Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. What we call here a Black Swan (and capitalize it) is an event with the following three attributes.įirst, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. He gives the rise of the Internet, the personal computer, World War I, the dissolution of the Soviet Union, and the Septemattacks as examples of black swan events. Taleb regards almost all major scientific discoveries, historical events, and artistic accomplishments as "black swans"-undirected and unpredicted. His 2007 book The Black Swan extended the metaphor to events outside of financial markets. īlack swan events were discussed by Nassim Nicholas Taleb in his 2001 book Fooled By Randomness, which concerned financial events. Taleb notes that in the 19th century, John Stuart Mill used the black swan logical fallacy as a new term to identify falsification. The term subsequently metamorphosed to connote the idea that a perceived impossibility might later be disproven. However, in 1697, Dutch explorers led by Willem de Vlamingh became the first Europeans to see black swans, in Western Australia. In that context, a black swan was impossible or at least nonexistent. 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. Juvenal's phrase was a common expression in 16th century London as a statement of impossibility. In this case, the observation of a single black swan would be the undoing of the logic of any system of thought, as well as any reasoning that followed from that underlying logic. A set of conclusions is potentially undone once any of its fundamental postulates is disproved. The importance of the metaphor lies in its analogy to the fragility of any system of thought.
: 165 When the phrase was coined, the black swan was presumed not to exist. The phrase "black swan" derives from a Latin expression its oldest known occurrence is from the 2nd-century Roman poet Juvenal's characterization in his Satire VI of something being " rara avis in terris nigroque simillima cygno" ("a rare bird in the lands and very much like a black swan"). : xxi More technically, in the scientific monograph "Silent Risk", Taleb mathematically defines the black swan problem as "stemming from the use of degenerate metaprobability". Such events, considered extreme outliers, collectively play vastly larger roles than regular occurrences. Taleb's "black swan theory" refers only to unexpected events of large magnitude and consequence and their dominant role in history. The psychological biases that blind people, both individually and collectively, to uncertainty and the substantial role of rare events in historical affairs.The non-computability of the probability of consequential rare events using scientific methods (owing to the very nature of small probabilities).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.The theory was developed by Nassim Nicholas Taleb, starting in 2001, to explain: The term is based on an ancient saying that presumed black swans did not exist – a saying that became reinterpreted to teach a different lesson after they were discovered in Australia. The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. A black swan ( Cygnus atratus) in Australia
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