Sunday Musings: Was The Last Bear Market A ‘Black Swan’ Event?

Very slowly, I have been trying to digest Nassim Nicholas Taleb’s book “The Black Swan.” It’s an incredible piece of work about the impact of the highly improbable.

Nassim explains that an improbable event has 3 characteristics: It is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was.

The astonishing success of Google was a black swan event; so was 911 (you can add Microsoft and a host of other companies to this list, including any past bear market events). For Nassim, black swans underlie almost everything about our world, from the rise of religions to events in our own personal lives.

Why do we not acknowledge the phenomenon of black swans until after they occur? Part of the answer, according to Nassim, is that humans are hardwired to learn specifics when they should be focused on generalities. We concentrate on things we already know and time and time again fail to take into consideration what we don’t know.

For years, Nassim has studied how we fool ourselves into thinking we know more than we actually do. We restrict our thinking to the irrelevant and inconsequential, while large events continue to surprise us and shape our world. In his book, Nassim explains everything we know about what we don’t know. He offers surprisingly simple tricks for dealing with black swans and benefiting from them.

This is not casual reading but very demanding, and it requires your full focus. If you like a challenge, and learn how to look at the world with a slightly different view, this book is for you.