The black swan theory, or theory of black swan events, is a metaphor that describes an event or a series of events that are coming as a surprise, have a major effect, and are often mistakenly rationalized after the fact with the benefit of hindsight.
Classic “black swans” events examples are the rise of the internet, the personal computer, World War I, the dissolution of the Soviet Union, and the September 11, 2001 attacks.
The theory was introduced to the world by statistician, former option trader, and risk analyst Nassim Nicholas Taleb, in his 2001 book “Fooled By Randomness”, which concerned financial events.
His 2007 book ‘The Black Swan: The Impact of the Highly Improbable’ extended the metaphor to events outside of financial markets. Taleb regards almost all major scientific discoveries, historical events, and artistic accomplishments as “black swans”—undirected and unpredicted.
Psychological bias: “Looking back, it makes sense.”
The theory identifies a black swan by 3 main components:
1. The event is a surprise (to the observer).
2. The event has a major impact.
3. After the first recorded instance of the event, it is rationalized by hindsight, as if it could have been expected; that is, the relevant information was available but unaccounted for in risk mitigation programs. The same is true for the personal perception by individuals.
“Things always become obvious after the fact” ~
~ Nassim Nicholas Taleb
The theory has many more layers and is relevant to multiple fields in our lives, and is far more complex and profound than how it is presented here; but perhaps the most interesting aspect of it is the 3rd component, the psychological bias of our tendency to rely solely on things that we have seen and encountered before.
In Taleb’s words:
“We do not spontaneously learn that we don’t learn that we don’t learn. The problem lies in the structure of our minds: we don’t learn rules, just facts, and only facts. Metarules (such as the rule that we have a tendency to not learn rules) we don’t seem to be good at getting. We scorn the abstract; we scorn it with passion.“
In other words, we rely only on what we know, but what about what we don’t know? What about what we don’t know that we don’t know?
How can this be relevant to our own personal life?
What else exists that you don’t know about?
Why is it called The Black Swan Theory? Why not the Blue Dog Theory or Brown Cat Theory?
Up until the 17th century, it was believed that all of the swans in the world are white. Why? Because no one had ever seen a swan that had a different color.
What happened in the 17th century? The discovery of Australia.
In 1697 Dutch explorer Willem de Vlamingh, witnessed black swans in Australia.
It was believed that all swans are white, since no one has ever seen something else. But what was the “truth”? That this whole time there was an entire continent named Australia that existed, just “waiting there” for someone to find it.
What does it say about your life?
Just because you haven’t seen yet something doesn’t mean that it’s not there, that it doesn’t exist.
“The privilege of a lifetime is to become who you truly are.”
~ Carl Jung ~
When you are looking at it through this perspective it is so inspiring.
What if there’s an entire “Australia” waiting for you within yourself? Waiting for you to discover it?
The fact that you haven’t seen it yet does not mean that it’s not there, that it doesn’t exist. The fact that at this point of your life all of your swans are white, does not mean that black ones are not there, within you.
