ORACLE

The Black Swan’s Parable

By Doug Samuelson

Gathered around the large-screen TV in the office’s reception area, the four analysts were sharing their reactions to the Japanese tsunami. “Amazing that the best prepared country in the world could be so overwhelmed by anything,” Ed marvelled.

“Yeah,” Gary responded, “I guess northeast Japan didn’t have ‘Kokura luck’ this time.”

“What’s that?” Dan, the youngest of the group, asked.

“Kokura was supposed to be the second atomic bomb target,” Gary explained. “But it happened to be covered by clouds and smoke that morning. So the bomber crew made three passes over the city, couldn’t see the aiming point, and proceeded to their secondary target – Nagasaki. Many Japanese know that story, and ‘Kokura luck’ became a phrase for a really lucky event, sparing you from catastrophe.”

“They had another phrase for that before,” Ed added. “Kamikaze. It means ‘divine wind.’ When Genghis Khan was headed toward Japan with a big invasion fleet, he ran into a typhoon that wrecked the fleet and foiled the invasion. That’s where that term originated. And that’s why when they started flying planes full of explosives into ships near the end of World War II, in a desperate try to stop the Allied advances, that effort became known as Kamikaze, too.”

“Well, maybe they’ve grasped something we Americans, especially we scientific and technical types, often overlook,” Gary noted. “Sometimes, even with the best planning and preparation possible, you just run into an event nobody could have anticipated.”

“Well, nobody values planning and preparation more than the Japanese,” Ed added. “They think we Americans trust too much to luck and aren’t persistent enough. ‘Diligent ants undermine the moat’ is a popular saying there. I don’t think any culture is immune, though, to thinking that when good things happen, we did it, but when bad things happen, why did we have such bad luck? Or Divine disfavor? You did see some of the idiotic comments from some American commentators, didn’t you? You know, the ones who always have some reason why somebody’s death or disaster must have been a sign of Divine displeasure – unless, of course, the person who died was one of their friends?” The group shared a groan.

“Actually, you can read a religious lesson into disasters, but not the lesson those preachers claimed,” Russ commented. “A Jewish friend of mine shared a commentary he’d read recently, I think right after that bridge collapse in Minneapolis: If rain fell only on the wicked, who would build a roof? The righteous would think it unnecessary; the wicked wouldn’t want to call attention to their assessment of themselves. But since disasters strike at random, we learn that taking care of just ourselves isn’t enough. We have to strengthen our communities as well, repairing bridges and mine tunnels, providing decent living conditions for everyone, improving security – and helping whoever ends up in harm’s way.”

“Good point,” Gary said admiringly. “But I think there’s another big idea here. You know how Einstein, and a lot of other physicists who followed his thinking, claimed that the universe doesn’t have any randomness built into it? That what looks like randomness is really just our ignorance of the underlying processes?” The others nodded.

“That was the argument between Einstein and Bohr,” Ed noted, “the one that led to Einstein’s famous quip that God doesn’t play dice with the universe. But not nearly as well known is Bohr’s reply a year or so later, the third time Einstein tried it: ‘Albert, it’s time you stopped telling God what to do.’ ” They all laughed.

“Well,” Gary resumed, “I think Einstein got it exactly backward. Randomness is part of the universe. After all, we and other sentient beings are uncertain, and we’re part of the universe, aren’t we? It’s certainty that’s an artifact of human ignorance. When we think we’re certain, it’s time to start looking for what we might have missed, before it cascades right over us!”

“I need to think about that for a while, but I see your point,” Dan conceded. (Dan was not a physicist.)

“I believe that’s a large part of what Nassim Taleb was saying in his book ‘The Black Swan,’ ” Russ added. “You have to hedge against the ‘unknown unknown’ events” [1].

“It’s even harder than he claimed,” Ed objected. “His investment strategy was to have a variety of low-probability, big-gain-if-it-happens options – but that’s still based on the assumptions that the markets will not break down completely and permanently, that the whole structure of government won’t fall apart, that the Earth won’t get hit by an asteroid, and so on. What he did is better than assuming everything will go on as it has been, but it’s still understating the possible effect of really off-the-wall events.”

“Some things do just happen, defying any attempt to predict them or take them into account,” Ed agreed. “I mentioned the Kamikaze pilots. Some years ago I read a memoir by one who happened to survive and described how they prepared for those missions [2].

“He survived by one of those off-the-wall coincidences,” Ed continued. “He had orders to fly his mission on Aug. 8, 1945. So he got a two-day pass just before that. He took a truck from his airbase to the nearest city, planning to transfer to a bus to go home and visit his family, but then he decided to take a couple of hours and visit a friend in that city … Hiroshima.”

Doug Samuelson (samuelsondoug@yahoo.com) is president and chief scientist of InfoLogix, Inc., a small R&D and consulting firm in Annandale, Va.

References

  1. Nassim Nicholas Taleb, “The Black Swan,” Random House, 2007 and 2010.
  2. Yasuo Kuwahara and Gordon T. Allred, “Kamikaze,” Ballantine Books, 1957 (and a number of more recent editions, with some revisions).