Was Covid-19 NOT a black swan event?!

Ever since the great intellectual Nassim Nicholas Taleb devised the phrase “black swan,” people have fervently used it to describe abnormal and rare events. When Covid-19 caused a plunge in stock markets in March and forced a global shutdown, many started to call it a black swan event. Narratives spur counter-narratives, and some scholars like Taleb himself and Adam Tooze have now come out to refute that Covid was NOT a black swan event.

I believe Covid-19 is, and we will continue to fail to predict and prevent black swan events that pose existential threats to humanity.

What is a black swan event?

According to Investopedia:

A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterized by their extreme rarity, severe impact, and the widespread insistence they were obvious in hindsight.
Classic black swan events include the rise of the internet and personal computer, the September 11 attacks, and World War I. However, many other events such as floods, droughts, epidemics, and so on are either improbable, unpredictable, or both.

The term “black swan” is quite intuitive: You keep seeing white swans in real life, so you develop a psychological bias that there would only be white swans in this world. However, this belief can be easily shattered when a black swan suddenly emerges in your life one day, but when that happens, you might be completely blindsighted and caught off guard. The “collective blindness” and unpreparedness to black swan events could impose great costs to the society – like when the bankers saw that their risk management models worked every single day, until the 2008 financial crisis happened and everything broke down. But by then the realization is already too late.

Adam Tooze and Taleb: Covid isn’t a black swan event

My friend Christian sent me this article two days ago entitled “The Coronavirus Pandemic Wasn’t a Black Swan Event. Why We Must Prepare for More Outbreaks.” It is an interview with Adam Tooze, the Shelby Cullom Davis chair of History at Columbia University. He is one of the world’s most brilliant financial historians and has been very active commenting on Covid’s impact on the global financial system. He was just on our podcast last spring discussing his insightful bestseller Crashed: How a Decade of Financial Crises Changed the World. He is currently working on Shutdown: The Global Crises of 2020, which will come out in 2021, and Carbon, which will be published in 2023.

Tooze’s argument is the following:

The thing that 2020 forces us to come to terms with is that this wasn’t a black swan. This kind of pandemic was widely and insistently and repeatedly predicted. In fact, what people had predicted was worse than the coronavirus. Since the early 1970s, scientists and social scientists have come to the view that humanity’s relationship with the natural world has become unbalanced. One facet of that is climate change. Another is the concern about “emerging infectious diseases,” which is what you get when more people go into areas that hadn’t previously had humans and start interacting with animals and catching new viruses. The classic cases are Ebola and AIDS, but you can also look at the new strains of flu coming from birds and pigs.
…
People knew about all these dangers, and there has been increasingly elaborate modeling about the risk of a catastrophe. What we’ve seen in 2020 was that the risk management failed.

In Tooze’s view, the Covid pandemic was entirely predictable, preventable, and highly probable. To simply attribute such an event to be “black swan” is almost intellectually lazy, and the danger of this line of thinking is that it could excuse the policymakers who screwed up big time.

In fact, even Taleb, the inventor of the term, thinks that Covid is not a black swan event, as reported in this New Yorker article in April:

Nassim Nicholas Taleb is “irritated,” he told Bloomberg Television on March 31st, whenever the coronavirus pandemic is referred to as a “black swan,” the term he coined for an unpredictable, rare, catastrophic event, in his best-selling 2007 book of that title. “The Black Swan” was meant to explain why, in a networked world, we need to change business practices and social norms—not, as he recently told me, to provide “a cliché for any bad thing that surprises us.” Besides, the pandemic was wholly predictable—he, like Bill Gates, Laurie Garrett, and others, had predicted it—a white swan if ever there was one. “We issued our warning that, effectively, you should kill it in the egg,” Taleb told Bloomberg. Governments “did not want to spend pennies in January; now they are going to spend trillions.”

Taleb is coming from the same place as Tooze: stop attributing everything to black swan and actually do your job! Had you done your job and listened to the experts, there wouldn’t have been this “black swan” in the first place!

We have always and will continue to ignore existential risks

I empathize with Tooze and Taleb’s sentiment, but I think they’re too idealistic in implying that we would’ve been able to predict and prevent Covid-19 simply because epidemics have long been recongized as an existential threat to humanity. Yes, we’ve come to recognize that pandemics pose an imminent threat after the AIDS, SARS, and Ebola outbreaks, but they were never bad enough to result in a fundamental shift in public sentiment and social norm that are needed to tackle this threat, especially for the Western developed nations.

