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The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. The term is based on an ancient saying that presumed black swans did not exist โ€“ a saying that became reinterpreted to teach a different lesson after the first European encounter with them.

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The Black Swan Theory!

๐Ÿšถ On a walk

Nassim Nicholas Taleb's Theory

The theory was developed by Nassim Nicholas Taleb to explain:

  • The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology.
  • The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities).
  • The psychological biases that blind people, both individually and collectively, to uncertainty and to a rare event's massive role in historical affairs.

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Few Real Life Black Swan Events
  • The COVID-19๐Ÿฆ ๐Ÿ˜ท
  • The Spanish Flu-all the focus was on WWl and the politics of it
  • Hitler and Holocaust
  • Collapse of Communism-none of the thousands of experts predicted it
  • Economic crisis of 2008-went far beyond a normal recession-once it happened economists and politicians were surprised at how few tools they had to solve the problem
  • Dot com bubble burst
  • Hiroshima, Nagasaki

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