The Unsustainable Black Swan

by Andre

In Nassim Nicholas Taleb’s bestseller “The Black Swan”, he discusses the inherent flaws of prediction while asking the reader to focus on the under valued likeliness of randomness and uncertainty. The title itself derives from actual black swans that, until seen by Western eyes when Australia was discovered, were unknown to exist.

Until this point, it would have been perfectly reasonable to say that all swans are white. But when the first black swan was introduced into the mix, all bets were off and each of the notion that all swans are white would have become obsolete.

Throughout history, there have been major instances that could fall into the black swan category. Events like Black Monday, the fall of the Soviet Union, the monumental rise of the Internet, and 9/11 are all black swans in their own right. Human hindsight and historical reconstruction are responsible for coming up with the explanations of why these events took place after the fact.

Think About the Thanksgiving Turkey if You Will

Every time the bird fed, the notion that the human keepers are simply looking after it would be reinforced (provided the turkey had the capacity for these thoughts). After a thousand days of the same feeding schedule, the poor turkey would have no reason to believe that suddenly, on an apparently random day, the pattern will end and snap, life will come to a sudden and unexpected end. But that exactly what happens.

I’m going to leave the explanations vague and unsatisfied right there (check here or the book for more) so that I can start tying it into Jeffrey Sachs’ predictions on sustainable growth.

Throughout his most recent book “Common Wealth: Economics For a Crowded Planet” Sachs uses recent economic, social and environmental trends to predict things like the convergence of global income per capita, rising ocean levels and all the typical Al Gore.

The statistical culmination of these trends are then used to back up just about every prediction in the book. Many of these predictions look so far into the future, without considering black swans, that it’s likely the numbers would have to be reworked every few years.

For example, he uses the average US economic growth of 1.7% per year as a guide for predicting where their economy will stand in relation to others by the year 2050. Since many other developing countries have a higher percentage of annual growth (on a smaller scale of course) he suggests the gap between everyone will one day converge. 

I find it difficult to believe that everything will go exactly according to plan based on historical averages for the next 50 years. Those pesky Black Swans are sure to pop up every once in a while. I accept that he is simply making an effort to organize the topics in the book as a strategy for figuring everything out. It is just my of my humble opinion that the scale of his approach detracts from the optimism he presents.

I wonder how his approach would have differed had he released the book after the black swan that is the current recession instead of months prior.”

He does at times acknowledge the possibility of Black Swans with words like, “Of course, this scenario is highly optimistic in that it assumes the world avoids any prolonged crisis, that the United States grows at the historical average, and that all other countries achieve convergent growth.” But these scattered bits remain more as an afterthought than an actual concern throughout the book. 

I wonder how his approach would have differed had he released the book after the black swan that is the current recession instead of months prior. I suspect his optimism would be dulled down quite a bit.

Making far reaching predictions based around a loosely defined, unpredictable human system is impossible to do with any certainty. Nobody can guess what surprises are in store for us in the next fifty years. He is simply one of thousands of modern day Nostradamus’s that hopes some of his guesses stand up against the test of time.

Ultimately, I suppose he is making an effort with the information he has available to him. This playing with the future on this scale is too much. I think these concepts were once explained to me during Back to The Future II, but I have since forgotten the what to make of it.

This entire argument was full of holes wasn’t it?

In conclusion, I’ll just repeat that the future is uncertain and that all predictions, no matter how thoroughly they were researched, are simply guesses. It seems Jeffrey Sachs forgets this sometimes.

My brain hurts, I think it’s time for some pink lemonade.