money ! Monedas 2012 ZeroTolerancePoorFuckMigrants
With the american politburo now pretty much patrolling the internet, even sites like this, you have to wonder how extreme the next black swan will be that is even unbeknownst to this site since evil(government) pretty much works around the clock.
The Black Swan has just been put on the endangered species list so back off.
Take your poor, stupid, lazy, dirty wretches yearning to suck welfare and commit acts of terror and shove them up your Socialist asses ! Monedas 2012 Comedy Jihad Re-Dedicating The Statue Of Liberty
“Consider a turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the genreal rule of life to be fed every day by friendly members of the human race “looking out for its best interest,” as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.”
Black Swan, Nassim Taleb
I have an artist friend who can take a mulattoe's DNA and make a computer enhanced portrait of what he would look like if he had no white blood ! BO Juice would look like Whoopi Goldberg ! Monedas 2012 Comedy Jihad Racial Revisionism
Nice picture of the Summer Palace btw.
Monedas has done what most black men won't do....he has eaten black pussy more than once ! Wasn't bad, either ! Monedas 2012 Comedy Jihad Funning Comedians
oh noez - TWO KINDS???
Let's boil the planet. Ecological doomsayers are all wrong.
Ooops !
Have you ever had or given a boiling hot enema ? Your not missing anything, trust me ! Monedas 2012 Ecological Doomers Depress Me !
The fish will be fully cooked when it comes out of the ocean - ready to eat. I love the future.
i havent read the book in quite awhile but i was pretty sure that the black swan idea had to do with limitations in inductive reasoning and the inapplicability of gaussian statistical methods to populations or samples of populations or time series having properties which violate the basic assumptions underlying gaussian statistical methods.
but other than that the rest of the piece was grand. Best to be prepared for shitstorms, do not trust authority and kicking the can down the road in the face of insuperable problems caused by morons elected by morons (and some unelected morons to whom the other morons delegated the responsibilities entrusted to the elected morons) increases the amplitude of subsequent events if modelled mathematically.
Necrometrics
Awesome!
The one thing I learned from this rambling mess of a post is that I have not been sufficiently wary of my furniture. Thanks.
Why?
The author is full of crap. I'm almost 60 years old and have never spent a single day of my life (with the exception of two power outages in 1968? upstate NY and in NYC 1978?) without electricity (it was a while ago and the power came back on pretty quickly).
There have never been food shortages or water shortages either. The statement that prepping is a "sensible precaution" is utter horse shit and proves that propaganda does indeed work and also that the quality of the guest posts on ZH is slipping badly.
It is actually pretty hilarious but the evidence you proffer supporting your assertion that the author is full of crap (using inductive reasoning mind you) could have been part of the book! The turkey did not know that his routine would change either. He just knew he was fed every day until one day he was taken out and slaughtered for food. The turkey is you! LOL
Read some history. It can and will happen here, just a matter of when (one can argue about days, weeks, months or years. could be decades or centuries even)
Wow, are you one ignorant and stupid SOB.
"It has never happened to me, therefore it is never going to happen at all."
History is filled with countless examples of those who died as a result of such blinkered arrogance and denial. By your "logic", apparently NOBODY died in the 2004 Indian Ocean tsunami, because none of them had ever experienced a tsunami before. By the same "logic", NOBODY died in the volcanic eruption of Vesuvius in 79 AD in Pompeii either --- nor did it even erupt --- as the mountain had never shown any evidence of volcanic activity in known history up to that point.
Idiot
Irony. The author obviously doesn't know what a Black Swan is, and neither do most of the commenters, and yet here you have hit upon it's complete opposite.
The Black Swan was a dialectic proposed by Karl Popper, not Nassim Taleb. It describes the limits of deductive reasoning, that is, every swan I have seen is white, every swan anyone in my culture has seen is white, therefore, all swans are white. Popper proposed that it only takes the existence of a single black swan to invalidate that 'assertion of fact'.
Your example is perfectly illustrative of the limits of deductive reasoning that Popper was alluding to. I have never been without electricity or food or water for any extended period of time, therefore it will never happen.
Therefore, if you believe Popper (or Taleb), that events that are outside the normal distribution can and do occur, then a sensible precaution would be to make some preparations for that.
Take electricity. In my lifetime, the longest I have been without electricity in my home was 3 days. So if 3 days is the extreme of the distribution, then a black swan event would be longer than 3 days. Diesel generators are fairly cheap now, and would be in high demand in an extreme disruption of supply, so spending a couple of hundred as insurance against that type of event is pretty sensible.
That is actually very interesting. I did not realize that Popper had come up with that. I recently read Wittgenstein's Poker, a story about a meeting between Popper and Wittgenstein at Cambridge and how the latter threatened the former with a hot fireplace poker at an informal meeting. It also dealt with the divergent stories of the rise to the top of the profession of the two in the aftermath of WW2. In any event I do think you mean inductive reasoning rather than deductive, inductive referring to drawing generalizations and principles from empirical observation and deductive having to do with reasoning about specific instances from statements or principles. The Black Swan has to do with the fact that an assertion based on having observed something repeatedly cannot really be ascertained to be true or false no matter how many observations there are in theory, though in practice there are many things that are taken to be true.
