Disruptive Tech Might Make Us Less Vulnerable to Black Swans
The era of relentless change may actually make markets less vulnerable to 'black swans,' those disruptive and unexpected turns of events that can quickly overturn our expectations and cause crises in markets.
How could this be? Shouldn't more uncertainty mean that markets will be less stable?
The truth is that as we become adjusted to a rapidly changing world, we are less prone to adopt the false certitude that makes a black swan event so dangerous.
The phrase 'black swan' was introduced into our vocabulary by the author Nassim Nicholas Taleb. As he explained it, years of experience of only observing white swans led many to believe that all swans were white. The discovery of a black swan in Australia proved that this conclusion was incorrect. This, he explains, is a metaphor for the power of the unexpected to prove that what we view as facts about the world are wrong.
The experience of rapid and significant change should make us less confident that we can understand our world and predict the future. As a result, people should take precautions to protect themselves and their investments against the unexpected. We'll prudently hedge against uncertainty, instead of blithely assuming the future will look like the past.
The surprising result is continuous disruption may make us less vulnerable to disruption.
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