Black Swan Theory
According to Wikipedia, a black swan event is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. In other words, a black swan event is being blindsided, followed by finger pointing, based on 20/20 hindsight.
Black swan events, while relatively rare, tend to recur, although each is likely to be very different. In recent history we have Pearl Harbor, 9-11, the financial crisis, and now, the Covid-19 pandemic.
Investors should be wary of those who claim to having foreseen a black swan event and provided an appropriate warning. A black swan event is inherently an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Never-the-less, in spite of its outlier status, human nature, and the pursuit of self aggrandizement, makes us concoct explanations after the fact.
All comments and suggestions are welcome.
Walter J. Kirchberger, CFA