On-line version ISSN 2411-9717
J. S. Afr. Inst. Min. Metall. vol.109 n.9 Johannesburg Sep. 2009
Presidential Address: Swimming with the Black Swan
Tranter Holdings (Pty) Ltd
The idea of the 'Black Swan' comes from the fact that prior to the discovery of Australia, it was assumed by the medieval uropeans that are all swans were white, because no European at the time had ever seen a black swan, even though these did exist. The sight of one black swan in Australia by the European explorers invalidated millennia of belief that all swans were white.
However, in the context of Nassim Nicholas Taleb, a brilliant author of the book by the same name, a Black Swan is a metaphor referring to any event that is rare, has an extreme impact, and is explainable and predictable, but only in hindsight. Taleb points out to us how we confidently predict the future based upon our past experiences when in reality we have no real idea what the future will bring. While we know that Black Swans are hugely disruptive and can radically alter the course of our future, we still allow them to enter our waters and disrupt our cosy plans with unexpected and devastating impact. Even though we can see how these black fowls have affected us and the majority of those living in our surroundings, whether positively or negatively, we continue to be blinded to their existence.
Black Swans occur when there is a disjoint between what we know and what we think we know. This disjoint is fuelled by facets of our human psychology that make us overconfident in our pronouncement about the future.
Despite the fact that we cannot forecast the future accurately in a world of Black Swans, this paper tries to point the reader to the fact that if we endeavour to keep our minds and eyes wide open, we should be able to identify the generators of Black Swans, and learn to mitigate their impact. We should be able to swim with the Black Swan.
“Full text available only in PDF format”
I have not given the source of every statement or fact, however, you will appreciate that some of the facts that appear here may have previously appeared in print elsewhere.
The references below are listed in alphabetical order by author.
1. ALLEN, M. On the Survival of Rats in the Slush Pile, Bradford on Avon, Kingsfied Publication, 2005. [ Links ]
2. BLEBY, M. 'Ponzi scheme may total R10 billion', Business Day, 12 June 2009. [ Links ]
3. BOGLE, J. C. and Sullivan R. N. 'Black Monday and Black Swans', Financial Analyst Journal, vol. 64, no. 2, pp. 30-40. [ Links ]
4. Brummer, Alex. The Crunch-How greed and incompetence sparked the credit crisis, London, Random House Business Books, 2009. [ Links ]
5. DFJ PORTAGE VENTURE PARTNERS, 'Ugly Duckling or Black Swan?', Ignite Presentation, 12 June 2007. [ Links ]
6. FIRESTONE, J. 'Black Swan ideas-Silent Evidence, Confirmation error, Epistemic Arrogance, and Future Blindness', Online publication, 1 June 2009. [ Links ]
7. GLEESON, A. 'Black Swan and Strategic Planning', Online publication. [ Links ]
8. MAULDIN, J., 'Unpacking the Black Swan', Online publication, 19 September 2007. [ Links ]
9. MATAI, D. K. 'The Black Swan and the Age of Insecurity', Online publication, 24 November 2008. [ Links ]
10. MATAI, D.K. 'Low Probability High Impact and Black Swan Events-The Opportunity and Risk of Asymmetric Globalisation', Keynote speech at Global Risk Summit, Geneva, Switzerland, 9 June 2007. [ Links ]
11. PARKER, E. and WEN, G. J. 'The Asian Financial Crisis and the Lessons for Globalisation', online publication, January 2000. [ Links ]
12. RUTTER, J. 'The Black Swan Survival Guide', Dow Jones Wealth Bulletin, November 2008 [ Links ]
13. SUNTER, C. 'Triggers that change the Future', News 24, Online publication, 1 October 2008. [ Links ]
14. TALEB, N. N. Fooled by Randomness-The Hidden Role of Chance in Life and in the Markets, London, Penguin Books, 2007 (There are earlier editions in the US and UK). [ Links ]
15. TALEB, N. N. The Black Swan-The Impact of the Highly improbable, London, Penguin Books, 2008 (There are earlier versions in the US and UK). [ Links ]
16. TEMKIN, S. Executives 'need to be alert to increased risk' in economic crisis, Business Day, 23 December 2008. [ Links ]
17. WESTNEY CONSULTING GROUP, 'Are stages and gates destroying predictability?-The unintended consequences of Front-End Loading', Westney Advisor, Online publication, August 2008. [ Links ]
18. 'Fooled by Narrative Fallacy', Contrarian Investors' Journal, Online publication, 18 August 2008. [ Links ]
19. 'History of the RMS Titanic', Woods Hole Oceanographic Institution, Online Publication, updated July 2008. [ Links ]