The Black Swan: The Impact of the Highly Improbable

We have a paradox. Not only have forecasters generally failed dismally to foresee the drastic changes brought about by unpredictable discoveries, but incremental change has turned out to be generally slower than forecasters expected. When a new technology emerges, we either grossly underestimate or severely overestimate its importance. Thomas Watson, the founder of IBM, once predicted that there would be no need for more than just a handful of computers.

That the reader of this book is probably reading these lines not on a screen but in the pages of that anachronistic device, the book, would seem quite an aberration to certain pundits of the “digital revolution.” That you are reading them in archaic, messy, and inconsistent English, French, or Swahili, instead of in Esperanto, defies the predictions of half a century ago that the world would soon be communicating in a logical, unambiguous, and Platonically designed lingua franca. Likewise, we are not spending long weekends in space stations as was universally predicted three decades ago. In an example of corporate arrogance, after the first moon landing the now-defunct airline Pan Am took advance bookings for round-trips between earth and the moon. Nice prediction, except that the company failed to forsee that it would be out of business not long after.

A Solution Waiting for a Problem

Engineers tend to develop tools for the pleasure of developing tools, not to induce nature to yield its secrets. It so happens that some of these tools bring us more knowledge; because of the silent evidence effect, we forget to consider tools that accomplished nothing but keeping engineers off the streets. Tools lead to unexpected discoveries, which themselves lead to other unexpected discoveries. But rarely do our tools seem to work as intended; it is only the engineer’s gusto and love for the building of toys and machines that contribute to the augmentation of our knowledge. Knowledge does not progress from tools designed to verify or help theories, but rather the opposite. The computer was not built to allow us to develop new, visual, geometric mathematics, but for some other purpose. It happened to allow us to discover mathematical objects that few cared to look for. Nor was the computer invented to let you chat with your friends in Siberia, but it has caused some long-distance relationships to bloom. As an essayist, I can attest that the Internet has helped me to spread my ideas by bypassing journalists. But this was not the stated purpose of its military designer.

The laser is a prime illustration of a tool made for a given purpose (actually no real purpose) that then found applications that were not even dreamed of at the time. It was a typical “solution looking for a problem.” Among the early applications was the surgical stitching of detached retinas. Half a century later, The Economist asked Charles Townes, the alleged inventor of the laser, if he had had retinas on his mind. He had not. He was satisfying his desire to split light beams, and that was that. In fact, Townes’s colleagues teased him quite a bit about the irrelevance of his discovery. Yet just consider the effects of the laser in the world around you: compact disks, eyesight corrections, microsurgery, data storage and retrieval—all unforeseen applications of the technology.[33]

We build toys. Some of those toys change the world.

Keep Searching

In the summer of 2005 I was the guest of a biotech company in California that had found inordinate success. I was greeted with T-shirts and pins showing a bell-curve buster and the announcement of the formation of the Fat Tails Club (“fat tails” is a technical term for Black Swans). This was my first encounter with a firm that lived off Black Swans of the positive kind. I was told that a scientist managed the company and that he had the instinct, as a scientist, to just let scientists look wherever their instinct took them. Commercialization came later. My hosts, scientists at heart, understood that research involves a large element of serendipity, which can pay off big as long as one knows how serendipitous the business can be and structures it around that fact. Viagra, which changed the mental outlook and social mores of retired men, was meant to be a hypertension drug. Another hypertension drug led to a hair-growth medication. My friend Bruce Goldberg, who understands randomness, calls these unintended side applications “corners.” While many worry about unintended consequences, technology adventurers thrive on them.

The biotech company seemed to follow implicitly, though not explicitly, Louis Pasteur’s adage about creating luck by sheer exposure. “Luck favors the prepared,” Pasteur said, and, like all great discoverers, he knew something about accidental discoveries. The best way to get maximal exposure is to keep researching. Collect opportunities—on that, later.