Coronavirus through the lens of Real World Risk, Incerto and Black Swans.
Extremistan vs Mediocristan Risk and Deaths
Comparing coronavirus, the flu and lawn mower accidents.
Extremistan is the land of wild unpredictability. Where Black Swans live. Mediocristan is the land of boring and usual. This is the land of cancer, the flu and lawn mower accidents.
- Extremistan: Fallouts from ebola, terror, nuclear, coronavirus.
- Mediocristan: Fallouts from cancer, people drowning in bathtubs, elderly people run over by lawn mower, gender-change operations gone wrong.
Basically there’s two very different types of risk.
Joe Norman, RWRI instructor, explains it perfectly above. Lawn mover accidents don’t spread like the plague through global travel, but the virus do. The lesson is don’t compare systemic and non-systemic risk.
- Lawn mower accidents = non systemic
- Corona = systemic
Is Coronavirus a Black Swan?
Yes and no. Remember the turkey and the butcher from The Black Swan?
Well, the Turkey is living good life. Getting fed and treated well. For the 1000 first days, that is. Then at day 1001 it gets it head chopped off. Black Swan event for poor turkey! For the butcher? Fully expected.
Here’s a Black Swan Turkey chart, Corona edition 👇
Black Swan events is subjective. Same with coronavirus. Not everyone got rekt in the market carnage. A few people were calling for the shut down we’re seeing now, back in January. Among them Nassim N. Taleb, Joe Norman, Yaneer Bar-Yam.
Taleb even wrote this in The Black Swan back in 2007:
Not a Black Swan
Update: Nassim Taleb and Mark Spitznagel slammed the idea of coronavirus being a black swan in this post of March 26:
Furthermore, some people claim that the pandemic is a “Black Swan”, hence something unexpected so not planning for it is excusable. The book they commonly cite is The Black Swan (by one of us). Had they read that book, they would have known that such a global pandemic is explicitly presented there as a white swan: something that would eventually take place with great certainty. Such acute pandemic is unavoidable, the result of the structure of the modern world; and its economic consequences would be compounded because of the increased connectivity and overoptimization. As a matter of fact, the government of Singapore, whom we advised in the past, was prepared for such an eventuality with a precise plan since as early as 2010.
Corporate Socialism: The Government is Bailing Out Investors & Managers Not You
Fore more check out the Black Swan summary and get the book on amazon / audible.
Disclaimer: I’m not an expert. I am an #RWRI alumni though.
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