Both Tooze and Taleb cite Bill Gates’ remarks in 2019 about pandemics as somehow predicting Covid. No, he didn’t. But even if he did, it had little influence on the public. People like Gates talk about big ideas and urgent issues for the world all the time, and frankly very few people start to seriously give a sh*t about these long-term threats after listening to their TED talks. We didn’t back then; we still don’t today even after Covid happened; and we won’t in the future…

The reason I say this is because along with epidemics, Gates and other public intellectuals also constantly bring up a dozen other existential risks to humanity that are in fact of statistically significant probabilities but we continue to ignore today.

Oxford philosopher Toby Ord projects that humanity has approximately a 1 in 6 chance of going completely extinct by the end of the 21st century (you can listen to his podcast interview with Ezra Klein if you want to learn more).

Specifically, he lists nuclear warfare (1 in 1,000 chance), bioterrorism (1 in 30 chance), unaligned artificial intelligence (1 in 5 chance), collision with asteroids and comets (1 in 1 billion chance)…

For bioterror, there are examples of how even high-level security labs could leak superviruses designed by well-intentioned scientists for the purpose of experimentation (gain of function research). Meanwhile, we’ve been witnessing the democratization of genetic engineering, where you can order CRISPR kits online and genetically edit yourself by yourself. There is little legislative progress on this matter.

So, if we get into a regional nuclear warfare or suffer from bioterrorism in 2021, some experts would come out and say “hey listen I’ve been warning you about this for years.” Yes, they have been, but does their previous remarks make the event no longer a black swan event? Not really. It would still be a catastrophic incident that the majority of the “expert class” and the public didn’t foresee.

Government is not incentivized to work on long-term threats and prevent black swan events

People often cite President Trump’s closing of the White House pandemic office as his failure to predict and prevent the pandemic. There are many flaws in the way President Trump handled this crisis, but I think it is somewhat far-fetched to criticize the shutdown of that specific office.

As I’ve explained above, there are more than a dozen existential risks. So, we’ve all been warned, but if you were President-Elect Biden, would any or all of these risks be on the top of your to-do list when you start in January? And if one of them were to materialize in 2021, could you really be blamed for not taking enough precaution in foresight?

Bruce Schneier is a famous public-interest technologist who came on our podcast to explain why IoT (Internet of Things) inventions like smart thermometers and smart cars pose a great existential threat to humanity in the long term, but nobody is paying attention because policymakers don’t get rewarded for working on long-term trends:

Imagine a politician looking at a large budget allocation for mitigating a hypothetical, long-term, strategic risk. She could designate funds for that purpose, or for more immediate political priorities. If she does the latter, she’s a hero with her constituents, or at least the constituents from her party. If she sticks with spending on secruity, she risks being criticzed by her opponents for wasting money or ignoring these immediate priorities. This is worse if the threat doesn’t materialize (even if it’s the spending that causes that). It’s even worse if the threat materializes when the other party is in power: they’ll take the credit for keeping people secure.

In other words, the incentive to NOT be prepared for long-term threats is quite high. In hindsight, we think President Trump really screwed up by not dedicating more resources to prevent pandemics at large, but going forward, how much resources would you dedicate to all the other existential threats that you’ve been warned about?

If we cannot answer the question above, then we will likely continue to fail to predict and prevent existential crises. It’s not one politician’s fault per se, but the underlying weakness of our socio-political structure.

Can someone give me a reason to be optimistic in 2021?

It is truly difficult to move the needle on these issues.

Just look at climate change – experts have been warning us about this existential threat for decades, and the public awakening and mass social movement probably still wouldn’t have started had Greta Thunberg not gone viral… And had the voter base for the Democratic Party not demanded climate progress more actively, the Party probably still wouldn’t have brought it on its platform this election cycle. And even so, the Biden administration is unlikely to devote its limited political capital on a major climate bill.

This is not to mention that the other half of the Republican voter base is still not convinced that climate change is a real issue, and true bipartisan legislative progress is nowhere to be seen. By the way, climate change is just one of the many existential risks…

Predictions by a few brilliant experts aren’t that helpful…

Taleb and Tooze think Covid isn’t a black swan event partly because they think it was entirely predictable. My two initial objections are:

Sure you can say that some experts totally saw it coming, but a few visionaries cannot replace the failure of an entire “expert class” – those who are in positions of power in academia and policymaking. In fact, the best experts repeatedly got things wrong and are still giving out wrong and inconsistent predictions.
Even if you had predicted the initial fallout itself, the subsequent set of chain reactions often spiral way out of people’s imagination, making the initial prediction not so valuable.

