What the Heck is a Black Swan Event? Should I Care? – Readyman

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What the Heck is a Black Swan Event? Should I Care?

Posted on February 10 2019

Often in history, freak events combine in unfortunate ways to damage or destroy entire societies and economies. Economists call them Black Swan Events and we’re more likely to face a Black Swan than any other collapse.

According to Nassim Nicholas Taleb (a finance professor, writer, and former Wall Street trader, Black Swan Events are always obvious in hindsight but are rarely predicted in advance. Most Black Swans have never been seen before.

The most-recent Black Swan Event was the Collapse of 2007/2008 when several strange factors combined to nearly take down the global economy. As it was, it caused the worst recession since The Great Depression. Looking back, we saw the following factors, in a fit of bad timing, coalesce into a very dangerous cocktail of financial disaster:

  • Subprime mortgages
  • Mortgage-backed securities
  • Credit default swaps
  • Derivatives trading
  • The Community Reinvestment Act
  • Credit Rating Agency failures

Prior to 2007, almost no one knew what these factors MEANT, much less how they might increase the risk of collapse.

More than half the time (depending on how you interpret history), collapses of societies have been due to Black Swan events like the Collapse of 2007/2008—unpredictable and chance factors that combine to cripple great economic systems.

Examples:

  • The Fall of the Roman Empire
  • World War One
  • The Great Depression

When we worry about “the end of the world,” we over-emphasize threats we have seen or read about such as war, flu, EMP (electro-magnetic pulse) and government tyranny. We rarely worry about threats we’ve never seen before, even though history proves that at least half of all collapses come about because of strange combinations of freak events. In other words, our biggest worry should be the threats we can’t imagine.

The bad news is that we probably cannot imagine most of the threats to our abundant and safe way of life. The good news is that we can easily and inexpensively prepare our families for those unexpected threats.

In rough numbers, the United States has experienced a massively-threatening event once every fifty years since 1776. It is likely that each person will experience one or two of these events in their lifetime. Baby Boomers have experienced three such events (World War Two, the Cuban Missile Crisis and The Collapse of 2007/2008.) Based on these statistics, preparing for such an event is utterly reasonable, especially if done without fear and with thrift.* (from How to Survive a Black Swan Event, available soon on Amazon.)

If you're interested in seeing a fictional Black Swan Event swallow America, in chilling detail, check out Black Autumn, A Post-apocalyptic Saga available now on Amazon.

 

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