The Black Pterodactyl Event

Most investors are familiar with the idea of a Black Swan event.

A black swan is an unpredictable event that is beyond what is normally expected. Black Swan events are characterized by their extreme rarity, severe impact, and widespread insistence they were obvious in hindsight.

Black Swan events were discussed by Nassim Nicholas Taleb in his 2001 book 'Fooled By Randomness', which concerned financial events. His 2007 book 'The Black Swan' extended the metaphor to events outside of financial markets.

Taleb regards almost all major scientific discoveries, historical events, and artistic accomplishments as "Black Swans"—undirected and unpredicted. He gives the rise of the Internet, the personal computer, World War I, the dissolution of the Soviet Union, and the September 11, 2001 attacks as examples of Black Swan events.

However, when one looks at what he characterizes as a Black Swan financial event in the past, they do not seem all that rare really. For example, events such as the dot-com bubble, Great Recession, and now a pandemic.

That means we have already had THREE Black Swan events in the last two decades. Something which happens every seven years or so is hardly an event of extreme rarity.

I admit the validity of the examples of the rise of the Internet, the personal computer, World War I, the dissolution of the Soviet Union, and the September 11, 2001 attacks as examples of Black Swan events.

These are much rarer events happening once a generation.

These types of events can be transformational for sure.

These ARE Black Swan events.

However, what we are going through now is a Black Pterodactyl event. A perhaps once in a century event. An event so transformational we will not recognize ourselves on the other side. Black Swan events come and they go on a fairly regular cycle based upon generational churn. The turn over in leadership as an upcoming generation moves into power creates the conditions for a black swan event more likely. There is a loss of experience as the generational churn occurs.

History repeats itself as it were.

Black swans are jarring events just as black swans are jarring to the eye. Nonetheless, we know black swans exist and if we sit at the pond long enough a black swan might land at any moment. The color is jarring but it is still just a swan as unexpected as it may be.

We will adjust.

The Black Pterodactyl event is so much more. Think of all that has happened in the last century. All the very real Black Swan events that have occurred. Yet if you pick up a book like Babbit, you will see a portrayal of American life that is largely unchanged. Black Swans are jarring but it is the Pterodactyl that brings about a new order.

Babbit has a car and garage and commutes to a salaried job. He is living the middle-class life every American aspires to be in their middle-class dreams. It is eerie to imagine how little has really changed when one considers the novel by Sinclair Lewis from 1922.

Here is Wikipedia's opening paragraph describing Babbitt as 'a satirical novel about American culture and society that critiques the vacuity of middle-class life and the social pressure toward conformity.'

A century ago and Babbit still seems germane to many American lives.

Oh, wait, maybe it does not.

Many Americans are working from their bedrooms and dining room tables. The daily commute has been heavily disrupted and though many think it will return, I truly doubt it will be as uniform and regimented as it once was.

The presidency of Donald Trump, the pandemic, and an incipient insurrection all signal we are in the middle of a Black Pterodactyl event.

What do I mean by a Black Pterodactyl event?

Anyone who has seen a Rodan movie knows how dangerous the Black Pterodactyl can be. He flies in and no one even believes it is a Pterodactyl at first. It must be an airplane. It cannot be a Pterodactyl, but indeed it is a Pterodactyl. As it flies away its jet wash destroying vehicles, buildings, and lives, everyone breathes a sigh of relief. The Black Pterodactyl is gone.

We are safe....but now it is just a moment of safety.

The Black Pterodactyl keeps returning until we turn and face it instead of running from it. The failure to recognize the Black Pterodactyl event means we run from fearful attack to fearful attack. If we fool ourselves into underestimating the extent of change we are currently undergoing, America will fall to the Black Pterodactyl.