When, on July 7, 2005, four young British men blew themselves up on London’s
transport network, killing 52 innocent people and injuring hundreds of
others, should we have been fully prepared for it?
Or was this what Nassim Nicholas Taleb describes in his new book as a “black
swan” event, something that was thought of as highly improbable beforehand
but which we quickly rationalise afterwards as being entirely predictable,
as MI5 is discovering to its cost?
Black swan events have fascinated philosophers for centuries. When the Dutch
explorer Willem de Vlamingh discovered black swans on the west coast of
Australia in 1697 and the news filtered back to Europe, it became an analogy
for the things we can and cannot know with certainty.
As John Stuart Mill, the classical economist and philosopher, put it: “No
amount of observations of white swans can allow the inference that all swans
are white, but the observation of a single black swan is sufficient to
refute that conclusion.”
Donald Rumsfeld is no Mill, but his most famous – and most ridiculed quote –
was a modern variation on the theme, taken directly from Taleb’s earlier
book, Fooled by Randomness.
“Reports that say that something hasn’t happened are always interesting to me,
because as we know, there are known knowns; there are things we know we
know,” the former US defence secretary famously said. “We also know there
are known unknowns; that is to say we know there are some things we do not
know. But there are also unknown unknowns – the ones we don’t know we don’t
know.”
Black swan events, according to Taleb, are the unknown unknowns, the things we
didn’t know we didn’t know until after they have happened. If the July 7
attacks were a true black swan event we should not seek to blame the
security services or the police.
If 9/11 was a black swan event, as he argues [he does not touch directly on
July 7], then we should forget all the congressional investigations and
soul-searching about the US administration’s failure to prevent it. Failing
to prevent another would indeed be an act of gross negligence, which is why
he says New York was infinitely safer on September 12, 2001 than it was on
September 10.
But the characteristic of a black swan event, that it is essentially an “out
of the blue” occurrence, means that in practical terms some things cannot be
prevented. Before September 11, given what was then a reasonable assessment
of the risk of such an attack, nobody would have approved a 24-hour air
force patrol in the skies over Manhattan. Even if there had been one, would
anybody have given the order to shoot down a passenger plane, even one
apparently bent on a destructive course? After 9/11, yes; before it,
unlikely.
Niall Ferguson, the historian, suggested that the Virginia Tech massacre, when
Cho Seung-Hui turned his guns on fellow students and teachers, killing more
than 30 people, was a black swan event. Maybe, though plenty of people were
worried enough about him to try to have him committed, and murderous school
and campus rampages are not exactly unknown in America.
Where Ferguson was on safer ground, perhaps, was in agreeing with Taleb’s
assertion that most history conforms to the black swan hypothesis.
Historians spend their time constructing narratives to prove that events
nobody foresaw followed a logical and entirely predictable course.
Hindsight is a wonderful thing. Economists are good at explaining market
crashes, booms or recessions after the event. They are not nearly so good at
telling you about them beforehand, as I would acknowledge. When I went to
meet Taleb it was not until I was well on my way that I glanced at the
publisher’s letter saying two of his pet hates were economists and people in
blue suits. I am the nearest thing this newspaper has to an economist and,
yes, I was wearing a blue suit.
Taleb is an engaging, lively and intelligent former Wall Street trader turned
professor (in the sciences of uncertainty at the University of
Massa-chusetts). His new book, The Black Swan: The Impact of the Highly
Improbable (Allen Lane), is a New York Times bestseller and No 4 in the
Amazon chart in Britain. It is funny, quirky and thought-provoking.
It appeals to common sense. Taleb talks of two worlds: Mediocristan, where
everything is fairly predictable and single events do not change things
much; and Extremistan, where the big, unexpected event changes everything.
We know how much September 11 changed things. In business and finance, we
know how much the rise of Google, largely unpredicted, has changed the
landscape.
There are, however, a couple of things about the black swan hypothesis that
suggest we should not be entirely swept away by it. The discovery of black
swans turned what had been a common misconception on its head, but it simply
replaced one certainty – all swans are white – with another – there are both
black and white swans.
Before 9/11, or before July 7, nobody was saying there would never be
terrorist attacks on New York, Washington and London. Indeed, most experts
said there would be. New York had its own history; the World Trade Center
attack of 1993. So did London, thanks to Irish terrorists. From September
11, 2001 until July 7, 2005, we heard little but warnings about the dangers
of a large-scale terror attack on London. There was surprise in the timing
and manner of the attack but not that it happened. Perhaps there was more
surprise in that something similar was attempted two weeks later.
My argument would be that we predict too much, not too little. The world is
full of predictions of big, epoch-changing events that never happen. When
one does, the people who predicted it are not slow in coming forward – 9/11,
or something like it, was predicted, but so were hundreds of other attacks,
some even more devastating.
You could argue that the whole of the dotcom bubble of the 1990s was a
prediction of the Google phenomenon. The problem was not that people failed
to see a Google coming; it was that they saw too many. Faced with a plethora
of predictions, the only thing we can do is try to form a reasonable view of
the risk attached to them. Sometimes we will get it wrong; often we will get
it right.
I am not saying we can predict everything. What I am saying is that it is
sometimes too easy to throw up our hands, admit our limitations and put
everything into the black swan category. Many of the biggest challenges of
our time are based on big events that, according to the experts, are
entirely predictable. Global warming, say scientists, will have predictable
effects on the ability of the planet to sustain life. The black swan event,
perhaps, would be if they turn out to be wrong.
