not to be blamed for what just happened. Getting tail risk wrong may be an indictable offense. But Black Swans? They seem to absolve everyone of any responsibility for what went down, because nobody could have seen it coming.
The habit mentioned earlier of equating Black Swans with ‘mere’ tail risk misses out on what is perhaps its most important dimension, namely the expectations we had going into the situation. Because of the role of expectations, what is a Swan to you may not be one to me. It is, in Taleb's preferred terminology, a ‘sucker's problem'. Naïve and ignorant individuals are more prone to experience Black Swans simply because they fail to form realistic expectations. To illustrate this idea, Taleb uses the example of a turkey somewhere in the US as Thanksgiving approaches. Having walked about generously fed for its entire life, the turkey is unsuspecting of the calamity that is about to befall it. The butcher, however, is obviously not unsuspecting, and he is therefore not in for a Black Swan – exactly the same event, but wildly diverging expectations.
The relativity of Black Swans has wide implications. Whenever a high impact event occurs, this may or may not be shocking. The more interesting discussion to be had is about who was attuned to this possibility and who was caught out? A Black Swan always requires a vantage point. To the suckers, it appears as if the tail just moved, but not necessarily to someone who sees the world a bit differently. Whenever we hear the term Black Swan mentioned, therefore, what should immediately spring to mind is the follow‐up question ‘Well, a Black Swan to whom?’
The Covid‐19 pandemic is a case in point. Was this a Black Swan? It certainly meets the criterion of being a highly consequential event. Interestingly, Taleb himself has gone on record saying that C‐19 was not a Black Swan. His argument is that there is a history of pandemics, based on which popular films were made well before C‐19. A basic analysis of the connectivity of the modern world (i.e. means of travel) would also have pointed to the obvious plausibility of a global pandemic. Respected institutions issued reports warning of global pandemics already in the early 2000s. Bill Gates gave a thoughtful talk on the subject in 2015, also issuing words of warning for those willing to listen.11 These considerations may well have sensitized students of history who also had the wisdom to internalize the possibility that this could happen in their own lifetime.
However, casual observation suggests that most of us have not reached such a state of immaculate wisdom. Many do not read books and have never heard of connectivity. All of our egocentric biases make going into denial about pandemics the easiest thing in the world, something which Albert Camus, the French philosopher, understood well:
‘Everybody knows that pestilences have a way of recurring in the world; yet somehow we find it hard to believe in ones that crash down on our heads from a blue sky.’12
For most of us, watching a film about something makes it seem even more unreal. It puts it in the same category as Bruce Willis drilling holes in meteorites about to smash into Earth – pure entertainment.13 If so, consuming films may turn us into even bigger suckers because they warp our expectations. Since we are now discounting zombies heavily as just movie entertainment, woe on us the day they show up on the doorstep, because we have not prepared one bit for that eventuality!
At any rate, even if we had read about pandemics and realized that the probability of another one is clearly not zero, there is something about the magnitude of the consequences. Just like the ‘business‐as‐usual’ risk, Black Swans have two dimensions: possibility and consequence. Granting the possibility of something is a binary situation: a recognition that such a thing could happen (as opposed to saying there is no way it ever could). Even if we are willing to entertain the possibility of something, we could still be suckers with respect to the consequences once the event is unleashed. This is why C‐19, for most people, was a genuine Black Swan. Pandemics, sure, I think I heard about that in school. But who could have imagined entire countries shutting down? Spending months on end in lock‐downs? Tourism coming to a near stand‐still? Mad dashes – knife fights even – for toilet rolls? It would take a pretty serious student of history, and one with a very fertile imagination at that, to envision the severity of the consequences along so many paths. Therefore, for a substantial majority of the planet's inhabitants, C‐19 was a Black Swan. Along the same lines, it would be questionable not to label the French Revolution with its decidedly wild consequences a Black Swan just because there had been revolutions prior to that.
When it comes to the possibility of something happening, history by now offers a pretty impressive palette of different types of events. We might think of these as ‘known unknowns’, as it is clearly within our reach to form an understanding of them. What even the most creative and superbly educated mind cannot envision, however, is the magnitude of the consequences of those events as they would play out in the present day. The dynamics are truly impossible to imagine, and hence the consequences. History only repeats itself for the most part. With respect to the consequences, most of us are suckers, especially when it comes to our own lives and times. Whenever something impactful but entirely conceivable hits our vicinity, we are stunned no matter what.
WHAT MAKES US SUCKERS?
The previous section referred briefly to the ‘not in our lifetime’ perspective. Let us linger on this point for a bit, as it is one of the keys to understanding Black Swans and why we are essentially born suckers. Most of us will freely admit that humanity is in for one disaster or other. Sooner or later, that asteroid will knock us out of our pants, for sure, but it is always later, somewhere out in the distant future. It is not going to happen in my lifetime. Why? Because I am somehow special. Stuff only happens to other people, whereas I am destined to lead a glorious and comfortable existence. Based on such egocentric beliefs, we might coolly concede that in the larger scheme of things, something is sure to happen, yet almost completely discount the possibility as far as our lifetime and corner of the world is concerned. Not that we always say so publicly or even think in those terms outright, it is more of a tacit assumption.
This ‘because I'm special' protective mechanism goes a long way in setting the stage for Black Swans. However, it is only one of the many ways in which our outlook is warped, which brings us to the long catalogue of biases that have been identified and described by scholars. A bias can be said to be a predisposition to make a mistake in a decision‐making situation, because it leads us away from the decision that would be taken by a rational and well‐informed person who diligently weighs pros and cons. What biases tend to have in common is that they make us more of a sucker than we need to be. They are a staple of business books nowadays (those on risk management in particular) and may bore the educated reader. Since they are so fundamental to the concept of Black Swans, we must briefly review them nonetheless. What follows is a non‐exhaustive list of certain well‐documented biases that in various ways contribute to the Black Swan phenomenon. As is commonly pointed out, these biases have been mostly to our advantage over the long evolutionary haul, but are often liabilities in the unnatural and complex environment we find ourselves in today.
The narrative fallacyIn explaining why we are so poorly equipped to deal with randomness, Taleb focuses on what he refers to as ‘the narrative fallacy’, which he defines as ‘our need to fit a story or pattern to a series of connected or disconnected facts’ (Taleb, 2007, p. 309). We invent causes for things that we observe in order to satisfy our need for coherent explanations. It turns out that we do not suffer dissonance gladly, so our brain will supply any number of rationalizations to connect the dots. By reducing the number of dimensions of the problem at hand and creating a neat narrative, things become more orderly. Everything starts to hang together and make sense, and that is how the dissonance is resolved. Since we are lazy as well, we often converge on the rationalization that satisfies our craving with the least amount of resistance. However, when we force causal interpretations on our reality, and invent stories that satisfy
