(This essay was published in South China Morning Post on 4 January 2017.)
The world has witnessed many black swans in the past year, most notably Brexit and Hillary Clinton losing the U.S. Presidential race to Donald Trump.
A black swan, according to Nassim Taleb, requires three principal characteristics: It is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was.
Many events would qualify as black swans by this definition – the astonishing success of Google and Amazon, the 2008 financial meltdown, the Arab Spring in 2011, “9/11” in 2001, the collapse of the Soviet Union and the Eastern European bloc in 1989, World War I, the Russian Revolution of 1917 and the French Revolution of 1789. Even the resignation of Leung Chun-ying last month was unexpected. The list of black swan events could be extended on and on into many other areas.
So why do we fail to acknowledge the phenomenon of black swans until after they occur?
Part of the answer is that humans are often slow to recognize the rare and novel because they have a propensity to extend existing knowledge and experience to future events and experiences. The tyranny of conventional wisdom limits our imagination.
To predict black swans, humans have to go beyond specifics and focus on generalities, to take into consideration what they don’t know. But this is difficult. Even experts who work with sophisticated models and mine seas of data are trapped by the rules and procedures they have invented to help guide their predictions.
But extreme events do happen much more than we dare to think, and typically they have a great effect.
These events tend to be the manifestations of some underlying disorder that is not detected. In markets, they reflect structural imbalances in supply and demand. In society, they reflect the existence of dysfunctional institutional arrangements.
Tim Harford’s book Messy: The Power of Disorder to Transform Our Lives (2016) is a timely publication in this sense because it celebrates the benefits that messiness, or disorder, has in our lives.He explains that the human qualities we value –– creativity, responsiveness, resilience –– are integral to the disorder, confusion, and disarray that produce them.
The mess Harford has in mind is less physical than psychological. It’s not that disruption is inherently good, or that we should strive actually to be messy. It’s that rigid rules are bad, whether they err on the side of too much mess or too little. Rigidity disempowers people. In telling us to be messy, Harford urges us to recapture our autonomy.
“Life cannot be controlled. Life itself is messy,” Harford writes. When we try to be rigid in response, the result is a messy failure.
His most powerful message is in the realization that mess — the autonomy that comes from discarding inflexible rules and neat labels — is important even when we don’t actually want it. The mess with the greatest transformative edge may be the one that forces you out of your routine despite your certainty that what you’re doing works just fine.
Our basic human insight is to stick with what we know. Rules are easier than exceptions: People themselves are messy, but heuristics and labels are often easier to rely on than nuanced analysis. The result can be a disconcerting like-mindedness, an invisible bubble of opinions that reinforces our own. This is the well-known echo chamber feature of social media.
Disorder leads to black swans. Being messy allows us to think out of the box to find creative solutions for the imbalances in our economy and dysfunction in our society.
And yet, despite lofty goals of freethinking, mess often fails in the moments it most needs to succeed.In our heart of hearts, we don’t like to be challenged about our dearly held beliefs. The end result is that we simply give up trying. Hartford urges us not to: “We have to believe the ultimate goal of the collaboration is something worth achieving.” That’s the true message he gives us — not for autonomy when we want it, but autonomy even when we are more comfortable without it.
The frequency of black swans in recent times is a manifestation of widespread disorder in many parts of the world. Our instinct is to see black swans through the same lenses we used in the past – to prescribe the same remedies used to treat previous disorders.
Perhaps we should pause and ask whether today’s black swans are indeed the same as those of the past. Are the effects of Globalization 2.0 sufficiently different from those of Globalization 1.0? Are their effects on poverty, inequality and economic opportunities the same now as they were then?
I think they are obviously not. So why stick with the same old remedies? Time to move out of our comfort zones.