Watch Nassim Nicholas Taleb, a Risk Specialist at the Global Trends Festival 2020

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The only thing we can be sure of in the future is crises - claims economist Nassim Nicholas Taleb. In his opinion, the world has no way of becoming immune to everything, but the turbulence can become our strength.

• A “Black Swan” cannot be predicted, because it is not possible to “manage risk” fully.
• The American market theorist, investor and philosopher explains how to benefit from the Black Swans.

Nassim Nicholas Taleb is an American economist, philosopher and trader of Lebanese origin. In his academic work, he focuses on issues connected with probability, randomness and uncertainty. He is a professor at the University of New York and author of bestsellers: “The Black Swan. The Impact of Highly Improbable", and “Antifragile. Things That Gain From Disorder". The Sunday Times has chosen “The Black Swan” as one of the 12 most important books published after World War II.

Living with the “Black Swan”

"What I call the Black Swan (written in capital letters) is an event with the following three characteristics. Firstly, it is unusual because it goes beyond the domain of our usual expectations, as no element of the past clearly indicates its possible occurrence. Secondly, it has a drastic impact on reality (as opposed to a bird with an unusual plumage). Thirdly, despite the lack of typicality of this event, our nature forces us to seek a justification for its occurrence after the fact in order to make it explainable and predictable," writes Nassim Nicholas Taleb in his book.

According to the economist, societies are not able to react well to the Black Swans because they focus too much on the past and look for the error they have made. However, it is only after the fact that we realise that such events could have been foreseen.

Taleb points out that the crux of the matter is that a “Black Swan” cannot be predicted, because it is not possible to “manage risk” fully. In his opinion, we should realise that they do exist, rather than playing soothsayers.

The author of the bestseller indicates that any “risk management” is wrong, because it assumes certain models, certain averages, and it is wrong to think that tomorrow will be the same as today.

So what should we do?

Taleb indicates that once in a while we will have to deal with something that is going to turn the life of our society upside down. We can only try to do our best every day and be reasonably resilient to this type of tragedy. If a Black Swan comes, this preparation will allow us to act much more effectively.

"There are many possibilities, it is enough to focus on the anti-knowledge, which is what we do not know. For example, we can learn to benefit from the Black Swans (with their positive effects) by maximising our exposure to such events. In fact, in some areas - such as scientific discoveries and venture capital investments - what is unknown brings disproportionately higher returns, because in the case of rare events, we usually have little to lose and much to gain,” writes Nassim Nicholas Taleb.

He also warns against drawing conclusions from the past too hastily and relying on historical data to predict the future. The guest of the Business Insider Global Trends Festival writes that if we are not able to “calculate” the risk, we often disregard it altogether, relying on already known models that give us a sense of certainty.

"Antifragility"

Another well-known publication by Nassim Taleb is “Antifragile. Things That Gain From Disorder". The author argues that some things are served well by shocks because they develop and flourish under the influence of changeability and stress. He cites in his book a model example of exercise in a gym. Muscles are subjected to effort and stress, but the effect can be impressive and beneficial to health.

Taleb transfers this example to organisations and companies. When a company avoids stress, its "muscles" become weaker and weaker, and this may be the first nail in the coffin in a constantly changing environment.

In his book Nassim Taleb distinguishes between two types of stress: negative and positive. The positive is the one that is often repetitive, but manageable. It is the one that creates new opportunities. The negative is the one that causes the boat to tip over and the company to come out weakened. Here, in turn, we come to the concept of antifragility, i.e. continuous testing, building resilience and constant change. Taleb writes that it is impossible not to make a lot of mistakes, but these should be used to draw conclusions and build “immunity”. Everything, however, depends largely on the mentality, because it is not in human nature to go beyond the comfort zone and to be exposed to inconveniences.


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