Shades of Black (Swans)

Black Swan theory was made famous by Nassim Taleb, who said that “a million sightings of white swans does not prove that all swans are white, but a ‘single’ sighting of a ‘black’ swan proves that all swans are not white” (emphasis mine). It refers to how individuals (and that includes crowds) often get ‘surprised/shocked’ with the consequences of what they had not expected, and how ‘systematic’ this shocking experience was. Add to this observation the fact that crowds have different behaviours, different capabilities and (simply) different identities from what we have as individuals, and you get the contours of a whole new theory. It is possible for crowds/markets to systematically get shocked by “black swan events”, even as individuals are at least partly prepared for them. John Mauldin describes it beautifully. He calls it “the lion in the grass”,

This article was originally published on June 15, 2013.