Global Crisis Blog

The Next Crisis Is Now ! White Swan? Or Black Swan?

By Shlomo Maital

All the signs point to it — the next crisis is imminent, it is now.

Economist Nouriel Roubini, of NYU’s Stern School of Business, and author of Crisis Economics, says that financial and business crises are “white swans” — that is, they are predictable.  Proof:  He predicted the 2007-9 crisis, in a memorable talk to the IMF experts in 2005.

Mathematician Nassim Taleb, of NYU’s Polytechnic University, author of The Black Swan, says crises are unpredictable. Like black swans, we thought they could not, did not, exist — but once discovered (in Australia), in hindsight we saw how probable they were.

Do you believe that global crises are white swans?  Or black swans?   It matters a lot.  If you think they are white swans, then you need to build the skills, knowledge, tools and capabilities to track global events, build worst-case scenarios and narratives, think independently, and above all detect asset bubbles.

If you think crises are black swans, then forget it, they are unpredictable, in timing and in causality.  What you need to do is not build tracking skills, but rather to build resilience, quick thinking, and ability to act under extreme duress, instead of freezing or panicking (as many of our financial and political leaders did in 2007-8).

I recently surveyed a group of MBA students.  I asked them, do you think crises are white swans, or black?  About half said, “white”.  And half replied, “black”.

It is entirely possible that both Roubini and Taleb are right.  There are crises that telegraph their arrival and hence are predictable — white swans.  There are crises that come from out of nowhere, out of the blue, that could not possibly be predicted.  And indeed, every crisis has elements of white and black swan in it.    No-one could have predicted that the Archduke Franz Ferdinand would be assassinated in Sarajevo.   That was a black swan.  But the geopolitical forces creating  potential hostility between Germany, France, Russia, Turkey and Britain  were clearly evident, as was the imminent demise of four empires (German, Russian, Austro-Hungarian, and Ottoman), and the impending demise of a fifth (British).

The message is that global managers need to know how to anticipate white swan crises, how to handle black swan crises, and how to tell the difference between them.

This is not a theoretical exercise. In the next blog, I will explain why I believe the next crisis is almost upon us, and what the causal narrative will likely be.  It will be a zebra crisis — both black and white.   And it will doubtless catch many by surprise.