Black Swan Dive

Black Swan Dive
words and music Elaine Diane Taylor
©2014 Intelligentsia Media, Inc.
SOCAN/ASCAP

There’s been an alarming number of deaths of a suspicious or sad nature in the financial sector in 2014. The number of these mid-level bankers were dealing with FOREX, and a number were associated with investigations into currency manipulation.

A case of ‘didn’t see it coming’ — a black swan event.

We’re less likely to prepare for events that have large consequences but are rare than we are everyday events with small impact. We tend to not see an event as possible when it doesn’t fit into our current worldview, or “story”, and only in hindsight is it rationalized as being .

BLACK SWANS

A Black Swan Event is any happening that wasn’t foreseen, had a huge impact and after-the-fact seems to make good sense.

Prior to the first recorded sighting of black swans in Australia in 1697, it was believed that all swans were white. References to “Black Swans” were not uncommon before then—but only as a label for something that no one believed existed. It was only after this time that the term “Black Swan Event” came to mean something rare that happened but was not foreseeable.

ECONOMIC CRASH OF 2008

The economic crash of 2008 was seen by some as a Black Swan event – out of nowhere.  I was among a group of people who thought it was coming, and I wrote about it years earlier, releasing We Know How it Goes (The Rise and Fall of Empires). I’m not sure about their histories, but mine includes the devastating impact of my own personal Black Swan Event a few years earlier — it seems to make one more prone to see others for who knows what reason. The folk song Black Swan Dive exemplifies this theory as the idea of pirates walking the plank and stealing gold, is tied to the economic crash of 2008, a financial trader called the London Whale who lost money for JP Morgan Chase bank while taking enormous risks, and to litigation into the alleged fraud and manipulation of FOREX currency trading and COMEX gold exchange.

This is juxtaposed with a string of fifteen deaths, some say more, of senior financial service executives in 2014, starting with the apparent suicide of William Broeksmit, 58, in central London, and including bankers jumping from buildings, a hit and run bicycle accident, and Richard Talley, 57 who was found dead after apparently shooting himself many times with a nail gun.

RISK AND “NARRATIVE FALLACY”

Psychological research has questioned the human ability to understand and act rationally with regards to risk. We have a tendency to create stories around facts, a “narrative fallacy”, that leads us to err in our risk assessment when we believe the stories and then make the facts fit the stories. Facts that don’t fit the current worldview are ignored or slanted to fit the current story of how the world works. Low probability risks generate less concern than warranted, but when they eventually occur, we tend to overestimate their likelihood and impact. Probably the reason why I now think out of the box when it comes to economic goings on.

This had a bearing on financial risks that the London Whale made in two ways: firstly, it created an ‘emotional discount’ for abstract and unfamiliar risks, increasing the tendency to ignore such risks even though they were clearly there. Secondly, it may yield too much focus on recently occurred high impact events (black swans), and less focus on other, much more likely risks which in this case was the loss of profit while engaged in allegedly fraudulent dealings.

When dealing with change and risk we are severely limited in our capacity to imagine and predict many of the events that will have a decisive impact on our individual or collective histories. Randomness and free will may be important sources of Black Swans. In the case of Black Swan Dive, the free will of the pirates results in the unforeseen final end of a walk down a plank and a swan dive into the ocean.

The risks of another economic collapse are highly possible as a new Black Swan Event. Black Swan Dive ends with the thought that a “black wing could be piercing the whole world through”. As the individual banker didn’t see that his actions could result in death-by-nailgun, we as a global economy could be ignoring the new risks created by even larger “too big to fail” banks and a Federal Reserve that is unable to print enough money to rescue the U.S. again without collapsing the whole economic system due to a lack of confidence.

I’m not hoping that anyone walks a plank.

A fair trial and legal ends are what I’d like to see. Compensation to those injured and tight regulation of the financial sector are my hope.

Our lives personally and as a society are subject to random Black Swan events and we must live with the consequences of these events. By trying to see outside our own narrative fallacies we can perhaps see that it’s possible for a black wing to pierce the whole world through, and to prepare ahead for the possibility.

We all walk a few planks in our lives and who’s to thank?

Maybe ourselves and our human nature.

BiBLIOGRAPHY

Durden, Tyler. 2014. “ABN Amro Ex-CEO Found Dead.” ZeroHedge. N.p., 4 Apr. 2014. Web 22 Apr.2014 http://www.zerohedge.com/news/2014-04-05/abn-amro-ex-ceo-found-dead

Fetherstonhaugh, D., P. Slovic, SM Johnson, and J. Friedrich. “Insensitivity to the value of human life: A study of psychophysical numbing.” The perception of risk (2000): 372-389. Print.

Moller, Niklas, and Per Wikman-Svahn. 2011. “Black Elephants and Black Swans of Nuclear Safety.”     Ethics, Policy & Environment 14

Runde, Jochen. 2009. “Dissecting the Black Swan.” Critical Review, 21

Taleb, Nassim Nicholas. 2007. “The Black Swan; The Impact of the Highly Improbable.” Random House

Weber, EU. 2006. “Experience-based and description-based perceptions of long-term risk: Why global warming does not scare us (yet). “ Climatic Change, 77: 103–120.

Black Swan Dive
words and music Elaine Diane Taylor
©2014 Intelligentsia Media, Inc.
SOCAN/ASCAP

Available on a soon-to-be released album on iTunes

4 thoughts on “Black Swan Dive

  1. Pingback: 3 Minute Gold News – October 1, 2014 | Elaine Diane Taylor

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  4. Pingback: 3 Min. Gold News – Jim Rickards – BBC Radio – May 7, 2014 | Elaine Diane Taylor

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