Black swan

Inthe Australian black swan was introduced to New Zealand as an ornamental waterfowl and populations are now common on larger coastal or inland lakes, especially Rotorua LakesLake WairarapaLake Ellesmereand the Chatham Islands.

Black swan

The importance of the metaphor 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 logic of any system of thought, as well as any reasoning that followed from that underlying logic. 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.

However, inDutch explorers led by Willem de Vlamingh became the first Europeans to see black swansin Western Australia.

Taleb notes that in the 19th century, John Stuart Mill used the black swan logical fallacy as a new term to identify falsification.


His book The Black Swan extended the metaphor to events outside Black swan financial markets. Taleb regards almost all major scientific discoveries, historical events, and artistic accomplishments as "black Black swan and unpredicted. He gives the rise of the Internetthe personal computerWorld War Ithe dissolution of the Soviet Unionand the September 11, attacks as examples of black swan events.

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.

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: 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.

The event is a surprise to the observer. The event has a major effect. After the first recorded instance of the event, it is rationalized by hindsight, as if it could have been expected; that is, the relevant data were available but unaccounted for in risk mitigation programs.

The same is true for the personal perception by individuals. Taleb contends that banks and trading firms are very vulnerable to hazardous black swan events and are exposed to unpredictable losses.

On the subject of business, and quantitative finance in particular, Taleb critiques the widespread use of the normal distribution model employed in financial engineeringcalling it a Great Intellectual Fraud. Taleb elaborates the robustness concept as a central topic of his later book, Antifragile: Things That Gain From Disorder.

For example, what may be a black swan surprise for a turkey is not a black swan surprise to its butcher; hence the objective should be to "avoid being the turkey" by identifying areas of vulnerability in order to "turn the Black Swans white". These limitations are twofold: The philosophical problem is about the decrease in knowledge when it comes to rare events as these are not visible in past samples and therefore require a strong a priorior an extrapolating theory; accordingly predictions of events depend more and more on theories when their probability is small.

In the fourth quadrant, knowledge is uncertain and consequences are large, requiring more robustness. His claim is that almost all consequential events in history come from the unexpected — yet humans later convince themselves that these events are explainable in hindsight.

One problem, labeled the ludic fallacy by Taleb, is the belief that the unstructured randomness found in life resembles the structured randomness found in games. This stems from the assumption that the unexpected may be predicted by extrapolating from variations in statistics based on past observations, especially when these statistics are presumed to represent samples from a normal distribution.

These concerns often are highly relevant in financial markets, where major players sometimes assume normal distributions when using value at risk models, although market returns typically have fat tail distributions. Can you assess the danger a criminal poses by examining only what he does on an ordinary day?

Can we understand health without considering wild diseases and epidemics? Indeed the normal is often irrelevant.

Black swan

Because the bell curve ignores large deviations, cannot handle them, yet makes us confident that we have tamed uncertainty. A fixed model considers the "known unknowns", but ignores the " unknown unknowns ", made famous by a statement of Donald Rumsfeld.

Taleb also argues for the use of counterfactual reasoning when considering risk.Choose your city to find the Black Swan Yoga locations and schedules closest to you.

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Black swan

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