What is a "Black Swan" Event?

Perhaps you’ve heard the term.  Just what, however, is a “Black Swan Event”?   The term was popularized by Nassim Nicholas Taleb  in his 2007 book on probability, The Black Swan.    As an aside, Black Swans (Cygnus atratus) are found in southern Australia and though not endangered are not well known.  According to wikipedia A “Black Swan Event” has 3 components:

1. The event appears by complete surprise to most people, in a relatively short time.
2. The event has massive, often world wide, impact.
3. After the event has occurred, people attempt to explain it in hindsight.

Here are some examples of “Black Swan Events”:

1. World War I. — Who would have guessed that a relatively minor assassination would trigger a world war in which tens of millions would die.
2. The terrorist attacks of September 11, 2001. — No one saw it coming.
3. The Economic crisis that started in late 2008.  — Some saw economic problems but hardly anyone predicted the severity.
4. The Rise of the Internet. — People had all kinds of predictions of the future but somehow totally missed this.

Our current Economic Crisis  is an example of a “Black Swan Event”.  Almost no one (with a few notable exceptions) saw it coming.  It is having a major world wide impact.  Now, in hindsight, people are attempting to explain it.  Since this is still unfolding we don’t know yet how “black” this swan will be.