Predicting the future is, in many cases, impossible.
People significantly underestimate the significance of extreme events when considering the future. “Black Swans” are these extreme events.
There is a tendency to give explanations to largely random successes or failures after the fact.
The idea of the black swan refers to the fact that, prior to the discovery of Australia, it was assumed that all swans were white, because no one (well, no European at least) had ever seen a black swan. However, they do exist.
However, in the book, a “black swan” refers to any event that is rare, has an extreme impact, and is explainable and predictable - but only in hindsight.
The author argues several major points:
Rare events occur much more often than we expect. Our minds are programmed to deal with what we’ve seen before, to “expect the expected”, so to speak. However, all too often extreme events do indeed take place, and have large, and long lasting effects.
Our tendency to discard rare events happens in part because people underestimate their ignorance. There is a great deal we don’t know, but since feeling ignorant isn’t pleasant, we tend to put it out of our minds.
We tend to invent stories where there are none. In other words, after the fact, we like to invent explanations for why things happened the way they did, which is much more comforting than staring at sheer randomness.
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1 comment:
Jimmy,
Apart from famous Bank failure - what other events do you refer to?
How to leverage the psycological understandings presented here in order to prevent failures? this is a more interesting question.
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