I was riding the DC Metro back from our new office to the hotel downtown, when I saw a rider reading a book "Wild Swans: Three Daughters of China," Jung Chan.
It dawned on me this was the true paradigm of risk addjusted "long tail" distribution discussion. Those long tail items - the probabilities that occur in rare instances with significant consequences - are there, they are known to be there because of the long tailed signature that the "event" is there.
This "event" may be a wild event, but it is there - sitting in the long tail of the probability distribution. It is not unknown. It is not an unknown-unknown. Only unknowable events are unknown.
Black swans are in the world. We just has to look for them. We need a method for looking for them. We need to do our home work and ask why would Black Swans NOT be in the world. What would prevent Black Swans for existing. If there is no reason for Black Swans, then we need to assume they exist and are just not seen.
There is a fundamental principle in physics...
If it is not forbidden it is possible - just not observable (at this point).
