“Black Swan, meet the Investor; Investor, Black Swan.”


Even if based on the past, it is highly improbable.  Many have used this metaphor as a way to paint a picture of things that happen in life that none of us expected because no one has ever seen a black swan, right?  These are the things that happen, that before they happen, we would even argue their improbability (or non-existence).  As an investor and a coach to many other investors, I found this to be an intriguing thought.

I came across this three part definition of a Black Swan, written by Nassim Nicholas Taleb.  A Black Sway is:

1.  An outlyer beyond the realm of our regular expectations.

2.  An event that carries an extreme impact.

3.  A happening, that after the fact, our human nature enables us to accept by concocting explanations that make it seem predictable.

Essentially, these are events that are at the same time rare, extreme, and retrospectively predictable.  Life is full of them, especially in the financial markets!

The take-home message is simple:  When investing, if you are being sold something based on someone else’s ability to predict future events and outcomes, Run! Don’t walk away.  No one knows the future.


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