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swans
30.04.2020

On the colour of Swans and our fragile world

There’s a fascinating and recommended interview in the New Yorker with Nassim Nicholas Taleb of ‘Black Swan’ fame.

Here are our three key take-aways (and excerpts from the article):

1. The COVID-19 outbreak is not a black swan.

  • A black swan is not a “cliché for any bad thing that surprises us.”
  • The pandemic was wholly predictable – and as such was “a white swan if ever there was one”. (see e.g. this article)
  • (Reminder: a black swan is “an event that comes as a surprise, has a major effect, and is often inappropriately rationalised after the fact with the benefit of hindsight.”)

 

2. We need to stop thinking and acting as though “our tomorrows are likely to be pretty much like our yesterdays”.

  • We (cognitively) tend to focus on the too-obvious most-common events – those “at the center of the bell curve”.
  • We disregard potentially fatal ‘fat tails’ - events that seem “statistically remote,” but in fact “contribute most to outcomes” by precipitating chain reactions.
  • The reason to worry about fat tails: “Proliferating global networks, both physical and virtual, inevitably incorporate more fat-tail risks into a more interdependent and “fragile” system.”
  • In an increasingly interconnected world, we therefore need to change business practices and social norms – “building political structures so that societies will be better able to cope with mounting, random events.”

 

3. Mr. Taleb spits out quotable quotes like nobody’s business:

  • On the delayed reaction of governments: “[They] did not want to spend pennies in January; now they are going to spend trillions.”
  • On the role of government: “The state,” he [Taleb] told me, “should not smooth out your life, like a Lebanese mother, but should be there for intervention in negative times, like a rich Lebanese uncle.”
  • On building up buffers: “If it can spend trillions stockpiling nuclear weapons, it ought to spend tens of billions stockpiling ventilators and testing kits.”
  • On the need to be resilient: ”That’s why nature gave us two kidneys.” 
  • On the value placed on efficiency over resilience: “It would seem most efficient to drive home at two hundred miles an hour,” he put it to me. “But odds are you’d never get there.”
  • On inequality: “When one per cent of the people have fifty per cent of the income, that is a fat tail.”

 

 P.S. See also Taleb and Mark Spitznagel's article with their view on the U.S. Government's bail-outs.

 

What black or white swans could impact your business? Try our scenario sprint to find out! Contact us for more information.

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