Black swan theory - Wikipedia

Black swan theory - Wikipedia

A black swan, a member of the species Cygnus atratus

The black swan theory or theory of black swan events is a metaphor that describes an event that is a surprise (to the observer), has a major effect, and after the fact is often inappropriately rationalized with the benefit of hindsight.

The theory was developed by Nassim Nicholas Taleb to explain:

1. The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology
2. The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities)
3. The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs

Unlike the earlier philosophical "black swan problem," the "black swan theory" refers only to unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outliers, collectively play vastly larger roles than regular occurrences.^[1]

Contents

• 1 Background
• 2 Identifying a black swan event
• 3 Coping with black swan events
• 4 Epistemological approach
• 5 See also
  • 5.1 Books by Taleb
• 6 References
• 7 External links
  

The phrase "black swan" derives from a Latin expression; its oldest known occurrence is the poet Juvenal's characterization of something being "rara avis in terris nigroque simillima cygno" ("a rare bird in the lands, very much like a black swan") (6.165).^[3] In English, when the phrase was coined, the black swan was presumed not to exist. The importance of the simile lies in its analogy to the fragility of any system of thought. A set of conclusions is potentially undone once any of its fundamental postulates is disproved. In this case, the observation of a single black swan would be the undoing of the phrase's underlying logic, as well as any reasoning that followed from that underlying logic.

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.^[4] In that context, a black swan was impossible or at least nonexistent. After Dutch explorer Willem de Vlamingh discovered black swans in Western Australia in 1697,^[5] the term metamorphosed to connote that a perceived impossibility might later be disproven. Taleb notes that in the 19th century John Stuart Mill used the black swan logical fallacy as a new term to identify falsification.^[6]
Specifically, Taleb asserts^[7] in the New York Times:

"What we call here a Black Swan (and capitalize it) is an event with the following three attributes. First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme 'impact'. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable."

"I stop and summarize the triplet: rarity, extreme 'impact', and retrospective (though not prospective) predictability. A small number of Black Swans explains almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives."

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The Black Swan (Taleb book) - Wikipedia, the free encyclopedia

The Black Swan: The Impact of the Highly Improbable is a literary/philosophical book by the epistemologist Nassim Nicholas Taleb. The book focuses on the extreme impact of certain kinds of rare and unpredictable events (outliers) and humans' tendency to find simplistic explanations for these events retrospectively. This theory has since become known as the black swan theory.

The book also covers subjects relating to knowledge, aesthetics, and ways of life, and uses elements of fiction in making its points.

The first edition appeared in 2007 and was a commercial success. It spent 36 weeks on the New York Times best-seller list.^[1] The second, expanded edition appeared in 2010.

Contents 1 Overview: Black Swan theory 2 Sales 3 Coping with black swan events 4 Summary 4.1 Part one: Umberto Eco's anti-library, or how we seek validation 5 Arguments 5.1 Higher frequency 5.2 The huge effect 5.3 Limits of human knowledge 5.4 Not all experts deserve the title 5.5 The narrative fallacy 6 Praise and criticism 6.1 Style 6.2 Praise 7 See also 8 Notes 9 References 10 External links