I am not sure it isn't Deductive since they are treating the Observed Instances as a Complete Reference Pool rather than implying in this ONE INSTANCE things might be different. I do not think financial markets use Induction it is simply too scary for their modelling and awful for their Marketing. Noone wants to hear they are buying THE BOND that might possibly default or be full of junk but all others are probably fine.
If you use Inductive Logic in Financial Markets you are an Insider Trader
'I did not realize that Popper had come up with that.'
Popper simply recycled an old idea that truly cannot be traced to its 'origin'. Before Popper brought the question to light after some time, Hume wrote about the limits and problems of knowledge and he, in turn, heavily relied on yet other philosophers and theologians like Pierre Bayle and possibly Huet. Basically it traces itself back to the supposed 'divide' of faith and reason. Certain philosophers/thinkers called fideists make a separation between faith and reason like Pascal and others.
Bit like David Hume and the Indian he thought had never seen snow. It is the English Empiricist Tradition (Hume was nevertheless Scots) versus the Kantian Synthetic Reasoning. Most financial markets follow Normal Backwardisation thinking the Past predicts the Future but fail to encapsulate the particular circumstances of the Past which might have shifted on the way to the Present. They are so filled with hubris that they have computers to calculate that they forget they are still calculating Odds in a gamble rather than defining Events.
Not really sure that Hume and Kant confronted the same philosophical themes. Hume did indeed bring into light the 'induction' problem and basically questioned the underlying foundation of the natural sciences: The Causal Principle.
Kant postulated necessary causality for scientific problems while on the other hand maintained free will to maintain human action. He attempted to work both out philosophically. Kant's 'Honest path/road' -- IMO his best contribution -- is nowhere to seen amongst today's supposed best thinkers.
I tend to disagree because the theme was Epistemology - Knowledge and how it was obtained. Hume was looking from the empiricist tradition of Observation and Kant was exploring Pure Knowledge as embodied in Kritik der Reinen Vernunft and whether there could be A Priori or even Synthetic A Priori Knowledge as opposed to Analytic Knowledge. In fact the issue of Knowledge and Belief was the central question of the 18th Century period
Kant himself stated:
“I freely admit that it was the remembrance of David Hume which, many years ago, first interrupted my dogmatic slumber and gave my investigations in the field of speculative philosophy a completely different direction.”
Interesting. Here's an excerpt from Rank's Psychology and the Soul:
The subjective feeling of free will has always been the counterargument of philosophers in the discussion of causality' Bergmann (1929, 7) admits that since Hume raised the question, no one has refuted him to validate the causal principle. Kant's orientation gave the problem a new twist: in precritical philosophy, science was considered an image, a photograph of reality, whereas after Kant it became an interpretation of reality, determined by certain categorical premises. In Kant's sense, the causal principle is a hypothesis claimed to underlie experience. Kant first formulated this "antinomy" of two principles -- causality, necessary for science; and freedom, essential for our everyday conduct --and tried to work it out philosophically. The value of this work is a statement of the problem, that is, understanding causality as a postulate we apply to nature, not a law derived from our knowledge of nature.
"...they forget they are still calculating Odds in a gamble..."
which just reminds me that they are using our money (now it's pseudo-private but wait until they have to be bailed out) for their gambles...
rant end
Let's not forget Taleb's "gray swan" also -an event that more or less clearly can be seen coming down the pike and thus be prepared for to some degree, as opposed to the mostly unforseen black swan.
Wow that is a really good post, best I have read in a long time.
Good stuff.
Almost everybody thought he was right. He was wrong.
He was quite correct in fact. Look at Ireland dependent upon one crop. When Malthus wrote the Corn Laws were in full effect setting a MINIMUM price for bread and raising the price of land. So without Repeal of the Corn Laws in 1846 Malthus would have been right and Northern cities swollen with Irish refugees would have exploded even more violently than they did. The US had a Frontier and as Von Thunen pointed out it had land available to expand - Europeans did not without risking major warfare.
As for Black Swans - you fail to mention LTCM where they were too busy measuring Betas and ignored Alphas. It is always the bit of the equation you forget or fudge that kills you -
"So what were the real threats to humanity following Malthus’ predictions? Was it overpopulation? Nope. Imperial warfare killed far, far more than any famine or resource crisis in the 20th Century."
Hmm. Maybe the reduction of population by war prevented that black swan. In absence of war, maybe that black swan would have come.
" To the lunatics at the NYT ..."
Leftist sophisticates are using the term Black Swan to in place of the more common leftist term “tipping point”. Both are variations on the same theme- it is that point in the near future when their magical thinking mysteriously starts to work, no matter how unlikely or even impossible what they are yearning for really is.