The Bite Of the Black Swan

John Milton and many others have propagated, through their poetry, that God has a mysterious way of working that should not be questioned. God created an uncertain world and left its interpretation on His so called greatest creation, Mankind. Since then man has been kind enough to have destroyed the very essence of this uncertain world.

Man is an animal who over the course of its existence has invented a lot of tools, all with the intention of making life smoother and easier to live. Man has managed to tame the free flowing river and produce energy out of it, to interpret the meaning of dreams, to write poems on dew drops resting on blades of grass and justified the title of being God’s greatest creation by ultimately changing nature’s balance. But man has repeatedly, as history teaches us, failed to deal with uncertainty. It has either brought peace in man’s heart or anxiety in his mind. It has repeatedly exposed the fragility of our knowledge and beliefs. Knowledge is to man what energy is to molecules. It makes us desperate and with more knowledge and information the world witnesses more innovation making it uncertain.

It has a lot to do with the way man grows up and the way he is taught about life. Think about how our own life has changed after the Wright brothers proved that birds were not the only species that could touch the clouds. How night’s pride of being beautiful was destroyed by Thomas Edison. Think about that idiot box in your room that can actually make you more intelligent if used properly. What are all these? These are simply those events that we would have never believed to be possible had it not been proved by someone else. And all these events have brought about massive changes to our everyday life. These are called Black Swan Events. Let us define a Black Swan Event. It has three distinct characteristics.

1. It is an outlier. That means it is something that lies outside the realm of human experience and expectations. Simply, it is something that has never happened before, making us incapable of predicting it.

2. It has a huge impact. Since it is unexpected it has the potential to disrupt our everyday normal conventions and wisdom.

3. Human minds have a tendency to seek explanation of an event after it has impacted him. So Black Swans can be interpreted and explained after their occurrence.

So the three distinct features are: rarity of occurrence, severity of impact, ability of interpretation.

Some examples of Black Swan Events are:

• Invention of the first computer, making us more accurate and efficient

• Invention of internet, changing the way we communicate and do business

• The first industrial revolution, making us more productive

• The first world war, making us aware of manmade destruction

• The launch of iPod, changing the way we listen to songs

All through our life we try and prepare for future by projecting yesterday into tomorrow. We are incapable of predicting the future, but still some of us show the audacity of predicting the oil prices one year hence even though there is no guarantee on the very next day’s price. Many Indian economists and scholars got elated when Goldman Sachs predicted that India is going to overtake Japan in 2042. This prediction does not take into account India’s deteriorating relation with its neighbors. A small territorial dispute with China can push India back a few decades. Then how much valid is this prediction and shall India start preparing its strategies based on this fragile prediction?

I read somewhere that Economics is funny; everything here starts with an assumption (let us assume that price and income to be constant….).Why is it so? Is it because of our tendency to make complex situations easy by assigning it reasons and causes and making assumptions that match with our views of world? It is in the process of going for this simplification that we end up overlooking more important cues.

The recent global meltdown was never predicted by even the most efficient of economics practitioners. It has impacted thousands of workers and their families worldwide. So can they call themselves as the real gurus? Following this logic can anyone claim to be master of a subject? Our years of experience and knowledge have a limitation when faced with uncertainty. When the Twin Towers were designed no one predicted that on a fateful day it will be used as a basis for propagating jihad by some terrorists flying commercial airlines. Can you think how the design could have been different had it been predicted.

The more we cling to the past, the more complex the future will become for us. Can our past experience make us ready for the next big thing? The subjects that we learn today may be outdated with a new invention. The company that we dream of might not be there tomorrow. Remember all the biggest events of this world have never been predicted before and our lives have never been the same after their occurrence. How we prepare for the uncertain future is for the readers to contemplate.

No matter how intelligent we think ourselves to be, how efficient we believe we are, there is no guarantee that man’s existence will not be challenged by the next big Black Swan. Remember the moment we try to bring in certainty with assumptions we are the most vulnerable to its impact.

To be a good human being is to have a kind of openness to the world, an ability to trust uncertain things beyond your own control that can lead you to be shattered in very extreme circumstances for which you were not to blame. That says something very important about the condition of the ethical life: that it is based on a trust in the uncertain and on a willingness to be exposed; it’s based on being more like a plant than like a jewel, something rather fragile, but whose very particular beauty is inseparable from that fragility.