Coronavirus and Black Swan Events

Nassim Nicholas Taleb quoted

"The central idea in the black swan is that: rare events can't be estimated from empirical observation since they are rare"

Well, you can get a general idea about black swan events by reading the above quote. But if you want to explore more about black swan events then you have to first be familiar with Nassim Nicholas Taleb.

Nassim Nicholas Taleb, a Lebanese author, an ex-banker who spent most of his financial career trading derivatives. He was the man behind the theory of swan events. Since he worked in the financial services, this led him to write a book titled "The Black Swan", in which he argues that most areas of human activities are influenced by rare, unpredictable events that have a big impact.

Black swan events are those events that are extremely rare and which is beyond what is normally expected of an event. These events are known for their extreme rarity, severe impacts which it creates, and with hindsight, they can only be understood when it has happened. Reliance on forecasting tools can both fail to predict and may increase the vulnerability of the black swans by offering false securities and this may increase the risk involved in black swan events.

These events can't be predicted, can only be prepared by building robust systems.

Examples are the best way to understand any concept. So to make your understanding crystal clear about black swan events. Here are some of the events in history with extreme rarity:

The crash of 9/11, Fukushima nuclear disaster, etc. Just have a glimpse of some of these events.

Crash of 9/11

On September 11, 2011, 19 militants related to Islamic extremist group al Qaeda hijacked four airplanes and two of the airplanes were flown into the two towers of the World Trade Center in New York City. The third airplane hit the pentagon just after Washington D.C and the fourth crashed in Shanksville, Pennsylvania. Almost 3,000 people were killed in this attack.

Fukushima Nuclear Disaster

On March 11,2011, an accident occurred at the Fukushima Daiichi plant on the northeastern Japanese coastline. Following a major earthquake, a 15 metre tsunami disabled the power supply and cooling of three Fukushima Daiichi reactors and this resulted in a severe nuclear disaster killing about 18,500 people.

Considering this current corona pandemic, one may think it as a black swan event. But is this pandemic really a black swan event? Let's find out.

Till now, coronavirus has claimed 7,06,000 deaths and 18.8 million confirmed cases worldwide, but this can't be considered as a black swan event because it turns out that the epidemiologists have been warning the people about pandemics for many years, so they weren't surprised. Also, some of the epidemiologists sounded the warning about COVID-19 once the picture from Wuhan, China started to become clear.

All the facts and figures about coronavirus were clear to all the countries and this pandemic hadn't started suddenly.

That's why this pandemic wasn't an unexpected event. The alarming bells of coronavirus were starting to ring in January 2020. Also, the Centre for Disease Control (CDC) had information about the Wuhan outbreak in December. In China, this virus has been affecting people since December. But according to media sources, China was hiding about this pandemic and was not willing to alert the other countries about this pandemic. So, also it can be said that this virus spread from China to other countries because of human negligence.

Indeed, Nassim Nicholas Taleb himself titled coronavirus as a white swan event (White swan events are those events that are highly predictable and have an impact that can easily be estimated). In an interview with Bloomberg, he clearly stated that the world has witnessed a lot such deadly viruses like this coronavirus like SARS, Ebola, Influenza. According to him, this pandemic will have a non-linear impact(not following a particular pattern, just connecting the dots). However, what Taleb wrote about coronavirus in an essay for a daily newspaper, is worth considering here, He wrote "These pandemic are inevitable and they are certain to happen at a particular time period. These all are the result of the modern world'. 

The government of Singapore read the books by Taleb and appointed Taleb as the advisor in 2010, as a result, the government of Singapore was able to prepare well in advance, collaborating with Taleb and the world is now witnessing that how successful Singapore proved to be while tackling this pandemic.

Also, there is one interesting fact that how the government wasn't alert and active pre coronavirus, and now they are spending a huge amount of money and other stimulus packages to revive up the economy. Taleb told there wasn't a single penny spent by the government to kill this virus ith the egg itself and now they are spending trillions of money. The politicians are terming this as a black swan event. And guess why? To escape the liability. Corrupt politicians are just saying that this is a black swan event and no one had ever thought about this before. Instead, they should work on the loopholes in the economy and nothing much but at least this time they shouldn't procrastinate and should take responsibility for this.

US President Donald Trump himself was spotted not obeying the safety rules and not wearing the masks. If leaders will have an attitude like this then how they can expect people to follow the guidelines. And then they will say that this is a black swan event and will escape the liability.

Surely coronavirus is not a black swan event and with proper planning and building a robust system we can have control over this deadly virus.