I wanted to start a black swan thread because I am fascinated by black swans. What captivates me in particular is my complete and total failure ever to see them coming! Sure, I realize at the core of the entire black swan concept is their element of surprise. Nevertheless, consider:
A small number of people MUCH smarter than myself saw the 2008 crash coming . . . . and profited hugely.
I’m not looking to profit, something well beyond my ability. But it would be nice just to avoid unwanted and undesirable black swan consequences!
The 2008 crash was a black swan. This current pandemic likewise. Other stuff is “out there”, some potential black swans are more likely, others less:
A caldera blow at Yellowstone, for example: unlikely
A Carrington effect redux: more likely (just my opinion) and in fact there have been moderate reiterations since 1859
Oceanic meteor strike/massive tidal wave: who can say
Watch your elevation on that one, more is better.
Meteor strikes land, worldwide dust: who knows
The focus of this thread is NOT on black swans so severe that all life on earth perishes. Obviously those are not really a problem since we all die.
Instead, and especially from the standpoint of personal finance and quality of life, it’s the smaller black swans which can pose a practical dilemma.
How about, for example, the shifting magnetic poles? Or, much more down to earth, how about loss of the internet?
There is a good piece in Financier Worldwide which talks about black swans. Here a couple of pull quotes:
The term ‘black swan’ was popularised by Nassim Nicholas Taleb in his 2007 book “The Black Swan: The Impact of the Highly Improbable”, to describe large-scale random events that are impossible to predict, yet have huge impacts
When planning for the unexpected, there is clearly a line to be drawn. Some possibilities are just too remote to justify the expense in time, money and human resources, and at some point boards must assess the cost benefits of attempting to predict the unpredictable.
One thing I sense strongly: the occurrence likelihood of a black swan of some sort during any interval of time increases as you enlarge the interval.
I’ve lived a decent number of years, but I nevertheless have trouble recalling black swans during the earlier years of my life. Probably I simply do not remember. I do recall the October 1987 stock market plunge. Am not sure it qualifies as a fully fledged black swan. Life moves faster today than once it did. This enhances possibility of events taking us by surprise.
Taleb, in his book, asserts our focus should not be so much on attempting to predict black swan events as it should instead be on arranging our affairs in a resilient manner able to weather unpredictable storms. I believe that is smart thinking, and I hope other forum members will share here their opinions on black swans.