Black Swan Theory PDF

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Its a review and summery of the the black swan ...

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ENGR 451 – Homework #1 Yiğiter BAYAR 214971145

BLACK SWAN From the past to the present, the events occurred even though people predicted there would be no people living. It was an incredible discovery for people whose effect once happened was unlikely. That's why life is full of unpredictability. Black Swan is important at this point. The black swan, which was used as non-existent until the 16th century, was used to describe the impossibility because all swans were known in white because all swans seen until then were white. Finance professor Nassim Nicholas Taleb developed Black Swan theory after the financial crisis of 2008 and he explained the theory as the effect of the seemingly improbable. According to the theory, all the swans in the world are thought to be white, and if the black swan is seen, the black swan will have a big effect. In other words, the occurrence of an event that is thought to be extremely impossible creates a much greater impact than the events that take place regularly. The black swan is a phenomenon that is deviating from what is expected in a normal situation and is very difficult to predict. According to the black swan theory, the events are briefly random and unexpected. Taleb therefore assumes that people should always assume the status of a black swan and must plan accordingly.

People have some limitations when deciding. These limitations can be explained philosophically, statistically and psychologically. When we look at the statistically Markov chains is important model. It offer us a model in which we can determine probabilistic rules of transition from one state to another. So it moves with statistical data without looking back. The Markov chain is colliding with the black swan model because the Markov chain uses statistical data, and based on the possibility events can ignore. From a philosophical point of view of the black swan, no matter how many white swans we see, in reality we believe that all swans are white because we can never prove the certainty. However, the emergence of a single black swan in an unexpected situation completely undermines the previous claim. While all swans believe white, the black swan is shocking and makes a big impression. Psychologically, it is a representative heuristict as a decision mechanism that uses past experience to guide decision making. Therefore, Black swan theory advocates the importance of risk management and decision-making. At the present time, Black swan theory is still used when making long-term financial investments. The returns on the stock market and the returns on the lucky side of the good looks thanks to the black swan. By depending on this theory, people can deal with complexity on economic system. Dodson and Westney (2014) suggest a five step process that truly manage the Black Swan on projects. “These are respectively ; Risk framing (hunting the Black Swans), Risk strategies (caging the Black Swans), Risk assessment (understanding the Black Swans), Risk brokering (feeding the caged Black Swans), Risk Validation (taming the Black Swans).” On the other hand, in daily living, an important example of the black swan is the September 11 attack. If it were foreseeable that the terrorists would miss passenger airplanes and attack, it could have been prevented. Perhaps there would not be negative situations caused by this event. The safety of the airline had not taken the necessary measures to prevent such incidents or attacks, or if so, did not have the precautions to suppress the attack

ecause he did not think of the possibility of such an event. However after this incident, the airport thought of the possibility of attack and the necessary protection was provided to prevent an attack again. That's why the September 11th event is a way for people to see their future and make plans to protect themselves against another black swan event. Black swan events provide to increased awarenss of uncertainy in decision making and also find new way to deal with risks. The other significant example is that the Challenger Space program designed by NASA resulted in a disaster. In 1986, the most tragic accident in the history of aviation had taken place. The shuttle exploded in front of the world, 73 seconds after its take off. This unexpected event has deeply affected both NASA and the entire world. It was an unexpected event because it had passed thousands of tests. The case of the Challenger disaster matches the criteria Black Swan event. For Black Swan events, There are generally two types of perspectives. They are either handle through prediction of the event or through striving with the circumstances in case it actualizes. Whereas some people claim that a Black Swan event is unpredictable, others believe that specific approaches provide to manage projects proactively. Morever, the black swan event has been the subject of a film and the film has been analysed from different directions. The important point in the film is that while the white swans characterize innocence and cleanliness, the black swan represents darkness and lust. From a psychological and social point of view, the film is a contradiction between the visions of modern society and women - a hard temperament and innocence-. Women internalize these visions because of society. Therefore, she mentions the cause of personality confusion in women.Therefore, the person challengely begins to live with himself and with others . The clash of the person with oneself causes a devastating effect. Shortly, in this paper, for dealing with Black Swan types of events. possible approaches are described. Black Swan Theory means being aware of things that you are not aware of. Nassim suggests always assuming that a disaster can happen. In fact, it is a big problem that we accept the Black Swan phenomenon after it has occurred. Because they focus on what people know and ignore what they don't know.

REFERENCES Dodson, K. and Westney, R. (2014), Predictable projects in a world of black swans, Westney consulting group Taleb, N.N. (2007), The black swan: the impact of the highly improbable, Random House Publishing Group, US...