The Black Swan Event Paradox

Introduction. Coined by Nassim Nicholas Taleb, a black swan event refers to an extremely rare, unpredictable, and unexpected event that has significant and widespread consequences[1]. More details will unfold in the discussion below. Possibly, the unpredictable and unexpected components dominate the true nature of black swan events.

 The Black Swan Paradox. If you're expecting a black swan event, can it happen? Possibly NO.  The reason is that black swan events are not expected and not predictable. Your antennae are up in your world. You expect anything and everything. For example, if you expect an asteroid to strike the earth next year, it’s terrible but not a black swan event. On the other hand, if your fiance dumps you at the altar, that would be quite the black swan event, though of the personal variety and not particularly widespread.

 Examples. No theory of black swan events exists, or principles for that matter. Perhaps one will develop. In the meantime, it may be best just to consider examples of what is and is not such an event. From these perhaps a general abstraction can be found.  By analogy, problems and solutions required some study before proper definitions were developed, and after that the rules.

 Right now, with economic conditions horrible, with at least two wars raging, with illegals pouring across the border, with schools failing, with demonstrators everywhere, we seem to be in bunker mode, waiting for the next debacle. So, what possible black swan events would be singularly disastrous that we don’t expect? Let’s explore just ten possibilities for the near term. Your task for each is to place a check if it’s unexpected and unpredictable having a disastrous impact, i.e. a black swan event. I’ll give my checks below.

            1.      The President dies suddenly.  He is old; his health is always in question; he needs a lot of                       rest.

2.      China attacks Taiwan. Well, they’ve been threatening this for some time.

3.      A massive earthquake occurs or a volcano erupts. We get at least one of each every year. But then eruptions on the magnitude of Krakatoa[2] or Vesuvius[3] are different. The San Francisco earthquake of 1906 was indeed a black swan event.

4.      Both Trump and Biden are not on the Presidential ballot. This could be a black swan, but possibly not disastrous. Unexpected?  Yes.

5.      Industrial robots attack workers.

6.      The top two American banks go bankrupt. This we neither expect, and the consequences would be great.

7.      A new and different highly virulent virus affects the world. Clearly, this would be disastrous, but after COVID, would it measure up to be a black swan event? Many already expect it.

8.      A student assumes the presidency of a major university. Faculty tenure is abolished; grades are eliminated.

9.      A full collapse of the world economy occurs next year.

10.  The sun erupts with massive sunspots, destroying satellite communications worldwide and massively affecting the weather.

Perhaps you can offer better examples of unpredictable, rare, and unexpected events. Predicting the future is difficult.

 Remarks. All of these are improbable and disastrous in scope. To my mind, only #5, 6, 9, and 10 would measure up as black swan events, because each would be a complete surprise and most would be calamitous, some even deadly. One comment about #5 is that just recently it happened at one of the Tesla plants. A robot, just one, did attack a worker. Bad robot.

 It’s good to think about these possibilities as so many of us now regard our world as encumbered by assorted instabilities, innovations, and incredible complexity. Can AI help? I’m not sure because AI is not really predictive; it only knows what it’s read. Of course, there’s generative AI, the creation of new knowledge, but it’s still very new.

 Summary. Not every unexpected, unpredictable, event measures up as a black swan event.

They should have some or several of the following characteristics.

·        Unexpected.

·        Unpredictable.

·        Rare.

·        Gross errors of calculations or assumptions.

·        High impact, widespread.

·        Impervious to risk management.

·        Resistant to modeling.

·        Disruptive.

·        Unforeseen.

·        Sometimes chaotic, random, or unstable events.

 A classic example of most of these characteristics is the world's first nuclear explosion that occurred on July 16, 1945, in New Mexico. Scientists did not know with certainty whether or not the bomb would set afire the entire earth. It didn’t. The greatest error of miscalculation I know was the result of spacecraft engineers at Lockheed Martin who used pounds instead of the metric system when exchanging vital data before the craft was launched. It fatally crashed on the Martian surface, at great expense and other consequences. The Tacoma Narrows Bridge[4] debacle was another colossal error of miscalculation, though it was foreseen by some. Bad engineering.

            
               Figure 1 Tacoma Narrows Bridge Disaster

 Of less than monumental importance, we include more local black swan events of the personal variety that almost all of us have experienced and many more will experience. A sudden family death, a terminal diagnosis, or even a risky surgery are among many examples. It is an easy case to consider personal black swan events as significant issues for psychological study.

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[1] Taleb, Nassim Nicholas, 1960- author. The Black Swan : the Impact of the Highly Improbable. New York :Random House, 2007.

[2] Winchester, Simon. Krakatoa: The Day the World Exploded, August 27, 1883. Waterville, Me., Thorndike Press, 2003.

[3] Lobley, J. Logan (James Logan), 1834-1913. Mount Vesuvius. A Descriptive, Historical, and Geological Account of the Volcano and Its Surroundings. London :Roper and Drowley, 1889.

[4] Petroski, Henry (2009). "Tacoma Narrows Bridges". American Scientist (2 ed.). 97 (2): 103–107