Black swan theory
[1] The reinterpreted theory was developed by Nassim Nicholas Taleb, starting in 2001, to explain: Taleb's "black swan theory" (which differs from the earlier philosophical versions of the problem) refers only to statistically unexpected events of large magnitude and consequence and their dominant role in history.
Such events, considered extreme outliers, collectively play vastly larger roles than regular occurrences.
[2]: xxi More technically, in the scientific monograph "Silent Risk",[3] Taleb mathematically defines the black swan problem as "stemming from the use of degenerate metaprobability".
[3] The phrase "black swan" derives from a Latin expression; its oldest known occurrence is from the 2nd-century Roman poet Juvenal's characterization in his Satire VI of something being "rara avis in terris nigroque simillima cygno" ("a bird as rare upon the earth as a black swan").
However, in 1697, Dutch explorers led by Willem de Vlamingh became the first Europeans to see black swans, in Western Australia.
Taleb notes that in the 19th century, John Stuart Mill used the black swan logical fallacy as a new term to identify falsification.
Taleb regards almost all major scientific discoveries, historical events, and artistic accomplishments as "black swans"—undirected and unpredicted.
He gives the rise of the Internet, the personal computer, World War I, the dissolution of the Soviet Union, and the September 11, 2001 attacks as examples of black swan events.
A small number of Black Swans explains almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives.Based on the author's criteria: According to Taleb, the COVID-19 pandemic was not a black swan, as it was expected with great certainty that a global pandemic would eventually take place.
Taleb contends that banks and trading firms are very vulnerable to hazardous black swan events and are exposed to unpredictable losses.
On the subject of business, and quantitative finance in particular, Taleb critiques the widespread use of the normal distribution model employed in financial engineering, calling it a Great Intellectual Fraud.
Taleb elaborates the robustness concept as a central topic of his later book, Antifragile: Things That Gain From Disorder.
[14] Taleb claims that his black swan is different from the earlier philosophical versions of the problem, specifically in epistemology (as associated with David Hume, John Stuart Mill, Karl Popper, and others), as it concerns a phenomenon with specific statistical properties which he calls, "the fourth quadrant".
