There are several things that people seem to conflate when talking about black swans: heavy tails and unknown unknowns, nonstationarity… Nassim Taleb has indeed talked about all of these concepts; he does not refer to them all as swans though AFAIK.
What I think of in this context is portfolio theory for a world of outliers.
I have nothing new to add yet, so I’ll just punt you to my bookmarked favoured essays on this theme.
- Asymmetric Opportunities and the Cult of Optionality
- Searching for outliers
- Rohit, How To Win Public Opinion, The VC Method
- Open philanthropy on Hits-based Giving.
- Illegible Medicis And Hunting For Outliers
- Black Swan Farming
Rohit, Spot The Outlier is exemplary:
In a world of plenty, selection is hard. In a world where selection is hard, we resort to ever more stringent measurement. But if measurement is too strict, we lose out on variance. If we lose out on variance, we miss out on what actually impacts outcomes. If we miss what actually impacts outcomes, we think we’re in a rut. But we might not be! Once you’ve weeded out the clear “no”s, then it’s better to bet on variance rather than trying to ascertain the true mean through imprecise means.
1 Black swans
2 Dragon kings
Some distributions are so heavy tailed that we should expect that one event from that is bigger than all the others put together. These are called Dragon Kings (Sornette 2009). It has been argued, for example, that nuclear disasters are likely of this type (Wheatley, Sovacool, and Sornette 2017). TBC
3 Knightian uncertainty
Important terminology for unknown unknowns.
4 Countercyclical philanthropy
If a charity is dedicated to dealing with unpredictable events, what does this say about the financial structures they should employ? MSF’s activity in war zones, for example. TBC