You think you know how the world works. We all do. We build these nice, tidy mental maps of the future based on what happened yesterday, and for a while, it feels safe. Then, something comes out of nowhere and smashes the map to pieces.
Nassim Nicholas Taleb called these events Black Swans.
Honestly, the term has been butchered by every talking head on CNBC since 2008, but the core idea remains terrifyingly relevant. A Black Swan isn't just a "bad thing" or a "surprise." It is an outlier. It carries an extreme impact. And—this is the part that really messes with our heads—we concoct explanations for it after the fact, making it explainable and predictable. We lie to ourselves. We say, "I saw that coming," when we absolutely didn't.
Black swan the impact of the highly improbable is a concept that fundamentally challenges our reliance on Gaussian distributions—that "bell curve" you learned about in high school where most things happen in the middle and the tails are thin. In the real world, the tails are fat. The weird stuff happens way more often than the math suggests.
Why Your Brain Hates the Highly Improbable
Humans are wired for stories, not statistics. If I tell you a story about a specific person losing their job because of a specific corporate merger, you’ll remember it. If I show you a spreadsheet of 10,000 job losses across a sector, your eyes glaze over. This "narrative fallacy" is exactly why we struggle with the impact of the highly improbable.
We crave order. We want to believe that if we study the past long enough, the future becomes a solved equation. Taleb argues the opposite: the more you study the past, the more you might be blinding yourself to the one thing that has never happened before.
Think about a turkey. The turkey is fed every single day by a friendly human. Every day that passes confirms to the turkey's "data" that humans are kind, predictable creatures who love turkeys. On the Wednesday before Thanksgiving, the turkey has the highest confidence in its safety based on a lifetime of evidence. Then comes Thursday. For the turkey, Thursday is a Black Swan. For the butcher, it’s just another workday.
Most of us are the turkey.
The Three Pillars of a True Black Swan
To understand black swan the impact of the highly improbable, you have to stop using the term for things like "the favorite team losing the Super Bowl." That’s just an upset. A real Black Swan must meet three specific criteria, and they are non-negotiable.
First, it is an outlier. It lies outside the realm of regular expectations because nothing in the past can convincingly point to its possibility. It’s the 9/11 attacks. It’s the rise of the internet. It’s the 2020 pandemic.
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Second, it carries an extreme impact. It doesn't just change your afternoon; it changes the trajectory of history, global markets, or entire civilizations.
Third, and perhaps most frustratingly, human nature makes us concoct explanations for its occurrence after the fact. We look at the 2008 financial crisis and point to subprime mortgages as if it were obvious all along. If it were truly obvious, everyone would have been shorting the market. They weren't. We "retrospectively predict" to make the world feel less chaotic than it actually is.
The Error of "Mediocristan" vs "Extremistan"
Taleb splits the world into two provinces. Understanding which one you’re standing in determines whether you’ll survive the next decade.
In Mediocristan, individual events don't matter much. If you take the tallest person in the world and add them to a group of 1,000 people, the average height barely moves. Weight, height, calorie consumption—these follow the bell curve. The improbable doesn't have much of an impact here.
Then there is Extremistan. This is the world of social media, finance, book sales, and viruses. In Extremistan, inequalities are so vast that a single observation can disproportionately impact the total. If you have 1,000 people in a room and Bill Gates walks in, the average net worth of the room increases by tens of millions of dollars. One person accounts for 99.9% of the total.
We live in Extremistan now. Our world is interconnected, complex, and prone to "winner-take-all" dynamics. Yet, our schools and our government agencies still use tools from Mediocristan to try and manage it.
The Problem with Modern Risk Management
Have you ever noticed how "expert" forecasts are almost always wrong?
In 2011, Philip Tetlock published a landmark study on expert political judgment. He found that the average expert's predictions were only slightly better than a dart-throwing chimpanzee. Why? Because experts are often the most susceptible to the "illusion of understanding." They focus on the "known unknowns" while completely ignoring the "unknown unknowns."
Standard risk management is built on the "Value at Risk" (VaR) model. Banks use it to calculate how much they could lose in a given day. The problem? VaR ignores the "tail risk." It tells you what happens on a bad day, but it has no idea what happens on a catastrophic day. It assumes the world is a casino where the odds are fixed and the rules are known.
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But the world isn't a casino. In a casino, you know there are 52 cards in a deck. In the real world, someone can walk in and set the table on fire. That’s the impact of the highly improbable.
