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Black Swan: A Rare Disaster, Not as Rare as Once Believed

The name for an unforeseen catastrophe goes back centuries in Europe, where no black swans had ever been seen. Eventually they turned up.

Grappling with the coronavirus pandemic and its disastrous impact on financial markets, commentators have reached for a familiar metaphor: the black swan.

Coronavirus is the black swan of 2020, read a memo that the Silicon Valley venture-capital firm Sequoia Capital issued on March 5. Since then, the Covid-19 outbreak has borne out the warning, with businesses facing dire economic prospects as the global health crisis continues spiraling out of control.

A black swan, for market prognosticators, is a rare, unpredictable event with serious and unavoidable effects. The theory of black swan events was developed by Nassim Nicholas Taleb in his 2001 book, Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, and then fleshed out in his 2007 follow-up, The Black Swan: The Impact of the Highly Improbable.

Mr. Taleb sought to move beyond this logical fallacy by providing a more precise framework for black swan events in terms of their statistical improbability and unexpected impacts. But some have argued that the Covid-19 health crisis should not be considered a black swan because it was not so improbable. Nate Silver of FiveThirtyEight told Fox News that it would be better described as a fat tail kind of black swan, with fat tail referring to a statistical scenario in which extreme outcomes are more likely to occur.

Policy analyst Michele Wucker has a different name for the pandemic and the attendant economic chaos. She calls it a gray rhino, her term for events that are obvious, visible, coming right at you, with large potential impact and highly probable consequences. Writing this week in the Washington Post, Ms. Wucker observed that the black swan, only visible in hindsight, is a convenient narrative for political and financial authorities who want to wash their hands of unforeseeable calamities when there were plenty of warning signs. Paying attention to the gray rhino, she argues, would be a far better use of our time than retroactively spotting black swans.

Instructions:

• Write one short 5-line paragraph SUMMARY of the article

• Then a second 5-line paragraph describing how the article relates to to the 2020 Coronavirus economic disruption

• And in the second paragraph state lessons learned