What is Black Swan theory?

“The problem of induction” – that any theory based on observations could be wrong – has long preoccupied philosophy.

20th Century British philosopher Sir Karl Popper also considered how new observations affected knowledge – such as spotting a black swan when it was thought all swans were white.

Nassim Nicholas Taleb’s 2007 book The Black Swan looks at the problem anew and describes the disproportionate role played by hard-to-predict events.

Such ‘black swan events’ are considered extremely rare but have huge historical consequences.

Examples include World War I, the September 11 attacks and the emergence of the internet.

While these events are a surprise, they are then rationalised in hindsight – they could have been predicted as the evidence was there, but went ignored.

The black swan reference derives from a Latin expression “rara avis in terris nigroque simillima cygno”

This translates as “a rare bird in the lands, and very like a black swan” – when first written it was thought that black swans did not even exist.

via BBC News – Is Nassim Nicholas Taleb Downing Street’s favourite adviser?.
HatTip to Dave Lull