Real-World Examples That Changed Everything
Let’s look at the 1987 "Black Monday" stock market crash. On October 19, the Dow Jones Industrial Average dropped 22.6% in a single day. According to standard statistical models, an event that many standard deviations away from the mean shouldn't happen in the entire lifetime of the universe.
And yet, it happened on a random Monday in October.
The internet is another one. In the early 90s, few "experts" predicted that a decentralized network for sharing research papers would eventually swallow the global economy, kill the newspaper industry, and rewire human psychology. There was no precedent for it. It was a positive Black Swan—an improbable event with a massive, transformative upside.
The 2020 COVID-19 pandemic is often called a Black Swan, though Taleb himself has argued it was actually a "White Swan" because many people (including Bill Gates) had warned about a global respiratory pandemic for years. However, for the average business owner or family, the impact felt like a Black Swan. It was a total rupture in the continuity of daily life.
How to Live in a World You Can't Predict
So, what do we do? If we can't predict the big stuff, are we just victims of fate? Not exactly. You can't predict a Black Swan, but you can build a life or a business that is robust—or even "antifragile"—to them.
You have to stop trying to be "efficient" and start being "redundant."
In nature, redundancy is everywhere. You have two kidneys even though you only need one. That’s inefficient. It’s a waste of energy and space. But if one kidney fails, you stay alive. Modern business culture hates redundancy. It loves "just-in-time" supply chains and lean operations. But lean operations are fragile. When a ship gets stuck in the Suez Canal, the "lean" supply chain collapses.
The Barbell Strategy
One of the most practical ways to handle black swan the impact of the highly improbable is the Barbell Strategy.
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Basically, you play it very safe in one area and very risky in another, skipping the "middle" ground entirely.
- In Finance: Keep 90% of your money in boring, ultra-safe assets like Treasury bills. Take the other 10% and put it into hyper-aggressive, high-upside "moonshots" (startups, crypto, whatever). If the moonshots go to zero, you’re still fine. But if one of them hits, your upside is unlimited.
- In Career: Have a stable day job that pays the bills (safe) but spend your nights building a side hustle or learning a radical new skill that could potentially change your life (risky).
What you want to avoid is the "middle." The middle is where you have moderate risk for moderate reward. The middle is where you get wiped out by a surprise.
Misconceptions About the Improbable
A common mistake is thinking that Black Swans are always bad. They aren't.
Penicillin was a Black Swan. A researcher leaves a petri dish out, mold grows, and suddenly we have a cure for infections that used to kill millions. The discovery of the New World was a Black Swan. These are "positive" Black Swans.
The goal isn't just to avoid disaster; it's to position yourself so that when an improbable good thing happens, you are there to catch it. You do this by increasing your "surface area" for luck. Meet more people. Read more weird books. Try small experiments that have low costs of failure but high potential rewards.
Another misconception: "We just need better data."
More data does not mean more accuracy. In many cases, more data actually increases your confidence without increasing your accuracy, making you even more vulnerable when things go south. This is known as "epistemic arrogance."
Actionable Insights for an Unpredictable Future
You can't stop the world from being chaotic. You can, however, change how you stand in the wind.
- Distinguish between "Scalable" and "Non-Scalable" risks. If you are a plumber, your income is non-scalable (Mediocristan). You can't work 10,000 hours in a week. If you are a software developer, your income is scalable (Extremistan). One piece of code can be sold to a billion people. Know which world you are playing in.
- Avoid the "Suckers" game. Don't bet your entire livelihood on a single point of failure. If your business relies 100% on a single algorithm or a single supplier, you are waiting for a Black Swan to kill you.
- Invest in "Optionality." The more options you have, the less you need to be right about the future. An option is the right, but not the obligation, to do something. Money in the bank is an option. A diverse skillset is an option.
- Stop listening to forecasters. Look at what people do, not what they say. A "market analyst" who predicts a crash but doesn't have a "short" position is just a storyteller.
- Focus on "Robustness." Ask yourself: "If the economy stopped for three months, would I survive?" "If my industry disappeared tomorrow, what would I do?" Building a life that can handle a 20% "drop" in any direction is more valuable than trying to guess when the drop will happen.
The impact of the highly improbable is only "devastating" if you are brittle. The most successful people and companies in history didn't predict their way to the top. They survived the bad surprises and were positioned to capitalize on the good ones.
Stop trying to predict the weather. Start building a better boat.