Eps 66: covid 19 - is it a black swan?
— The too lazy to register an account podcast
If there was ever a black swan event, it would be the COVID-19 pandemic.
I don't think the collapse of mid-February was a black swan event.
We should develop protocols forlistening to the alarmists, even though we won't necessarily act on their warnings.
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Host
Sean Brown
Podcast Content
These are uncertain days, and how to assign probabilities to the likelihood of a global pandemic, or even a single event in particular, is a fundamental question in several areas, including finance and politics that transcend those of one's own industry.
Experts have spilled barrels of ink predicting a "Black Swan" event that will have a profoundly negative impact on the country, while others see an economic recovery by the fourth quarter of 2020. Some predict a long bear market, while others believe that the market will pick up again in the second half of this year or even the first few months of next year.
For Bradley Foster Sargent, we don't have a crystal ball, so we can't say exactly how a Black Swan event will play out and how it will affect the economy and markets. The Black Swan effect has been identified as an unlikely event that mocks what we can normally expect. Black swans sighted in Western Australia in the 19th century rejected the ingrained notion that all swans are white.
Nassim Nicholas Taleb popularized the word "Black Swan" in his writings in the late 1990s and early 2000s. He wrote: "There is a tendency for confident predictions not to take into account the real uncertainties of the future."
It describes a sudden and unexpected event with enormous consequences that can disrupt your life in a significant way. Very soon one could see that one has a clear critical and contrary thought process.
According to Taleb's rules, COVID 19 can therefore be called a black swan, but it also threatens to serve as a catalyst for all subsequent "black swans." It has become one of the most important events in the history of mankind, if not the greatest.
The extent of the impact of what is happening will depend on whether we react flexibly, in perspective or in panic. The fundamental economic distortions in the financial markets caused by COVID 19 and subsequent events in the United States, Europe and Asia.
Too often, we have tried to predict, control, and understand the catalysts that enabled them to spark such dramatic events in the first place. Too often we have been unable to understand these events because we confuse the catalyst, the most immediately obvious factor, with the actual cause or even the context. Simple credit allows people to get away with buying assets with artificially inflated values.
Looking ahead, companies have reduced the impact of Black Swan events by identifying and preparing for potential events. It would be better to say that nothing in the recent past predicted the crash of 2008. Can we say that such a thing has never happened, or even if it did, that it would cause the current crisis?
What Taleb has emphasized in the past, and what is often appreciated, is that excessive focus on the Black Swan's terminology misses the bigger picture of the financial crisis and its impact on the global economy. This could include examining the impact of other events, such as the collapse of Lehman Brothers in 2008 or the crash of 2008. The assertion, made by other risk analysts, was that there was indeed a pattern of events.
For a number of reasons, including the collapse of Lehman Brothers in 2008 and the crash of Goldman Sachs in 2009, these events were perceived as far more serious than they might have been.
The label has become fashionable since the black swan metaphor was coined in a book of the same name in 2007. To put it bluntly, there is a tendency to predict the next "black swans" and turn any potential black swan into a white swan.
Moreover, those responsible for these preparations dismiss their blatant failures because of their perceived exceptional nature. What makes the occurrence of the COVID-19 outbreak seem astronomically rare is that it is being treated as such and we will fail to prepare for the next pandemic.
I know this because I am the managing director of a university research institute for disaster risk reduction and have been researching and writing about disaster and risk management for over 20 years.
When European explorers landed in Australia in 1697, they discovered black swans living there, which immediately disturbed a long-standing thought system. The term is a metaphor that has its origins in the fact that people have always thought that a swan must be white, although there is no evidence that this can be confirmed by empirical evidence. Black swans are a popular term, but also a myth and not a scientific fact.