Of Black Swans and Grey Rhinos
Wisdom Letter #28 | The One About Risk
Have you ever seen a black swan? Its quite rare. Here, take a look.
Although we are not talking about black swan the bird, or even Black Swan the movie.
We are actually talking about the concept of Black Swan Events.
Its a term used to define highly improbable events, impossible to predict, which have a massive impact on the world, but which seem obvious in hindsight.
The term is coined by philosopher writer Nassim Nicholas Taleb in his 2007 book “The Black Swan”. The term has an interesting origin story about the western world’s discovery of black swans in Australia, read it on Wikipedia.
Its a good way to think about the risk of the unknown unknowns that an unpredictable future brings.
Speaking of risk, humans hardly understand it properly, and rarely account for it in there decision making. Before taking any decision there are factors which are known knowns that we can calculate and analyze, there are factors which are known unknowns that we can estimate and try to predict, and then there are unknown unknowns that we can’t make head or tail of. Its these factors that pose the largest risk in any decision.
Take a look at this cool 7 minute video to gauge our understanding of risk associated with unknown unknowns.
Black swan theory is essentially the study of the impact of unknown unknowns or even of unknowable unknowns.
Some say the dinosaurs were wiped off the planet in a once in lifetime Black Swan event of a meteor strike. The event changed the course of the life of this planet since.
Its speculated that some day humanity can also be wiped off with such a black swan event. It can be another meteor strike, or a massive volcanic eruption or even a global viral outbreak.
Anyways, on an unrelated note, the ongoing Novel CoronaVirus pandemic has also been touted as a black swan event of 2020 by big-shot VC funds. It certainly is having a large impact on the whole world, and its set to change life for all of us.
Our hygiene standards are definitely going to improve once we are through this, we might learn to hedge our material production away from China as well, and we might actually end up cracking the enigma that is WFH(work from home)
But is it obvious in hindsight? Do we have enough evidence to say that COVID-19 was inevitable, and if it was then could it really have not been predicted before hand?
Today on The Wisdom Project, we go down deep into the rabbit hole of Black Swan events, we learn what we can from our history, we meet other black swans, both positive and negative, both global and personal.
And yes, we say hi to an entirely new creature — THE GREY RHINO
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