The Black Swan

The black swan is an event with extreme improbability and large magnitude and consequence thought to play a large role, an outlier, a dip in the market, a mark in history.

People tend to think of history as stories, simplified, summarized, and elegant, but there are often moments like these with great pangs in our stomachs unsure and unfathomable. And as days pass, we seem to tend to rationalize the events past – that they are fathomable that they somehow made sense. Alas, the occurrence of the market shifting up or down, one country or state falling or another though they lay completely outside of our forecast, do not seem so outlandish in the aftermath. This retroactive plausibility causes a discounting of the rarity and conceivability of the event.

We seem to be apprenticed to the skepticism, to be trained to the practice to chance and uncertainty, to the opacity of the narrative.

The problem we are facing is complex. We could manufacture stability by pushing money into the economy, but we should care more about the consequences than really how it happened and how we were wrong.

Instead of pushing money being added with no result, unemployment in New York triggered by Wall Street losses percolate on and on… and the feedback loops goes on to monstrous input estimation errors.

I think systems are still too complex, which creates leverage not optimization. It is hard to frame the risks and try to calculate them. There is great degree of interdependence in today’s economy.

Perhaps instead of focusing on the improbable, the worst case scenario, and the unknowns, we can focus on the redundancies as our insurance – less imposed, more regular, and more derived from the past – the long-term game.