Year 9-10
With the white of winter everywhere, will a “Black Swan” be easier to spot? Not really, because a Black Swan is like the wind. And who has seen the wind?
The “Black Swan” phenomenon has become popular ever since Nassim Taleb introduced this concept in his book by that name. To quote him:
“It illustrates a severe limitation to our learning from observation or experience and the fragility of our knowledge. One single observation can invalidate a general statement derived from millennia of confirmatory sightings of millions of white swans.”
My goodness, why can’t people write in plain language? Here’s what the man means: because nothing in the past gives any hint that a certain disaster will ever happen, the chance of this taking place at all is very remote. But when something unexpected does occur, in hindsight we’d say, “of course; makes sense.”
Since the Bible goes back a long way, a few examples from it are not out of place. During the time before the Flood, when Noah built the Ark – they must have called him Nutty Noah behind his back – nobody expected to drown in the centre of Asia, but, things had gotten so bad that, in retrospect, we can now see that a new start was needed. So God pulled a Black Swan.
Good man Job never expected to lose everything he held dear, but, as the Bible shows, Job’s misfortune was necessary to turn him from an ego-centered fellow to an eco-centered man. That Black Swan event still serves as an excellent example of God’s mysterious ways to educate even us today.
Recent samples are the rise of Hitler, the Pearl Harbour bombing, the fall of the Soviet Union, and September 11.
Nassim Taleb gave a good illustration. “Until Thanksgiving the turkeys live well. Everyday, the food arrives. Everyday, they get bigger and fatter. Then, one day, just before the third Thursday in November, when Americans celebrate their traditional Thanksgiving dinner…with no warning, comes the knife…the crash…the collapse…the discontinuity…the 7 sigma event in the turkey’s life that changes everything.”
Look at our banking collapse: A real Black Swan, it changes everything.
Barton Biggs, in his book, “Wealth, War, and Wisdom”, also mentions the Black Swan. Although he still expresses his total commitment to “the wisdom of equity markets”, “the intuitive astuteness of the investors”, and “the perfect and dispassionate judgements of the stock exchanges”, he ends his book on a note of caution. Says he: “expect the unexpected”, prepare for a “Black Swan” event.
Writes this man who has spent his entire life on Wall Street, and is seen as THE authority there: “History often leaps forward in disorderly, chaotic jumps.” He even quotes “The Four Horsemen” those beasts of doom cited in Revelation 6, who “will ride again and the barbarians will be at the gate“.
He says that “By definition, the next Black Swan will be some form of total breakdown of civilized society and the social and financial infrastructure as we know it.” The ongoing Money Melt-Down has the potential to deteriorate into such a disaster. No wonder the Pentagon is preparing 20,000 troops especially for such an eventuality.
Biggs cites one scenario: “The trigger event could be a power failure that lasted not a day but a month and would paralyze the economy.”
This was before the money-meltdown whose consequences are still in its infancy. Says he, ”Whatever happens, it most likely will be an event that is both unexpected and we will not be prepared for”. This fits the present circumstances. Both former Secretary of the Treasury Alan Greenspan and the current one Ben Bernanke voiced their surprise in connection with the current crisis, caused by the enormous fall-out from their cheap money policies. Yes, a true Black Swan situation.
So here is what Barton Biggs recommends: “Another strategy should be to have a farm somewhere or a ranch far off the beaten track but which you can get to reasonably quickly and easily…. You should assume the possibility of a breakdown of the civilized infrastructure. Your safe haven must be self-sufficient and capable of growing some kind of food…. It is expensive to be early, but it is far better to be early than to be late.”
His advice to the wealthy applies to all of us.
The least anybody can do is to have sufficient food in place – canned, frozen, dry, milk powder, root crops, bottled water – for at least 4-6 weeks, together with some basic camping supplies for cooking, heating, sleeping.
We don’t know when the next Black Swan rears it elongated neck. Better be prepared.