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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 46826  
Subject: Re: Looming Black Swan ... Date: 12/9/2012 3:56 PM
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by definition, a black swan is unforseen

Its perhaps a fine distinction, but I thought a black swan was a statistical outlier. That is to say everyone focuses on the 80/20 rule. The idea that 20% of your customers do 80% of your business. So you focus your efforts on that portion.

In statistics they teach that most of the events are expected to fall within two or three standard deviations of the mean. Hence, extreme events are often ignored. But some do happen.

They may not be unforeseen, but they are considered so unlikely that little or no resources go into planning for them.

Consider the 100 year flood. They happen so infrequently that funds are not available to deal with them.

Superstorm Sandy is a good example of a Black Swan. People have been talking abt possible flooding in low lying areas around New York Harbor for at least a few years (as part of global warming concerns). But little was invested to deal with the event.

There must be hundreds if not thousands of infrastructure projects that could be undertaken to address outliers like 100 yr floods, earthquakes, asteroid impacts, forest fires, humongous snow storms/blizzards, nuclear war, etc, etc.

Competition for resources intensifies as people realize the impact of some of these and the need for better preparations.
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