As worries about the coronavirus roiled global markets last week, investors and journalists debated whether or not the pandemic is a Black Swan: a statistically improbable life-changing event.
By definition, Black Swan events are difficult to predict because they fall so far outside of our normal expectations. Nassim Nicholas Taleb coined the term in 2001, but it didn’t enter popular consciousness until his 2007 book seemed to anticipate the 2008 financial crisis.
We’ve seen good arguments on both sides for whether or not COVID-19 “counts” as a Black Swan. It’s an interesting debate, but we think Taleb’s book offers food for thought either way.
One key insight to consider: Taleb says that people are naturally overconfident about what they know.
The best way to work through uncertain times, then, is to be honest about your own ignorance. Base your decisions on the best possible information available at any given moment instead of indulging emotions and gut feelings.
You’ll find more useful info in our Instaread on THE BLACK SWAN.