What comes to your mind when you see this topic? The Black
Swan movie! :) Well it was a psychological thriller. It does explain about a hidden
contradictory personality and makes a quite interesting tale on its own. (Multiple
personality Disorder) I am not planning to surf on that topic right now. What
I would be taking you through is the Black Swan theory by Nassim Nicholas Taleb.
For those who have read the book “The Black Swan – The
Impact of the Highly Improbable” this topic would be familiar. And for the
benefit of others, I would take you through what the theory is all about and
then try to apply it to something different, out of the usual and not to something in which the
theory is generally applied.
Now my first question to you is “Can you imagine swans being
black?” Majority might answer it as “No”. (Except the ones who have read the
book earlier ;) or the ones who have understood the fact that things might exist
thought it might not have been seen or observed currently).
Remember what Sir Arthur Ignatius Conan Doyle says in
Sherlock Homes.
“When you
eliminate the impossible what ever remains however improbable must be Truth”
The term “black
swan” derives from a Latin poetic expression. Its oldest known reference
comes from the poet Juvenal's characterization of something being "rara
avis in terris nigroque simillima cygno.” In English, this Latin phrase means
"a rare bird in the lands, and very like a black swan." When the
phrase was coined, the black swan was presumed not to exist. Juvenal's phrase
was a common expression in 16th century London
as a statement of impossibility. The London
expression derives from the Old World
presumption that all swans must be white because all historical records of
swans reported that they had white feathers. Thus the theory of a swan being
black was considered impossible
But the presumption
was disproved later when a Dutch expedition led by explorer Willem de Vlamingh
on the Swan River in 1697, discovered black swans in Western Australia
It is a fact that a
black swan is a member of the species “Cygnus atratus”, which remained
undocumented in the West until the eighteenth century
Now this is how Nassim Nicholas Taleb starts his book “The
sighting of the first black swan might have been an interesting surprise for a
few ornithologists (and others extremely concerned with the colouring of
birds), but that is not where the significance of the story lies. It
illustrates a severe limitation to our learning from observations or experience
and the fragility of our knowledge. One single observation can invalidate a
general statement derived from millennia of confirmatory sightings of millions
of white swans. All you need is one single (and, I am told, quite ugly) black
bird.”
Here we go. So “The Black Swan Theory” or Theory of Black Swan Events is a
metaphor that encapsulates the concept that the event is a surprise (to the observer) and has a major impact. After
the fact, the event is rationalized by hindsight. The theory was
developed by Nassim Nicholas Taleb
Now here comes a
question in mind as to how to identify / classify an event as a black swan
event. It has some characteristics.
First, it is a
surprise (to the observer or to the related set of people on whom it has an
impact though others from outside might have predicted the same the concerned
person is quite oblivious)
Second, the event has
some major impact (which can be immediate or it would have been the seed for
some further greatly impacting events)
Third, after its
first recording, the event is rationalized by hindsight, as if it could have
been expected (e.g., the relevant data were available but not accounted for)
According to Taleb,
the highly expected not happening is also a Black Swan – as, by symmetry, the
occurrence of a highly improbable event is the equivalent of the non-occurrence
of a highly probable one. A small number of Black Swans explain almost
everything in our world, from the success of ideas and religions, Economic
booms and recessions, Dynamics of historical events to the elements of our own
personal lives.
If an event is going
to create such a big impact why would anyone be blind enough not to notice?
Why there is
blindness to black swan events?
Would be continued
in next post :)
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