The Delusion Of Predicting Black Swans

There are three elements of the black swan events

• They are very difficult to predict.
• They have a high impact on society
• After the event people have the tendency to rationalize them giving the illusion that they were expected

The frustrating aspect of Black Swan Theory is that it provokes people to ask when the next black swan will be. This completely misses the point. Asking when the next black swan is or whether or not it is possible to avoid black swans tells me that you don’t understand Black Swan Theory. By definition black swans can’t be predicted or avoided. Yet, people continue to believe that both are possible.

Why?

I think it goes back to the narrative fallacy, which is what the third bullet point highlighted. As Taleb explains, the narrative fallacy describes our “limited ability to look at sequences of facts without weaving an explanation into them, or, equivalently, forcing a logical link, and arrow of relationship, upon them.” I italicize “limited ability” to suggest that the narrative fallacy is unavoidable. We simply cannot assess the past without creating a narrative that fits with the present and projects the future. For better or for worse, this means we will continue believe that past experience guarantees knowledge of the future. It’s a strange paradox: we will always believe that we have a grip on the future even when we are repeatedly surprised by what it brings us.

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