Nicholas Taleb Writes 10 Commandments for Dealing with Black Swans

Posted: April 15th, 2009 | Author: Steve | Filed under: Business | Tags: Business, finance, investing, mathematics, stimulus | View Comments

Ever since the current financial crisis began, Nicholas Nassim Taleb, author of The Black Swan: The Impact of the Highly Improbable, has been everywhere. His astute and irreverent analysis of why human psychology is ill-equipped to deal with very unlikely yet very impactful events has captured the attention of many who are searching for answers in uncertain times.

Mr. Taleb is in the headlines again with a Financial Times opinion piece entitled Ten principles for a Black Swan-proof world, which lists some principles for preparing for, avoiding, and dealing with these unlikely events.

For those unfamiliar with the term, a “black swan” is any event which can have an extremely large impact, but is so unlikely to occur that it is considered impossible. According to Wikipedia: “The term Black Swan comes from the assumption that ‘All swans are white.’ In that context, a black swan was a metaphor for something that could not exist. The 17th Century discovery of black swans in Australia metamorphosed the term to connote that the perceived impossibility actually came to pass.”