The Black Swan

the black swan

THE IMPACT OF THE HIGHLY IMPROBABLE

“Remember that you are a balck swan”-Nassim Nicholas Taleb

NEELABH SINGH

SECTION E

140102080

INDEX

1. INTRODUCTION

2.1. WHAT IS THEBLACK SWAN?

2.2. IS RANDOMNESS REALLY RANDOM?

2. DISCUSSION

3.3. CHARACTERISTICS OF BLACK SWAN EVENTS

3.4. WHY WE ARE VURNABLE TO BLACK SWAN EVENTS

3. THE CURIOUS CASE OF THE BELL CURVE

4. BLACK SWAN EVENTS AND INVESTMENTS

5. CONCLUSION

6. REFERENCES

1. INTRODUCTION

2.1. WHAT IS THE BLACK SWAN?

The concept of Black Swan events was popularized by the writer Nassim Nicholas Taleb in his book, "The Black Swan: The Impact of the Highly Improbable". The essence of his work is that the world is severely affected by events that are rare and difficult to predict. The black swan theory or theory of black swan events is a metaphor that describes an event that is a surprise (to the observer), has a major impact, and after the fact is often inappropriately rationalized with the benefit of hindsight. The theory was developed by Nassim Nicholas Taleb to explain:

The disproportionate role of high-impact, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance and technology.

The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities).The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs.

Unlike the earlier philosophical "black swan problem", the "black swan theory" refers only to unexpected events of large magnitude and consequence and their dominant role in history. Such events, considered extreme outliers, collectively play vastly larger roles than regular occurrences.

2.2. IS RANDOMNESS REALLY RANDOM?

The human brain is programmed to...