The Black Swan

If I am open to ways in which every aspect of life intertwines with, and informs the other—I am often gifted with insights that cause me to rethink deeply-held assumptions. It is as if life hands me lessons one day I will surely need the next.

One recent Sunday, Judi and I were in Chicago and wandered into a bookstore—my idea of nirvana! Since I had only a few pages remaining in the work I was enjoying, I wanted another to accompany me on the train home that afternoon.The Black Swan by Nassim Nicholas Taleb, showed up prominently after its publication in 2007, and while tempted—I perused it many times—I always resisted adding it to my library. That morning, however, it ruffled its feathers on the shelf of “staff recommendations” and I gave up. “You win” I said in resignation and followed it to the cashier.

As with any good and reliable friend, this one put its arm gently around my shoulder, pointed out at the world and asked “If you look from this perspective, doesn’t much of life appear surprisingly different?”The author’s ideas so destabilized the earth beneath me that I began to see almost everything in a new light.

Taleb’s key message, as I read his work, is that we are misled when taught that Gaussian distributions—the normal or bell curve—capture the majority of life’s randomness. The normal distribution of human height and weight gets translated into financial tools such as beta—the risk assigned to an individual stock—or the theory of random walks, which purportedly explains the movements of the Dow Jones Industrial Average. We are trained to see these derivative statistical tools as primary descriptors of variation.

How then to categorize, understand or learn from the market crash of October 19, 1987…S&L crisis during the 1980s and 90s… dot-com collapse that began in March, 2000…Wall Street turmoil after 9/11…or current global economic crisis we may or may not have overcome? When we use Gaussian tools to describe the world, we are forced to call these unexpected events “outliers” and dismiss them as unimportant, improbable flukes. And yet, they account for a large portion of the variability my portfolio has confronted since the day I inserted the first dollar into my retirement account.

What Taleb asks me to consider is that black swans—those highly improbable, impactful events—impose the majority of randomness in our lives, and we pass them off as minimally important “outliers” at great peril.

I was reminded of Taleb’s ideas during a recent conversation. A friend, who found himself destitute in this virulent economy, described a successful business venture early in life. “I made a great deal of money, but it was just such a fluke!” It may have been an improbable, unpredictable series of events, but to this day it remains an important chapter in his life—one that enabled much of the rest.

How many of us, when recounting our journey from birth to this very moment, are forced to recount multiple improbable, unpredictable events—chance encounters or overheard conversations—that reveal the truth of our story?

When tempted to think otherwise, I recall a morning in 1979 after I arrived in Boston to begin my MBA. As I entered the MIT post office, I held the door for a young woman. Later, after she became Judi Breisch, she admitted she thought the gesture was sweet. That seemingly unimportant moment—and that young woman—made this moment, and most in between, possible.

If life is inherently unpredictable—if I cannot count on life’s momentary stability to help me see the road ahead—how do I move into the very next moment? I would suggest that perhaps life will gift me with such insight—but that would be just such a fluke. But stay tuned!

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