by Charles Hugh Smith
Of Two Minds
Our Nobility’s assessment of risk and their war-gaming of vulnerabilities are fatally deficient.
Many people have heard of Nassim Taleb’s black swan but fewer understand how few events qualify as black swans. Per Wikipedia, a black swan is an unpredictable or unforeseen event, typically one with extreme consequences, an event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight.
Taleb’s black swan theory refers 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.
In other words, if an event was deemed possible but very low-risk, it isn’t a black swan. France’s Maginot Line offers an interesting example of the difference between events that are deemed low-probability and that play out in ways that weren’t anticipated and a true black swan.