Are We On The Verge of Black Swan Events?

While reading different articles online, I came across an interesting read titled “Black Swan Events.” These events are those events which are neither anticipated, nor being prepared for but their impact is such that it changes the Economy, Demography, and Sociology of the world.

Black Swan Event

The term Black Swan originates from the (western) belief that all swans are white because these were the only ones accounted for. However, in 1697 the Dutch explorer,Willem de Vlamingh discovered black swans in Australia. This was an unexpected event in (scientific) history and profoundly changed zoology.

The term came to light in the Modern- Day world through Nassim Nicholas Taleb, a finance professor, writer, and former Wall Street trader. Taleb wrote about the idea of a BLACK SWAN event in a 2007 book prior to the events of the 2008 financial crisis. Taleb argued that because black swan events are impossible to predict due to their extreme rarity it is important to understand the unforeseen and uncommon aftermath that such events can possibly have on society and the entire world.  It is important for people to always assume a black swan event is a possibility, whatever it may be, and to plan accordingly.

The Black Swan Event have these Common Characteristics,

It cannot be predicted .

It has a catastrophic impact when it does occur.

It is explained in hindsight as if it were actually predictable.

Past Black Swan Events

The financial crash of the U.S. housing market during the 2008 crisis is one of the most recent and well-known black swan events. The effect of the crash was catastrophic and global, and only a few outliers were able to predict it happening.

In 2008, Zimbabwe had the worst case of hyperinflation in the 21st century with a peak inflation rate of more than 79.6 billion%. An inflation level of that amount is nearly impossible to predict and can easily ruin a country financially.

Is COVID-19 a Black Swan Event?

There have been many arguments that both support and run contrary to this. .Experts say, as the pandemics keep occurring in the world from Spanish Flu to SARS to H1N1 , governments have been preparing contingency plans and SOPs for crises like these so it cannot be considered as a Black Swan Event.

I consider it as a Black Swan Event as 2020 has already passed and world agencies are still not able to determine the economic and social losses this pandemic has caused. 

The aim of the countries across the world should be to build robustness against such unprecedented events . The Reserve Bank of India has already assessed that India might experience financial loss of approximately Rs 7,80,000 crore incase of an unforeseen global risk scenario or “ black swan” occurrence.Only the future may tell the exact losses to the entire human ecosystem.

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