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  • Lord Copper

Want a Black Swan for your Lake?

I’ve got friends who love to talk about the expectation of black swan events. They like to believe they are telling us something we need to know, when they make these predictions. Now, I’ve always been of the opinion that by their nature black swan events are unpredictable, so I thought it might to interesting to think a bit about the phrase and what it actually means.

Rara Avis

First of all, then, what is a black swan (apart from a waterfowl)? The phrase has been popularised in recent times by Nassim Nicholas Taleb, a highly original thinker and writer, but it is actually far older than that. The oldest known use was by Juvenal, who used the words “rara avis in ferris nigroque simillima cygno” (a rare bird in the lands and very much like a black swan). When Juvenal used it, it signified something impossible, because the black swan did not exist – within the knowledge of the people of the time. As  far as they were concerned, all swans were white, because that is all they had ever seen, and therefore, by definition, to describe something as a black swan was to underline that it was something which could not exist. However, with the discovery by Europeans of the Australian continent, the meaning changed subtly. Explorers came back with tales of having seen black swans ( I thought only in the south west, but apparently in the east as well), and before long they had been brought to Europe to grace the ornamental lakes of the aristocracy (from where some escaped, forming a few breeding colonies in various parts of Europe). But the fact that they existed meant that the phrase could no longer signify something completely impossible, which was Juvenal’s usage. The meaning morphed into something highly unlikely, or unexpected. In other words, when the travellers arrived in Australia, all they knew was white swans; the black ones they saw were against all expectation. However, once you know they exist, then it is entirely predictable that you are going to see them. Hindsight is important. So the usage has shifted from ‘something completely impossible’ to ‘something completely unexpected’, or, better, ‘a perceived impossibility which might later be disproven’. 

Lehman Brothers?

What have we seen, then? Well, 2008 and the collapse of Lehman Brothers would seem to fit the bill. It was unexpected, and yet with the benefit of hindsight, the movement of the global economy towards that point can be traced. So like the black swan, it was there, even though it had not been seen. With more open minds, could it have been more generally predicted? In other words, if instead of accepting that all swans are white, and that therefore the black one cannot exist, the global power-brokers had taken the view that all swans so far seen are white, but that does not preclude the existence of black ones, would the result have been different? We shall never know the answer to that, but it’s tempting to think that if rather than accepting Gordon Brown’s Panglossian ‘no more boom and bust’, we had queried it more strongly, perhaps the shock could have been mitigated.


Was Brexit a black swan event? No, categorically not. It was perfectly possible to see that it could happen at the time. With a binary choice – a two-horse race – both outcomes have to be accepted as possible, even if not likely. Any bookie who loaded his book on one side only would not survive long. Why did there appear to be such chaos on the 24th June? I can’t answer that; unprepared politicians, I suppose, who failed to understand that whatever they wanted, either side could win.


How about the future? Is there a big black bird with a baleful look in its eye flapping its wings in our direction? We shouldn’t be able to tell – however open-minded we are, there will no doubt always be the possibility of something slipping by. But that’s not the same as those who predict, for sure, that there is a black swan coming that will leave the global economy reeling, just like Lehman Brothers did. If you can predict it, clearly it’s not a black swan but rather an event visible down the track, and in those circumstances, provisions should be able to be made. If all you’re saying is that something unexpected might happen, well, thanks, but we can probably all work that out for ourselves. The paradox of the black swan event is that with the benefit of hindsight, we can see that we should have been able to predict it. Without the hindsight, though, we had no way of predicting it. After the event, we can rationalise; before it, what we see looks pretty much like general random noise. 




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