Black Swan Event – Meaning, Origin & Usage
The phrase ‘black swan event’ has been bandied about fairly often since the turn of the millennium. However, not everyone understands what is meant by the term, or how the term came about. The good news is that this article is going to solve that problem.
In this article we’ll cover what is meant by the strange phrase, and how the term may have originated, and was later popularised. We will then proceed to go through several historical examples of black swan events, before highlighting the typical characteristics of black swan events so you know how to recognise them.
Then, we’ll briefly cover how to deal with a black swan event should one arise, before going on to discuss use of the term ‘black swan event’ in literature and pop culture. We’ll even throw in a handy section where we answer your most frequently asked questions on the subject. Let’s get straight to it.
What is meant by the phrase ‘black swan event’?
The term ‘black swan event’ is commonly used to describe an event that is very rare and extremely negative and has a significant impact on society. It is also considered to be completely unpredictable, although it is often rationalised in hindsight.
The origins of the term ‘black swan event’
The term ‘black swan event’ is derived from a Latin expression used to describe something as extremely rare if not impossible.
Back in the 2nd century, people believed that all swans were white, and that there is no such thing as a black swan. However, in 1697s, a Dutch explorer by the name of Willem de Vlamingh sailed down the derbarlyerrigan in Western Australia and observed black swans for the first time. Europeans at the time refused to believe that black swans existed, and De Vlamingh had to send some specimens to Batavia to convince them. Thus it was considered to be an ‘unforeseen event’ that changed the way people viewed the world. Ever since then, the term ‘black swan event’ has come to represent the idea that something that was once thought to be impossible may later prove to be true.
The term ‘black swan event’ was popularised by Nassim Nicholas Taleb, a former Wall Street trader and scholar, when he used it in his book Fooled by Randomness, published in 2001, where he argues his ‘black swan theory’ described shortly in our FAQ section.
Historical examples of black swan events and their impact on society
It is beyond the scope of this article to cover all of the black swan events there have been over the years, but here are two from recent decades that are still in living memory.
The 9/11 terrorist attacks
On the morning of 11 September 2001, Al Qaeda terrorists hijacked four commercial passenger planes in the United States. Two planes were flown into the Twin Towers of the World Trade Center in New York City, causing both towers to collapse. A third plane crashed into the Pentagon, just outside Washington, DC. The fourth plane crashed in rural Pennsylvania after the crew and passengers attacked the terrorists on board, preventing it from hitting another target thought to be the White House.
These attacks were considered a black swan event because they were unexpected and they had a huge, wide-ranging impact over the course of the next decade. The attacks led to the US declaring the “War on Terror” and the invasion of Iraq. There was increased transportation security and reduced international travel. The attacks also led to a rise in anti-Muslim sentiment in the US, and there was a significant psychological impact on people who were in the vicinity at the time, and to a lesser extent, to Western civilisation at large.
The COVID-19 pandemic
The rapid, worldwide spread of the coronavirus in early 2020, possibly earlier, caused significant disruption to businesses, travel, and daily life. This was considered by many to be a black swan event because it was considered unexpected and it had a huge, wide-ranging impact over the course of several years.
In many ways the entire world came to a stand still. Many flights were cancelled, nations advised their civilians to work from home, only leaving when absolutely necessary. Many businesses in the hospitality sector, including hotel chains and restaurants, saw so much damage to their business that they weren’t able to ever reopen. People lost their jobs, and there was a known and profound effect on the psychology and anxiety of the younger generation.
There has been some debate as to whether the COVID-19 pandemic truly can be considered a black swan event because there have been other wide-spread viruses in the past which also had a significant negative impact, including the Black Death in the 1300’s costing up to 75 million lives, and the Spanish Flu pandemic in 1918-1920 that killed an estimated 17–100 million people.
Characteristics of black swan events: how to recognize a black swan event
Here’s how to spot a black swan event according to Taleb’s criteria:
- The event is a surprise (to the observer)
- The event has a major effect
- After the first recorded instance of the event, it is rationalized by hindsight
Dealing with unpredictable black swan events
Black swan logic suggests that outliers are more important than what is known and should be studied more closely. To deal with potential black swan events, people can try to gather as much information as possible – not just the raw data, but also from thinking outside the box – and to review it rigorously, and be aware of their biases.
Use of the phrase ‘black swan event’ in literature and pop culture
Nassim Nicholas Taleb continued to write books on the subject of the black swan theory, including one called The Black Swan: The Impact of the Highly Improbable, published in 2007.
Three years later in 2010, there was a film released called Black Swan starring Natalie Portman. The film’s title refers to the unpredictable and improbable event of character Nina obtaining the lead role in a prestigious New York ballet. Nina becomes both the white swan and the black swan and pays a significant price to do so.
FAQs
What is the black swan theory?
The black swan theory developed by Nassim Nicholas Taleb explained the disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology.
It also highlighted the psychological biases that blind people, both individually and collectively, to uncertainty and to the substantial role of rare events in historical affairs, as well as the non-computability of the probability of such consequential rare events using traditional scientific methods.
What is the black swan fallacy?
The black swan fallacy can be defined as the tendency to ignore evidence that contradicts our beliefs and assumptions. The term can also be used to refer to the belief that things we’ve never seen don’t exist.
What is the black swan argument?
The term ‘black swan’ has also come to be used as a metaphor for the reality that just because something has not happened does not mean that it cannot occur in the future. The metaphor is analogous to the fragility of any system of thought and a testament to the fallacy of assumption.
What is a grey swan event?
A grey swan event shares similarities with a black swan event. However, where a black swan event is highly unpredictable, a grey swan is somewhat predictable – but highly unlikely. One example of a grey swan event is Brexit, the exit of Britain from the European Union. The British public never had a vote on ever joining the European Union, so there shouldn’t necessarily have been surprise that when they could vote on it, they may have voted out. Brexit caused the British pound to drop sharply to a 31-year low against the US dollar.
Final word
So, to summarise, the term ‘black swan event’ is an idiom and metaphor which refers to an event, which was previously seen as impossible, that has a significant and negative impact on the economy or on society as a whole.
A Latin version of the phrase is known to date back to the 2nd century. However it wasn’t until the late 1600’s that Europeans found out, against their beliefs, that black swans existed. Later, at the turn of the millennium, Nassim Nicholas Taleb developed the Black Swan theory which maintains that there can be hard-to-predict, and disproportionately negative events in history, science, finance, and technology.
In addition to this, the phrase ‘black swan fallacy’ has also been used in a looser sense in recent times, to refer to both the tendency to ignore evidence that contradicts our beliefs and also to the belief that things we’ve never seen don’t exist.
There are several examples of black swan events throughout history, including the 9/11 terrorist attacks, the COVID-19 pandemic, the 2008 financial crisis, and the WannaCry ransomware attack.
