The U.S. job market turned weaker last month, dashing hopes for an economic rebound.
A report from the Labor Department on Friday shows employers cut 92,000 jobs in February, when economists had expected the U.S. would continue adding jobs, albeit at a sluggish pace. The unemployment rate inched up to 4.4%.
Job gains for December and January were also revised downward, with December now showing a net loss 17,000 jobs.
The weaker than expected jobs report comes as Americans are already anxious about the high cost of living. Those affordability concerns will likely be amplified as the war in Iran has triggered a sharp rise in energy prices. AAA reports the average price of gasoline jumped another 7 cents overnight, to $3.32 a gallon. That’s 21 cents higher than this time last year.
Nassim Taleb popularized, in the mid to late 2000’s, the concept of an actually unforseeable risk, that there was absolutely no way to price in to any risking models, because it was a totally unprecedented occurrence, a thing that legitimately had never happened before.
Based around the idea of I think some European explorers being totally flabbergasted upon seeing the first black swan that they’d ever seen, their entire previous experience and culture teaching them that swans were always white.
The entire idea was that these kinds of things do actually happen, historically, with fairly decent regularity.
But, a whole bunch of people who I guess just skim-read Taleb’s writings… just took a ‘Black Swan Event’ to mean ‘something very uncommon’.
… Which is missing the point entirely.
Because ‘something very uncommon’ very often is something that is considered, is modelled in as a possibility (just a low possibility) in risk evaluation models.
A Black Swan Event on the other hand is supposed to be something that escapes that, that could not even exist as any kind of a possibility in your risk model.
Basically, if I can run through a list of assumptions your risk model makes, and then describe scenarios where those assumptions are broken, and how that changes your risk model… those aren’t really Black Swan events, especially if I can also model the chances of your assumptions being wrong, based on … you know, other times those kinds of assumptions have turned out to be wrong, in the past.
Consider the insurance/legal concept of ‘an act of God’.
Its… not literally meant to mean an actual act of God, its meant to mean something out of any involved party’s direct control.
… But you can still build entire sophisticated risk models based around the likelihood that ‘God’ will do a particular thing at a particular point in time.
The phrase Black Swan Event was invented to try and convince people that they should probably be double checking their investment/insurance strategies, should probably lower their overall risk appetite compared to what existing models tell you it should be, that people should be more conservative with money, have backup/contingency plans, because those models often, provably, fail to appreciate or understand or imagine hitherto unprecedented events.
But, a bunch of morons just started using the term as an excuse for themselves when things happened that they did know were possible, just didn’t think were likely.
Or, as an excuse for things that… fairly easily could be modelled, if they had done proper underwriting, used more comprehensive, already existing metholodologies… but well that’s hard and takes time and involves more work!
The exact opposite of what Taleb was trying to get people to do.
So, in order for the unexpected number to be caused by a Black Swan event, the event has to be unaccounted for in modelling. If the number has a 0.1% chance of happening but is caused by variables that were accounted for, it doesn’t count. Is this correct?
And a number that had 50% chance of happening can also be caused by a BS event. Basically the status of BS event is unrelated to the probabilty of the resulting numbers.
And now I’m not sure of what I should do with that concept
I see how it could get used as a variant of “the future can never be determined with full certainty and therefore I can’t be blamed for anything”
You’ve basically got it, yeah.
Its… admittedly complex to grasp, or explain in detail without me getting a cup of coffee and then giving a whole ass intermediate/advanced level statistics crash course.
The core idea is that… you are not as smart as you think you are, not matter how much your hedge fund or whatever pays you.
Things can happen that you literally are not capable of conceiving as possible, untill they happen.
Thats a real Black Swan.
But, thats not the same things as things you can concieve of, but think are unlikely, think can be easily hedged against, or aren’t worth hedging against.
Thats just your own hubris.
And now with BlackRock utterly collapsing, we’re all about to find out our pensions and 401ks were … essentially mostly theoretical.
It is like when sg1 went back in time because a solar flair intercepted them while they were traveling.