What Does "Black Swan Event" Mean?

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In the days following the massive earthquake in Japan, various news organizations and blogs have been using the term "black swan event" quite regularly.

The earthquake in Japan, they say, was a black swan event.

So what does "black swan event" mean?

The term "black swan", as it applies to finance/economics, was popularized by Nassim Nicholas Taleb in his book "The Black Swan".

When you think of a swan (as in the bird), what comes to your mind? If you are like most people, then you probably envision a graceful, white bird that floats on the water.

Most swans are white, but some, in fact, are black. The existence of black swans is a fact that takes most people by surprise.

Now let’s apply this to the theory of "black swan events". A "black swan event", to start, is an unexpected surprise (just like the bird, the black swan). In addition, black swan events also have these traits:

1. They have a major impact on society.
2. People, in hindsight, contend that they were not surprised that the event took place.

So a "black swan event" is an unexpected surprise that has a major impact on society. In addition, people look back on the event and contend that they were not surprised that it took place.

That’s a "black swan event".

Some examples of "black swan" events?

1. The creation of the Internet.
2. The earthquake in Japan.
3. The fall of Russia.
4. 9/11.
5. The financial collapse of 2008.


Definition of Black Swan Theory