Is the coronavirus pandemic a black swan event?
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Is the coronavirus pandemic a black swan event?

Headlines across the world are referring to the coronavirus pandemic as a ‘black swan’ event:

“As Coronavirus Spreads, Stocks Fall Again and the White House Frets About a Black Swan.” The New Yorker February 2020 

“Trump faces ‘black swan’ threat to the economy and reelection.” The American magazine, Politico March 2020

“Black swan event weighs on South Africa miners.” Mining Journal June 2020

But does this powerful metaphor, ‘black swan’, aptly describe the coronavirus pandemic?

The term “black swan” gained traction a decade ago during the Great Recession and its economic aftermath. Investor and statistician Nassim Nicholas Taleb published his book about unpredictable events, The Black Swan, which quickly became a best-seller in 2007. The author explains how an event can come to be named a black swan:

“First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme ‘impact.’ Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.”

So, the first clue is that black swan events are, by nature, quite exclusive. But this still begs the question: Can COVID-19 be considered a black swan event? Let’s look at some of the characteristics of this event set out by Taleb.

“First, it is an outlier…”

Over the past 15 years, there has been no shortage of articles and white papers issuing dire warnings that it would only be a matter of time before the arrival of a global pandemic involving a new respiratory disease. On BBC Future in 2018, it was reported that experts believed a flu pandemic was only a matter of time and that there could be millions of undiscovered viruses in the world. So, can one describe the emergence of this dangerous virus as an unpredictable outlier that suddenly swooped in from outside our “regular expectations?” Can one say that nothing in the past can convincingly point to its possibility?

Taleb, who is sixty-one, in an interview with the New York Times explained that “the pandemic was wholly predictable—he, like Bill Gates, Laurie Garrett, and others, had predicted it—a white swan if ever there was one. “We issued our warning that, effectively, you should kill it in the egg,” Taleb told Bloomberg. Governments “did not want to spend pennies in January; now they are going to spend trillions.”

James Pethokoukis, writer for The Week, said that…”a good chunk of American popular culture this century — World War Z28 Days LaterThe Walking DeadThe Last of Us — has revolved around the idea of a mysterious, apocalyptic virus — although it may turn you into a zombie after killing you. Our entire society has been soaked in this scenario. Take the 2011 Steven Soderbergh film, Contagion, starring Matt Damon and Gwyneth Paltrow. It grossed $135 million in the domestic box office and is currently one of the hottest films in the Warner Bros. library. The origin of the virus in that film even echoes what many scientists think occurred with the coronavirus.”

“Second, it carries an extreme ‘impact.”

The coronavirus pandemic has had an extreme impact on human lives and has led to widespread and devastating economic losses. But then this can also be said of the fatal Zaire Ebola virus. The 2014-2016 outbreak in West Africa has been the largest Ebola outbreak to date, with more than 28,600 cases. Consider also the current ongoing outbreak in Democratic Republic of Congo, as well as SARS in 2004 and H1N1 in 2009.

“Third, Will it be normalized after the fact?”

“…in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.”

As best described in the Financial Times, “the defining legacy of most disease outbreaks is their lack of legacy. The 1918 flu pandemic probably killed more people than the first world war — estimates now go above 50m — but is treated as a footnote to the conflict. For many years, historians didn’t really write about the so-called Spanish flu, except to note that it wasn’t actually Spanish. (Spain, being neutral during the war, may simply have censored news of the outbreak less than some other countries.)”

In the end, we are naturally hardwired to normalize and only time will tell if the world reverts to this technique post COVID-19.

Considering the above, we have to conclude that the Corona virus is not an unpredictable black swan. However, Taleb cautions that, owing to “increased connectivity,” the spread will be “nonlinear”— two key contributors to Taleb’s anxiety. I would highly recommend you read the New Yorker article “The Pandemic Isn’t a Black Swan but a Portent of a More Fragile Global System” in which Taleb addresses deeper concerns in more depth.