Handing Lifes Black Swan events

Handing Lifes Black Swan events

Sujatha Rao encourages us to be prepared for unexpected events in our lives by making the  most of opportunities or reserves while they are available

Up until 1697, human beings believed  all swans to be white. But then some Dutch  explorers spotted a few black swans in Western  Australia and, suddenly, human beings woke  up to the reality of the existence of black swans.  When we come to think of it, statistically, all it  takes is the sighting of one black swan to prove  that black swans do exist.  

Since then, the term ‘black swan theory’ came  to be used as a metaphor for describing an  occurrence that is rare and unpredictable but  has a catastrophic impact. 

Nassim Nicholas Taleb popularised this theory  in his famous book The Black Swan. According  to Taleb, to be classified as a black swan event,  it should meet the following three criteria: 

It should be an outlier, lying outside the realm  of the regular, expected happenings. It should  lead to an extreme impact. Despite its outlier  status, in hindsight, it’s explained to be an  event that could have been predicted. 

Both the world wars, the 9/11 terrorist  attacks, and the 2008 financial crisis are some  examples of black swan events that fit into  all the three attributes described above. The  recent pandemic is not considered to be one  by researchers as they found that there is a  one per cent probability of pandemics of some  intensity occurring, making them not that rare  after all.  

Such black swan incidents show that we cannot  assume the absence of evidence to be equal to  the evidence of absence. This theory has been  very beautifully put into words by Donald  Rumsfeld in the following quote: 

58 LifePositive | FEBRUARY 2023

The terrorist attack on the Twin Towers had shocked the world 

There are known knowns; there are things we know  we know. We also know there are known unknowns;  that is to say, we know there are some things we do not  know. But there are also unknown unknowns—the  ones we don’t know we don’t know. And if one looks  throughout the history of our country and other free  countries, it is the latter category that tend to be the  difficult ones. 

In his book, Taleb argues that expecting the  unexpected and being prepared for it may  actually be a lifesaver in certain situations.  While this appears to be quite common-sensical,  to further elucidate the significance of this, he  cites the phenomenon of the turkey being fed  well throughout the year, leading to its getting  fooled into believing its very good fortune in  life, till the arrival of Thanksgiving Day causing  it to lose its head in one single day. 

So it goes without saying that if we act as though  we are in a fool’s paradise, totally oblivious and  unprepared for the unexpected, then we could  be as damned as the turkey is when doomsday  arrives in our lives out of the blue. It pays not  only to expect the unexpected but also to try to  hedge ourselves against the known and unknown  major events that we encounter in our personal  lives.  

Taleb, who (among many other things) is a  derivative trader, claims he uses trading to gain  independence and freedom from authority. He  often adopts a customised strategy with his  investments by being passive and aggressive at  the same time. He says he put 90 per cent of his  money into very safe havens, such as treasury  bills, etc. and the remaining 10 per cent into very  risky investment options to reap the benefits  from a positive black swan event. 

While the above example is a specific one  

from the financial aspect, let’s now examine  some of these known, unknown, expected, and  unexpected events in life that we encounter in  general: 

•  Known-Expected Events: 

Examples: Life-stage events such as education,  marriage, retirement, etc. 

•  Either Expected Or Known Events

Examples: These are certain things that fall in  the realm of the grey zone. For instance, while  we know that all of us will eventually die, death  sometimes might hit us most unexpectedly through a sudden, massive heart stroke.  Similarly, a pregnant woman expecting the  birth of her child during a certain month may  have to deal with a surprise actual-arrival date. 

With proper planning in life, whether the matter  is related to finance or other things, we should  be able to tide over the events listed under (a)  and (b) smoothly. For a majority of the life 

stage–related events, preparation is within  one’s own control as we more or less know their  timelines. So proper planning for each of these  events—be it from the financial angle, from  the perspective of acting upon building the  requisite skills, or from the overall well-being  aspect—and acting upon the said plan will help  us successfully cross each of these milestones. 

However, there is a lot of difference between  knowing about an event and acting in  preparation for that event. It is worth taking  the right steps much in advance with adequate  planning to save a lot of heartache later on,  especially for matters that are listed under (b). 

•  Neither Known Nor Expected 

Examples: Pandemics, accidents, etc. are  certain events in life that hit us in an unknown  and unexpected way. COVID-19 has amply  demonstrated the risks of an unknown event  knocking us down when we are least expecting  it. Before its arrival, 2020 was touted to be that  special year ushering in a new millennium  holding a bright promise in its wake. Within  three months into that year, it became clear  that this was unlike any year in the century in  terms of the negative impact it unleashed upon  

The occurence of the worldwide Covid pandemic in 2020 was Black Swan event 

60 LifePositive | FEBRUARY 2023

It’s true that there is little that one can do in the face of  something that comes as totally unexpected from the  unknown realm of things. But having a contingency plan  for things is far better than sitting in denial that nothing  untoward is likely to happen. Everyone needs to create  that little place to keep things going on in life, no matter  what happens.

human beings across the globe. We lost many lives  and livelihoods to the pandemic. Even a planned  mega event such as the Olympic Games had to be  postponed. If this doesn’t serve as a wake-up call,  then nothing else will. 

It’s true that there is little that one can do in the  face of something that comes as totally unexpected  from the unknown realm of things. But having  a contingency plan for things is far better than  sitting in denial that nothing untoward is likely  to happen. Everyone needs to create that little  place to keep things going on in life, no matter  what happens. For instance, even though one is  doing quite well at work presently, one cannot  vouch with a 100 per cent guarantee that one  is absolutely at no risk of losing one’s job. So it  always pays to keep upgrading one’s skill sets and  have an alternative plan. But that has to happen  before the catastrophic event comes calling. For  example, one can save money when one still has  the job and not after one gets laid off. 

Similarly, while there’s little one can do after  the pandemic hits, there is definitely something  

human beings can do in terms of boosting their  immunity levels through properly taking care of  themselves through healthy practices so that it  can act as a protective shield against eventualities  like this. For eventualities that may or may  not happen, you should create reserves when  everything is going well. 

Black swans (the birds) perhaps exist only in  certain parts of the world. But the metaphoric ones  abound everywhere and in everyone’s life. While  this might appear to be a scary thought, we should  never lose the perspective that there is abundant  beauty in not knowing what our future holds. It  makes the journey that much more exciting when  the future holds a pleasant surprise. On the flip  side, it can also bring us crashing down when the  opposite happens. That’s the very reason why  there’s a need to cushion our fall. 

Let’s march on into the future with hope in our  hearts and a plan in our minds so as to learn to take  the black swan events of our lives in our stride. 

Sujatha Rao is a retired banker. She has been contributing articles to various newspapers and magazines over  the last two decades. Two of her short stories were placed third in Times of India’s national level Write India contest  (Seasons 1 and 2). Her first book titled In the Company of Stories was published recently. Her other interests include  reading, traveling, practising yoga, and mindfulness.