At A Glance – Black Swan Event

An occurrence which is impossible to predict, but has major consequences for us all

A black swan event is a way of describing an unexpected incident which has wide reaching consequences. The term was conceived by the statistician and former Wall Street trader Nassim Nicholas Taleb, in his 2001 book Fooled By Randomness. Black swan theory discusses the dominant role of unexpected events upon history. Why do rare and hard to predict occurrences have such significant influence on the world? Why do these extreme events have so much more impact than things which happen on a regular basis? Can we build robustness against negative black swan events, and learn how to exploit positive ones?

Perhaps the most significant black swan event in recent years was the financial crisis of 2008. It fulfils the three categories for a black swan which Taleb sets out in his theory. Firstly, it was unexpected – an outlier in what would normally be likely to happen. Secondly, it had catastrophic consequences, affecting organisations and individuals on a global scale. Lastly, people attempted to explain the event after it had happened, using the benefit of hindsight to claim that it could have been predicted.

Whilst we can never predict the future, the concept of the black swan event is of importance to technology and business for a number of reasons. Some of the most significant events in human history are attributable to technological developments, from the wheel all the way down to the world wide web. If we can gain a better sense of how these developments take place, then we will be better suited to seizing their potential. Black swan events signal disruption on a major scale. Whether it’s blockchain, artificial intelligence, or the electric vehicle revolution, if there’s one thing technology has taught us it is to expect the unexpected.