For example, some brilliant investors in the tech world must have envisioned a dramtically different world with the rise of social media apps like Facebook and Twitter, but the impacts of these technologies have been much more profound and negative than anyone foresaw. That’s why we see some investors regreting nowadays that they had invested in companies like Facebook – their initial prediction that Facebook would connect people across the world was correct, but it’s also useless today as Facebook’s second-order impacts are much more consequential (e.g. influencing elections, profiting off of people’s echo chamber addictions, etc.).

It is already hard enough to predict the first-order trajectory of a virus, a technology, a movement, or a policy. But it is even harder and close to impossible to foresee the second-order impacts of these first-order developments. And arguably, the second-order chain of events are much more consequential than the initial black swan events themselves.

Those who can do well at first-order projections are successful VC investors, policymakers, and the like. Those who do well with second-order predictions are a few rare visionaries but mostly charlatans. The charlatans don’t have to be outright frauds; they are often well-intentioned policymakers blined by their own naive empiricism and ideological biases. (By the way, which category does Alex Jones fall under? And what about Alan Greenspan?)

The experts also didn’t correctly predict much…

Many seem to suggest we could’ve prevented Covid long before January. Sure, but we didn’t even need to do that. Had we gotten any prediction right in the subsequent months, things wouldn’t have been as bad.

I would prefer to focus not on the initial mistake, but on the prolonged series of failures by the expert class from March until today that will almost surely continue into the foreseeable future:

Trajectory of the virus

The political and media institutions across the spectrum (except a few) failed completely in predicting the swiftness and trajectory of the virus spread in the US. For timeline reference, In January, people in China knew Covid was going to evolve into at least a national epidemic. Even here at Policy Punchline, we interviewed epidemiologist Jessica Metcalf on Febuary 14th, in which she clearly stated that Covid would evolve into a global pandemic.
In other words, you didn’t have to know in 2019 that Covid were coming; you just needed to know that in Febuary; and most of the experts didn’t even do that. The institutions continued to give out wrong advice and predictions to the public until March and later.
Even today, there is still not an academic or scientific consensus regarding how deadly Covid-19 truly is. Therefore, the public discourse ends up devolving into being “narrative-driven,” where media outlets and even science experts cherrypick a set of facts to defend a certain political party’s decision, which continues to happen today even though our understanding our the virus has improved.

The suffering economy

In March, we suffered the fastest fall in global stock markets in financial history and the most devastating crash since the Wall Street Crash of 1929. People were prepared for a years-long recession, and Congress quickly passed the CARES Act.
The stock markets, however, magically recouped losses in a span of weeks and even reached historically high level of equity prices, and everyone got cocky and started talking about a V-shaped recovery: “this is a temporary shock to the economy, and there were no fundamental underlying issues blah blah blah.” The political will for more fiscal stimulus soon dissipated, and only on 12/21 did the Congress painfully pass a small $900 billion relief package.
The stimulus was late, long-overdue, and insufficient to solve the problem. Today, we’re still 10 million jobs away from the employment level in Febuary. We will likely head into an anti-competitive post-Covid recovery where large corportions eat up market shares of small Main Street businesses. Wealth inequality is pushed up to historically high levels.
The scary feeling and sense of urgency from March have long been forgotten and put into the history books. Today, we’re nowhere close to reaching a political consensus regarding what kind and size of stimulus is needed for post-Covid recovery in 2021 and beyond. The one consensus we do have, however, is that market participants are now more confident than ever that the markets will continue to go upwards next year.

