The Black Swan.

I am not blogging at all, though I keep on promising myself everyday that tomorrow would be day when I would become prolific! So I thought, I will just pen down my Toastmaster speeches. Here's the toastmaster speech which I gave this week.

Today I am going to talk about something, which is hard to predict, very rare, a game changing event and which would have huge impact in your life. No, I am not going to talk about your wife's/girlfriend's moodyness (I dont think thats even a word) or your bonus , but instead I am going to talk about 'Black Swan theory'.

Before I explain what the theory is, let me just take a step back and retrace the orgin of this word.Till couple of hundred years back swans were always considered symbol of purity (white). Most of the literature would compare swans with purity and sacredness. And then they discovered Black swan swimming around in Australia. Thats how this theory gets its name, although this is not a game changing event or a huge impact event.

This theory been made famous by Nassim Nicholas Taleb in his 2007 book The Black Swan. It refers to rare event, which are game changers and impossible to predict. Some of them are : Invention of a wheel,world war I, Iphone, www, 9/11, Asian tsunami etc.

As I said earlier , these events are impossible to predict and be prepared for. They can be good ones or pretty bad ones which can bring us to our knees. What I am going to talk about today is how can we either use these event to our advantage or atleast limit our losses. I am going to give a gist ( my opinion) from this book (lessons learnt) on how to cope with these kind of events. Given the time constraints I am going to limit myself to three lessons.


1. Beware of the black swan
What this necessarily means that be up on your feet , always! Dont rest on your laurels. A good example of this case is : MOTOROLA .
A few years back, Motorola had this huge hit in MOTORAZR . But while competitors were investing heavily in smartphones and iphones , motorola was busy releasing the pink version.
Now if you take a look at the current top five best selling phones in the world, motorola is nowhere in the horizon. Complacency made them ignore the black swan

2.Beware of the unknown unknowns
What we dont know is always more important than what we actually know. Ignorance acknowledgement might not be such a bad thing after all. Rather than being cocksure of uncertain things which would anyways land us in soup , we can be ignorant and be aware of it.
A good example of this is : The year 2007 and 2008.
If you would have switch on T.V. or picked up a paper couple of years ago, all the experts were talking about how the economy is booming and oil is going to hit $250 a barrel. And then Subprime crisis hit them, of which nobody had any idea whatsoever. Oil dropped to $ 40 a barrel and the so called experts started speaking of impending doom. And the regular folks simply lost half of their 401k's.

3. Beware of the news
Too much news can be toxic. Take any kind news for example. we hear a news today and we build our own assumptions around it. We hear some more news tomorrow, rather than taking the new news at its face value, we selectively chose to select section of news to support our assumptions. we should always take the "NEWS" with a pinch of salt, Whatever showed in T.V. or internet might not always be correct or true.



As told in the book, "we are ignorant and would continue to be so". Though we cannot predict any black swan event, what we can do is be prepared for it. That itself puts us ahead of the "sure thing" confident guys , who are just one step away from disaster. This might help us in cutting down our losses during the black swan event , or as in the case of iphones ( 18 yr olds making millions through iphone apps) even profit from it.



Cheers.


Sources : wikipedia, Motley Fool