Nassim Taleb did himself and the rest of the world a big favor when he popularized the term “black swan” back in 2007, just before all the money caught on fire. Taleb became a renowned seer, and the rest of us had a convenient shorthand for when things went bananas. All the money is on fire? That’s a black swan, baby. Donald Trump is president? Black swan time. Lady Gaga wears a meat dress? Black swan again.
Black swan events, to roughly paraphrase Taleb, are things people don’t see coming because of their limited human perception but have dramatic impact and seem inevitable in hindsight. Not everything fits this definition. If I forget to renew my home insurance and my house burns down, that’s not a black swan event. Robinhood Markets CEO Vlad Tenev yesterday told Congress it was the black swan’s fault when day traders nearly blew up his app by placing too many orders to buy meme stocks all at once. Like me with my ruined house, Tenev is really the one to blame, writes Tim O’Brien: It was possible to see such a thing coming and prepare for it.
Congress is still hunting for black swans in the GameStop saga, but Nir Kaissar writes it’s barking up the wrong, uh, pond. Weird stuff will happen (along with the laughs, Matt Levine notes) when you get a bunch of redditors together chasing tendies, but that is not a systemic crisis.
Texas freezing over and losing power is another example of a false black swan, Tim notes. In fact, roughly the same thing happened just 10 years ago, and Texas gets cold and snowy more frequently than you might think. But the state acts as if there were nothing but white swans to the horizon, Bloomberg’s editorial board writes, failing to winterize its equipment or accept that climate change makes freakish events more common. And it’s not just Texas; much of the rest of the country’s contingency planning for climate disasters amounts to pointing at the scape-swan.
Adding layers of irony to the Texas story — sort of like how Ted Cruz leaving behind a dog named Snowflake when he flew to Cancun enriched his saga — many Texans wrongly blame clean energy for their power problems. But not only did wind turbines not fail as much as natural gas did, but clean energy also helps keep weather nightmares from getting worse. On top of that, it’s creating jobs even as the fossil-fuel industry cuts them, Matthew Winkler writes.
That’s a pleasant surprise. A green swan, you might call it.
The other thing you can’t possibly call a black swan is the Covid-19 pandemic. Yes, it’s been an awful event unlike anything we’ve experienced in 100 years, but people saw it coming. Governments around the world have nevertheless struggled to respond. Even some of those who are praised for their reactions hit their limits eventually. New York Governor Andrew Cuomo wrote an arguably premature book about his pandemic experience, but he is now besieged for under-reporting Covid deaths and generally being jerky. Justin Fox crunches the numbers and finds the state is persistently undercounting deaths, though he also finds some potentially exculpatory evidence suggesting this is less sinister than just weird and maybe jerky.
Still, redemption is always possible. Boris Johnson made some big mistakes early in the pandemic, but lately the UK has been a model of vaccine distribution and scientific discovery, writes Sam Fazeli. There’s hope even for the weird and the jerky.
Lessons in Covid Markets
Traders could certainly be forgiven for seeing Covid as a black swan event, at least in the early days. Deeply swannish stuff happened to bond, oil, and other markets as the financial world adjusted to the terrible new normal. John Authers looks back at the year in charts and finds one very comforting fact shined through: Throwing free money at everybody makes it all better. Less comforting: Someday all that free money might make it all worse again.
(Bloomberg)