Efficacy of lockdowns and preparedness for ICU rush

In April, lockdowns were instituted in hope to stop the spread of the virus. We said we were going to do them for a few weeks to stop the spread before gradually reopening up. The lockdowns turned out to be much less effective than we predicted because of a variety of factors from people’s unwillingness to cooperate to the chaos in federal-state coordination. Then, Europe had to go back into lockdowns in November, and likewise with many part of the U.S. because the extremely high level of case counts are overwhelming hosptial capacities again like they did in March.
Say it was understandable that the local governments weren’t prepared for the ICU rush in March, but then they had 8 months to prepare for the second wave – which politicians have been talking about for months – and they still didn’t get it right.
8 months after the initial Covid hit, most politicians are still unable to express a consistent view on the trade-off between public health and economics. Which do you prioritize and at what cost? Because it’s difficult to take a stance, most have chosen the easy way out to resort to reactionary and flip-flop policies, such as telling businesses to reopen and close under a short notice, while not investing nearly enough resources for school reopening or hospital capacity expansion.
The severe consequence is the loss of public trust. California governor Gavin Newsom and NY governor Andrew Cuomo were initially praised as brilliant technocrats who took swift actions against Covid, but are now seen as enforcers of unreasonable, inconsistent lockdown policies even by initial supporters. On the other hand, Florida governor Ron DeSantis, who initially ignored expert advice and simply decided to fully reopen the state, is seen as a rising star by Republican voters for not instituting any lockdown. These are all sub-optimal policy choices, and it shouldn’t have to be this way.

Non-existent social solidarity and more dramatic polarization

When our podcast began our Covid-19 special coverage in March, and likewise with all podcasts and articles published then, the central narrative was all about “social solidarity.” What happened later was QAnon swept through the heartland; BLM forced a major social awakening upon this country; dramatic polarization dominated the socio-political discourse; and half the country now thinks the election was stolen… Nobody saw any of this coming.

So, from the trajectory of the virus to the duration of the lockdown, from V-shaped recovery to the great social progress and “Blue Wave” – most of the dominant narratives and predictions have been proven to be wrong and wrong and wrong…

You can see Covid-19 as this big, overarching, singular event that could’ve been prevented long before it happened. Or, you can see it as a series of small “black swan” events all connected together, and we managed to mishandle and mispredict almost every single one of them in the past few months.

Stop trying to predict; embrace the uncertainty to make good policies

What I hope to show here is even if we didn’t get the initial outbreak right, we still had a few dozen of opportunities to compensate for that initial mistake. The fact that we still mismanaged all the following opportunities thus points not to our inability to prevent Covid early on, but our more fundamental inability to make good decisions in face of radical uncertainty.

Taleb tried very hard to convey this point in his works and in that New Yorker interview:

His profession, he says, is “probability.” But his vocation is showing how the unpredictable is increasingly probable. If he was right about the spread of this pandemic it’s because he has been so alert to the dangers of connectivity and nonlinearity more generally, to pandemics and other chance calamities for which covid-19 is a storm signal. “I keep getting asked for a list of the next four black swans,” Taleb told me, and that misses his point entirely. In a way, focussing on his January warning distracts us from his main aim, which is building political structures so that societies will be better able to cope with mounting, random events.

Taleb wants us not to focus on the initial mistakes, but to care about the series of mistakes we continued to make and the lessons we shall learn from them.

We should stop fooling ourselves that it would be possible to keep foreseeing and preventing all “black swan” events because they’re by nature unpredictable. Trying to pin down uncertainties defeats the whole point of studying uncertainties. What is needed, therefore, is to build up resilient institutions that can be “antifragile” to most uncertainties.

Collective blindness in hindsight

Taleb warned us about the “collective blindness” before the black swan event took place, but what I see as more dangerous is the collective blindness and memory loss in hindsight.

Because we’ve read so much about Covid, because there’s so much media reporting on how the government failed to respond to it, and because we think we know the matter so well today, we’re now convincing ourselves that we could’ve totally seen it coming.

Or, at least, we think that had we had the kind of information that Trump or the government had, we could’ve totally predicted what would then unfold.

But we didn’t back then, and we probably can’t going forward. So, it’s probably best to get out of our own cognitive dissonance and hindsight bias and stop thinking that we’ve got it all down.

As I’ve explained in my post about election forecasting, we should constantly adjust our beliefs in face of uncertainties that constantly emerge in today’s world. One helpful to put this into practice could be to write down a few short-term predictions you have for 2021, and see if they match with what acutally happens. If they don’t, that means that you should probably readjust your way of thinking.

The last thing we need today, however, is to linger on the initial mistakes we made in January and convince ourselves that the world would’ve been a beautiful place had we just fixed this one thing… The reality is there were in fact so many more things that we failed to fix, and we won’t get it right next time either.

Tiger GaoDecember 26, 2020Comment