Black swans and the turkey problem

For centuries, Europeans used the phrase "black swan" to mean something that could not exist. The Roman poet Juvenal described a rare thing as being like a black swan, because every swan anyone had seen was white. Then, in 1697, a Dutch expedition led by Willem de Vlamingh reached the west coast of Australia and saw black swans on a river there. One sighting overturned a belief that centuries of observations had seemed to confirm.

Nassim Taleb took the name for his book The Black Swan, published in 2007, to describe a particular kind of event with three features. Nothing in past experience points to it, so it sits outside the range of what anyone was expecting. Its effect is enormous. And once it has happened, people explain it so convincingly that it looks as if it should have been obvious, even though nobody predicted it at the time.

He illustrates it with a turkey, a story he borrowed from Bertrand Russell, who told it about a chicken in 1912. A farmer feeds the turkey every day, and every day gives it one more piece of evidence that the farmer looks after it. After a thousand days it is very sure. Its confidence is at its highest the day before Thanksgiving. The evidence it had was real. The problem was that a thousand days of being fed could tell it nothing about a day unlike any it had lived through, so its certainty kept rising right up to the day it was killed.

The name has since been stretched to cover almost any unpleasant surprise, and Taleb has pushed back on that. In March 2020 he told Bloomberg Television that the pandemic was a white swan rather than a black one, because it had been widely predicted, including in his own 2007 book, which had warned about a strange acute virus spreading across a connected world. The attacks of 11 September 2001, by contrast, he counts as a true black swan.

The turkey's shape turns up all over working life. The client who has been with you for years and now makes up most of your revenue. The supplier you have never had trouble with. The platform that has sent you customers every month since you started. The one person who knows how the old system actually works. The longer the record, the more reassuring it looks, so the dependency keeps growing, and nobody plans for the day it ends, because every piece of evidence so far says that day will not come.

Nobody can forecast which of these will go, or when, and that is exactly what makes them black swans. What you can do is ask what would happen to you if one of them did. Write down the things you depend on most, then describe, as concretely as you can, the week after each one disappears. For most of them the answer will be uncomfortable but survivable. What you are looking for is the one where the honest answer is that you would be finished. That is the thing to fix, whatever the forecast says, and the fix is usually unglamorous: a second supplier, a few months of costs in reserve, a second person who knows the system, a client base where no single name can sink you.

The honest limit is that this costs money in every year the disaster does not come, which is most years. A second supplier costs more than one, and money held in reserve is money not invested, so spare capacity tends to look like waste right up until it is needed. That is part of why it is so often the first thing cut. On why the events that do hit then look obvious in hindsight, see hindsight. On building so that shocks make you stronger rather than only survivable, see antifragility.

The Black Swan

Nassim Nicholas Taleb, 2007

Written a year before the 2008 financial crisis, it is the fullest version of the argument that the events which change the most are the ones our forecasts leave out.