Before Natalie Portman slipped on a pair of ballet shoes and won an Academy Award, the term “black swan” was already full of psychological tension. Nassim Taleb coined the term to describe extreme, unforeseeable events with nasty consequences, whether in the natural world or in financial markets.
A notch down from there, we find what can be described as “gray swans”—things that are stronger than anything we’ve seen, but that we can foresee to be physically possible. Given that we have pretty short historical records in most places, it’s not much of a stretch to accept that we haven’t experienced the full range of possible weather. And after all, low probability events happen eventually.
Recently Princeton’s Ning Lin and MIT’s Kerry Emanuel went gray swan hunting in the world of tropical cyclones, using climate models to simulate many more storms than exist in our brief historical records. And some of the gray swans they found look like mean bastards.
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