Black Swan

A Black Swan is an unforeseeable event that occurs beyond what is usually expected of a situation that may have serious repercussions. Black swan incidents are described by their extreme rarity, severe consequences, and widespread belief that they were obvious in context.

There are no restrictions on how a Black Swan event will take shape. It can be anything - a natural catastrophe, a war, a financial collapse, or the spread of a virus. However, according to Taleb, who developed the hypothesis of how serious and unexpected events can play an outsized role in life, they share three characteristics that help identify black swan events.

History of Black Swan Theory

Nassim Nicholas Taleb, a finance lecturer, author, and former Wall Street trader, coined this term. Taleb published a book about the concept of a black swan event in 2007 before the events of the 2008 financial crisis.

The word "Black Swan" relates to the myth that westerners assumed all swans were white, and that is all they had ever seen before Australia was discovered, and the first black swan was founded. According to the Black Swan theory, what you don't know is much more important than what you do. You can use all of your experience to plan for what you think is a possible scenario, only proven wrong by a single Black Swan event.

How to Identify Black Swan Event?

To identify events, you need to focus on the characteristic listed below:

• Black Swan events occur outside of conventional standards, and nobody in the past has credibly predicted it.
• The occurrence has a significant and far-reaching effect on civilization or the whole planet.
• The Black Swan event is predictable after it has occurred. Although the incident was unexpected, it is now understandable in retrospect, and the world wonders why they were not prepared.

Types of Black Swan Event

There are two types of black swan events:

• Negative black swan event
• Positive black swan event.

A negative black swan event is when the event's downside is unbounded while its upside is restricted. A positive black swan event is just the opposite of a negative black swan: unpredictable, high-impactful activities with infinite upside and limited downside.

Examples of Black Swan Events

Throughout history, there have been a host of Black Swan incidents that have taken several different ways. They include both the World Wars, the collapse of the Soviet Union, the rise of Islamic fundamentalists, 9/11, the impact of the Internet's spread, and the 1987 and 2008 financial crisis.

Coronavirus pandemic is the black swan event the world is currently facing. Although the threat of a virus was recognized, governments worldwide were unprepared, indicating that it was considered an outlier event with a low chance of happening. It has had disastrous effects on both public health and the Economy. Furthermore, now that it has occurred, it can be explained, and everyone is curious why the world was not prepared.