| || |
| || || |
| || |
Could someone explain a "Black Swan" event please?
| || || |
People have described what Black Swan events (as used by Taleb) are, but neglected a bit to elaborate on why it is important to consider the concept. The human brain injects a large number of well documented biases into our thought process (confirmation bias, survivorship bias, lookahead bias etc...) and it is basically impossible to eliminate all these biases even when a person consciously attempts to do so. As a scientist, I expect you are well aware of these since the scientific research process is engineered such to suppress as many of these as possible. One of the simple biases is the fact that an event that hasn't been observed in the past tends to be considered impossible (mostly unconsciously) by people. For a statistician, this is a fundamental mistake, it is the analogue of treating a sample of a population the same as the whole of the population and thus neglecting to consider this fact as a source of errors in any predictions.
Example: most people have never been dive bombed by a bird of prey while running a forest trail before, so for all intents and purposes this event is considered extremely unlikely and I certainly have never heard of a single instance of it happening. That is until it happened to me while running up the Albispass. It thus came as an utter surprise to me when I got hit from behind by an 'effin falcon.
The next time I ran there, I saw the bastard upfront and sure as hell he tried it again but I knew that it's coming and I could predict and evade it's maneuvers.
These kind of issues are pervasive everywhere in reality. People underestimate the likelihood of extreme events simply because they are rare, even to the point to ignoring the possibility of something happening (and thus implicitly assuming that it is impossible), simply because said event hasn't been observed yet.
This is actually a good thing, because in almost every aspect of life, you have to work with incomplete information, and the vast majority of the time it is more effective to make a decision than get bogged down trying to forecast increasingly harebrained events. There is a very strong effect of diminishing returns.
Just as an example, many people predicted 2008, and the vast majority of them have predicted a dozen crises beforehand that didn't materialize and another dozen since that also haven't materialized. If one actually tried to bet on all these predictions, they'd have lost far more money than the gains in 2008 would've been. What plays into the hands of these doomsday artists is yet another bias of the brain that tends to stress a recently event far more than observations before it.