Black Swan

The term black swan was made popular by the bestselling book of the same name by Nassim Nicholas Taleb. A black swan, as Taleb defines it, is an unforeseeable event with significant consequences.

Because hardly anybody expects black swan events, such as the subprime loan crisis of 2007, their results can be devastating. According to Taleb, if we could better understand the processes that lead up to these events, as attempted by the chaos theory, we could be better prepared when they strike.

Taleb advises investors not to put too much faith in economic predictions based on established theories.

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