In logic there is a "black swan" concept. In its simplest terms it refers to the fact a proposition is scientific only if it can be proved false. That idea was made popular by Karl Popper. For example if we see a white swan we know there is at least one white swan, but it is conjecture to conclude all swans are white. The fact is that finding one black swan would falsify the conclusion all swans are white means it is capable of being tested. That was the only context I was aware about when talking about a "black swan as a theory. I admit I was not familiar with Nassim Nicholas Taleb’s book The Black Swan: the impact of the highly improbable until I heard him interviewed on CNN while in Italy. I was rather impressed with his observations when applied to the financial condition and future of this country as well as the market world wide.
I’ve not had a chance to read his book, but I understand it discusses the occurrence of high impact, hard to predict and rare events that are beyond normal expectations. He discusses ways to protect against the harm from these events, as I understand it. I was impressed with ten of his principles in that regard. Here’s a summary I got from the internet:
- What is "fragile" should break early and nothing should ever become too big to fail.
- There should be no socialization of losses nor privatization of profit or gains
- People who drove a school bus blindfolded and crashed, should never be given a new school bus and allowed to drive again.
- Never allow someone making an "incentive" bonus manage a nuclear plant – or your finances
- Counter balance complexity with simplicity
- Do not give children sticks of dynamite, even if they come with a warning
- Only Ponzzi schemes require confidence. A government should never be in a position where it needs to "restore confidence."
- Do not give an addict more drugs if he has withdrawal pains
- Citizens should not depend upon financial assets or the advice of experts for their retirement
- Make an omelete with broken eggs.
I am very interested in reading his book. He sounds like someone with common sense and that seems to be rare among politicians and Wall Street.