I saw a black swan

I was recently in El Retiro park in Madrid and was shocked to see a black swan by the lake for the first time.

Nassim Nicholas Taleb popularised the term black swan event in his book The Black Swan, which he describes as an unpredictable, rare, and catastrophic event that profoundly impacts society and can only be explained and understood in retrospect. (The term is based on an ancient saying that presumed black swans did not exist.)

I read the book as a teenager, and in finance we use the term when markets are faced with unexpected freak events, such as 9/11 or the Covid-19 pandemic. Though I’ve used the term many times, I’ve never thought about an actual black swan beyond the illustration on the book's cover, so I was truly surprised to see one.

It has got me thinking about unexpected events and what we can do to prepare for them.

How unexpected are they really?

Unexpected events occur in many cases when we least expect them. Because they are unexpected (concerning domain, timing, magnitude etc), it isn't easy to prepare for each event. However, whilst their timing is likely to come as a surprise, many ‘unexpected’ events have a high probability of occurring, which means we can, to some extent, prepare for them in advance.

Preparation is important because these events don’t just have a direct impact; they can also indirectly impact many other aspects of our lives. For example, an exogenous shock can disrupt healthy habits whilst our attention turns to dealing with the shock, so the effects of it are magnified.

Over the course of our lives, we can expect some of the below to occur, with some actions we can take ahead of them:

• Health - take out private medical insurance

• Bereavement - preparing a will

• Redundancy - having a side hustle or a backup career plan

• Unexpected costs - having rainy day savings

Implementation idea

Conduct an audit of your life and spend time thinking about the events that you know will eventually occur that will have disruptive effects. Consider whether there are steps you can take today to limit their impact when they materialise.

Sadly, good things don’t always last forever. We know this about many aspects of our lives, but we can be tempted to hope for the best and not prepare adequately for them. Preparing for bad things is not fun, but our future selves will thank us.

Best, Alex Joshi.

On my bedside table:

• Podcast: Huberman Lab - Dr Susanna Søberg: How to use cold & heat exposure to improve your health (link)

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