Definition of Black Swan Theory
By Dave Manuel
What is the definition of the "black swan theory"? What does "black swan theory" mean?
The term "Black Swan Theory" was popularized by Nassim Nicholas Taleb in his book "The Black Swan".
The "Black Swan Theory" says that there are "Black Swan events" that have a major impact on the course of history.
It is assumed that all swans are white, so a black swan (which does in fact exist) is seen as being impossible and unexpected.
This is the same theory behind a "black swan event" - an event that is nearly impossible to predict. An event that is unpredictable and unexpected in even the most detailed and carefully calculated of probability models.
According to Taleb, "Black Swan events" have three characteristics:
1. It is a surprise.
2. It has a major impact.
3. People contend that they expected the event to take place (in hindsight).
Examples of "Black Swan events" would be 9/11, the collapse of Russia or the invention of the Internet.
Source: Wikipedia - Black Swan Theory
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