Black Swan Events
The black swan events theory is an analogy that describes an event that comes as a surprise, the event is unimaginable with major effects and it disrupts the economy of nation/world also it harms the lives of people. Black Swan events create a chaos. In the business world the term was propagated by Nassim Nicholas Taleb, a finance professor, writer, and former Wall Street trader. Talab described the 2007-08 subprime mortgage crisis – the collapse of housing market in US when the housing bubble burst because many borrowers were unable to pay back their loans. The dramatic increase in foreclosures caused many financial institutions to collapse. Many required a bailout from the government.
Another black swan event took place In March 2013 in Cyprus. The banks and its customers experienced an acute crisis because of the terms of an agreement to receive financial assistance from the European Union and the International Monetary Fund. The original proposal, which included a bank deposit levy on Cypriot bank account holders, was rejected by the country’s parliament because of chaotic situations raised.
Few more black swan effects were 2011 Tōhoku earthquake and tsunami in Japan in which according to the Japan Reconstruction Agency, nearly 400,000 buildings were destroyed or irreparably damaged and another 750,000 were partially destroyed across the country in March 2011. Nearly 16,000 people were killed and 2,500 are still listed as missing.
More recently the dire effects of Covid-19 when economies of most nations in world suddenly stopped. the pandemic continues to present daunting challenges for governments and international organizations. The economic impacts threaten to undo decades of recent progress in poverty reduction, child nutrition and gender equality. But Covid 19 has worsened efforts to support refugees, migrants, and other vulnerable communities.
Black swan events cannot be rationalized; their occurrence devastates nations and economic rebuilding takes time and efforts. By definition, governments, organizations and society cannot fully prepare for Black Swan events. Since they are random and unexpected, they are almost impossible to anticipate, and thus to prepare for.
Green Swan Events
A green swan refers to an unforeseen environmental catastrophe attributed to climate change. It is a large-scale event connected with global warming and the impacts of pollution that could trigger a systematic financial crisis worldwide with negative implications. Green swans are risks created by human behaviour that includes pumping pollutants into the environment, destroying natural ecosystems such as forests and water catchment areas, and destabilizing climates. John Elkington, the man who originated the Triple Bottom Line, and has authored 20 books, and founder of sustainability consultancy named Volans, introduced the term Green Swan in his book “Green Swans: The Coming Boom in Regenerative Capitalism”.
According to his book, Elkington adds, Green Swans are “solutions that take us exponentially toward breakthrough” or “systemic solutions to global challenges, solutions that tap into positive exponentials.” They deliver “exponential progress in the form of economic, social, and environmental wealth creation.” Elkington also adds, “Too often, Black Swans take you exponentially where you don’t want to go, whereas Green Swans take you exponentially where you do want to go.”
The melting of the glaciers, a phenomenon that has intensified in the 20th century, is leaving our planet iceless. The fast melting of glaciers is affecting Antarctica and Greenland which are affecting the ocean currents, as massive amounts of very cold glacial-melt water entering warmer ocean waters is slowing ocean currents. And as ice on land melts, sea levels will continue to rise. Top geologists say that many countries near the sea will vanish in another 20-30 years.
Carbon dioxide concentrations are rising regularly because of the fossil fuels that people are burning for energy. Fossil fuels like coal and oil contain carbon that plants pulled out of the atmosphere through photosynthesis over many millions of years; we are returning that carbon to the atmosphere in just a few hundred years.
A good example of a Green Swan, according to Elkington, is the adoption of electric vehicles. It started out very slow, out of sight for most people. But gradually, and largely propelled by Elon Musk, it has accelerated step by step. It has now reached the exponential part of the curve, the point of no return, where it is rapidly embraced at increasing speed, disrupting the entire car industry on the path toward creating environmental, social, and economic wealth.
Dependence on solar energy is another example of Green Swan effect. Solar energy can help to reduce the cost of electricity, contribute to a resilient electrical grid, create jobs and spur economic growth, generate back-up power for night-time and outages when paired with storage, and operate at similar efficiency on both small and large scales.
Similarly, rain water harvesting reduces soil erosion, stormwater runoff, flooding, and pollution of surface water with fertilizers, pesticides, metals and other sediments. It is an excellent source of water for landscape irrigation with no chemicals, dissolved salts and free from all minerals.
White Swan Event
A white swan event is highly anticipated depending on available information and accurate forecasting. It is sure to occur. Its impact is easy to quantify. Human errors are usually considered the cause of such events.
Nasim Taleb uses the White Swan theory to explain events of dramatic proportions that had been predicted. A classic example he gives is of COVID-19. The pandemic had been predicted by many people before, including by Bill Gates in TED talk in 2015. The Governments of different nations in the world chose to ignore the warnings until too late.
Stocks markets are an excellent example of white swan event. They are also volatile and unpredictable because of the continuous flow of news, announcements, international data points, etc.
The crypto currency market is another example of a white swan event. Since its creation over a decade ago, it has experienced tremendous growth. While there are always periods of bear market conditions, the crypto market behaves like a pendulum that swings upwards and downwards. In the crypto market there are scalability difficulties, which means they may not be able to process enormous quantities of transactions at once. Due to the extraordinary volatility of most cryptocurrencies, investors don’t trust even in the most popular ones like Bitcoin. The volatility of the value of a particular cryptocurrency makes it difficult for investors to forecast their continued profitability in the future.
Conclusion
Black, Green and White events are radical in nature, they are a part of our life. In true sense the world has become VUCA. The acronym of VUCA stands for Volatility, Uncertainty, Complexity and Ambiguity. The world is experiencing a crazy spin of events because too many uncertainties have plagued it. These days you don’t see linear organisations, they hardly exist. Most organizations exist by adapting complexities and by behaving resilient. We see new trends and practices in society which are seemingly evolving very fast. The world of business demands flexibility and adaptiveness. Traditional and outdated approaches do not work. Black, Green and White Swan events will occur constantly and we will have to face them powerfully.
