Last week, we introduced Taleb’s definition of black swans; rare, unpredictable ‘unknown unknowns’ in military terms, with major impacts, exploring historical examples that reshaped society post-event. This week I’m going to introduce a fictional black swan and how to react to them but before that the unpredictable part of Taleb’s definition needs some modifications. True black swans by Taleb definition are not only rare but practically non-existent outside of natural disasters such as earthquakes. To discuss a black swan, I am going to change the definition a bit and say these events are unpredictable to most observers but predictable or at least imaginable to some. Taleb would likely call them grey swans. For instance, Sputnik was known to the Soviets, but an intelligence failure and complete surprise to the rest of the world. Nikola Tesla anticipated the iPhone 81 years ahead of time. 9/11 was known to the perpetrators and was an intelligence failure. Staging a significant part of your naval fleet in Pearl Harbor during a world war and forgetting to surveil the surrounding area is not a black swan, just incompetence.

With that tweak out of the way, we’ll explore in Part II where Taleb discusses strategies to mitigate a black (grey) swan’s major impacts with a fictional example. His strategies can be applied to pre-swan events as well as post-swan. Pre-swan planning in business is called contingency planning, risk management, or, you guessed it, black swan planning. They include prioritizing redundancy, flexibility, robustness, and simplicity, as well as preparing for extremes, fostering experimentation, and embracing antifragility.

Imagine a modern black swan: a relentless AI generated cyberattack cripples the Federal Reserve and banking system, wiping out reserves and assets. Industry and services collapse nationwide and globally as capital evaporates, straining essentials, with recovery decades away if ever. After the shock comes analysis and damage reports, then the rebuilding begins.

The Treasury, with no liquid assets, must renegotiate debt to preserve global trust. Defense capabilities are maintained at a sufficient level, hopefully hardened, to protect national security, while the State Department reimagines the world to effectively bolster domestic production and resource independence while keeping the wolves at bay.

Non-essential programs, from expansive infrastructure projects, research, federal education initiatives, all non-essential services are shelved, shifting priorities and remaining resources to maintaining core social and population safety nets like Social Security and Defense. Emergency measures kick in: targeted taxes on luxury goods and wealth are imposed to boost revenue and redirect resources. Tariffs encourage domestic production and independence.

Federal funding to states and localities is reduced to a trickle. States and municipalities must take ownership of essential public services such as education, water, roads, and public safety. The states are forced to retrench and innovate, turning federal scarcity into local progress.

Looking ahead, resilience becomes the first principle. Diversification takes center stage, with the creation of a sovereign wealth fund based on assets like gold, bitcoin, and commodities, bolstered by states that had stockpiled reserves such as rainy-day funds, ensuring financial stability. Local agriculture, leaner industries and a realigned electrical grid, freed from federal oversight, innovate under pressure, strengthening a recovery. Resilience becomes antifragility, the need to build stronger and better in the face of adversity. And finally, the government must revert to its Lockean and Jeffersonian roots, favoring liberty and growth over control, safety, and stagnation: anti-fragility.

Source: The Black Swan by Nassim Nicholas Taleb, 2007. Graphic: The Black Swan hardback cover.