About thirteen years ago, Nassim Taleb gatecrashed the party of everyone who called themselves an expert on risk with the publication of his Black Swan: The Impact of the Highly Improbable. It was a timely book, published as the Great Recession burned through the economy and the financial markets.
Its central point was that we underestimate the probability of improbable events. Europeans first saw black swans around 1700 in Australia; until then they had assumed that the quite commonplace bird didn’t exist. Taleb’s writing was compelling (if at times dismissive of other thinkers and ideas) and the point didn’t need much proving, given what was happening in the society.
The work in a way built on earlier efforts from the likes of Benoit Mandelbrot, whose work on fractals I have come to follow and admire. The main concept of the book has become so widely used, including by non-experts, that its actual meaning and relevance may be not clear anymore.
Taleb’s more recent work has not struck a chord with me; I agree with someone who called the experience of reading his latest book like “being trapped in a cab with a cantankerous and over-opinionated driver.”
Goldstone began his work half a century ago; Turchin followed in his footsteps. They research historical cycles to understand how social instability and revolutions happen. They both predicted the rise of a right-wing populist in the US (Goldstone decades ago), and are currently seeing a turbulent, potentially violent period ahead for the United States and the West in general. Rereading their aforementioned article now, it is remarkable to think it was written before the election. They practically predict the aftermath.
Contrary to most other academics, not to mention public intuition, Goldstone and Turchin see the seeds of upheaval within the elites themselves and not the “proletariat.” Dramatic changes happen, they argue, when the wealthy want an ever larger share of the pie while resisting taxation and blocking the path to wealth for anyone who isn’t their clan or kin. Of course, these fissures need to be exploited by the rest of the society as it prepares for change; urbanization and education help catalyze this process.
Here’s a graph that exemplifies the pair’s research. The negative historical cycle is boosted by declining living standards, increasing intra-elite competition/conflict and a weakening state. The positive cycle is propped by greater equality, greater elite consensus and a more legitimate state. They are plotted below on the same graph. As we see, we are headed into red territory.
If we are to extrapolate from all the above, it seems that we are headed for some sort of a catalytic event in the coming period, but the nature of that event we cannot predict. It is too easy, and probably wrong, to describe it as a simple revolution. The data from our research points to this as well. Any large-scale violent upheaval would of course be disastrous for our societies, and those who wish for it are delusional.
No, at the Altruist League we feel that we are indeed headed to an unprecedented period, but we think that it can be a positive one. The abandonment of the cult of greed, wealth and celebrity. A financial elite that finds meaning and creativity in improving the society fundamentally and largely anonymously. A new social contract that ends government-bashing and reaffirms our commitment to reformed institutions.
Black Swans are, after all, unexpected. And this would be a very unexpected thing to happen for those not closely following the evolution of the mind of the financial altruist. I have had a glimpse or two over the past few years in my position, and am in fact very hopeful.
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