Alessandro Marchesin

Nov 21, 2021

4 min read

The Black Swan: Was It Possible to Forsee Covid Pandemic?

Source: Pexels

The Black Swan Theory

  1. The event observed comes as a huge surprise. Classic statistics would describe it as a vast and improbable event.
  2. The event’s happening provokes enormous consequences and changes, and a small amount of them explain many facts happening in the world.
  3. Due to psychological biases, humans tend to find an explanation afterwards and point the finger against whoever did not recognise it as unavoidable.

Why do the Black Swan Exists?

  • The amount of time you can put in defines the salary.
  • Your effort is the first predictor.
  • No single day will have a significant impact on your income.

How Brains Hides the Black Swan

  1. The illusion of understanding: the world is too complicated, and people wrongly oversimplify events
  2. The retrospective distortion: we create stories and connect dots to make sense of the world, even if when there’s not
  3. The categorisation tendency: we love creating boxes in which we put everything that looks resemble.
  4. The round-trip fallacy: we are very likely to confuse the statement “no evidence of black swan” with “evidence of no black swan”. Taleb uses the example of a turkey that since has not been eaten for 1000 days. He will never be at the center of the table during a Thanksgiving.
  5. The survivorship bias is a sample selection bias that occurs when a data set only considers “surviving” or existing observations. It fails to consider observations that have already ceased to exist. Do become-rich-books survey people who were unable to succeed? In finance, an example of survivorship bias is when studies on mutual fund return only use databases containing data about mutual funds that currently exist and fail to include data about funds that no longer exist.

A Note on Statistics

Now What?