The term “black swan” in finance was first coined by Nassim Nicholas Taleb, a former Wall Street trader, statistician, and author. He introduced it in his 2001 book, “Fooled by Randomness,” and fully explored the topic later in his 2007 book, “The Black Swan: The Impact of the Highly Improbable.”

As described by Taleb, these events typically have three distinct characteristics. They are:

  • Unexpected, with nothing in the past pointing to the possibility of them occurring.
  • Catastrophic in impact with lasting consequences.
  • “Retrospective in predictability” with people afterwards often trying to rationalize them to make it seem like they were predictable (hindsight bias).

Although black swans can’t be predicted, a lot can still be learned from them so that teams can bolster their resilience in the face of unexpected events. Black swans can be subjective, but we look at some widely accepted examples over the last century and their impact. Keep your eyes peeled for the white swan in our list! 

The Great Depression (1929)

This severe global economic downturn began in 1929, starting with the US stock market crash of “Black Thursday.” It lasted until about 1939 and was the most prolonged and severe depression ever experienced by the Western world. It led to significant changes in financial institutions, political policy, and economic theory. Originating in the US, it had major implications worldwide, such as severe unemployment and drastic declines in output. Americans faced the most difficult conditions since the American Civil War. Plummeting crop prices, overproduction from pre-depression modernization, devastated the agri sector, leading to widespread farmer bankruptcies and foreclosures.

Black Monday (1987)

This was the biggest crash since Black Thursday. On October 19, 1987, the Dow Jones Industrial Average (DJIA) fell 508.32 points, a decline of 22.61 percent, ending a bull market that had lasted since August 1982. The concerns that led to the market collapse included inflation worries, a weakening dollar, and rising oil and commodities prices. Black Monday showed how interconnected the world’s financial markets had become. By October 20, the Federal Reserve said it would provide liquidity to the market, and the market gradually started to improve.

The Dotcom Bubble (early 2000s)

The mid-1990s saw unprecedented growth in the IT and telecommunications sector. The Dotcom Bubble was characterized by a rise in US technology stock values in the late 1990s and particular investment in internet start-ups that made little to no profits. Between 1995 and 2000, the Nasdaq experienced a fivefold increase, which peaked in March 2000 before plummeting by nearly 77 percent by October 2002. Big names like Amazon and Microsoft survived the tumult, but there were many casualties, such as the online pet supply company Pets.com and the internet toys supplier, eToys.

9/11 Attacks (2001)

The terrorist attacks on September 11, 2001, temporarily halted financial markets, with the New York Stock Exchange (NYSE) and Nasdaq remaining closed for several days after – the most extended shutdown since the 1930s as the city dealt with the loss of lives and infrastructure. Oil prices initially rose, before retreating as supply from the Middle East continued. Longer-term, broader economic and trade impacts included alterations to supply chains, like increased security measures and changes to how goods were transported.

The Global Financial Crisis (2008)

The crisis was a global economic downturn triggered by the collapse of the US housing market bubble and excessive speculation on property values. The crisis developed slowly, with two Bear Stearns hedge funds collapsing in mid-2007. Losses from subprime loan investments triggered panic that led to a downward economic spiral, causing the largest bankruptcy in US history – the collapse of Wall Street bank Lehman Brothers in September 2008. Images of employees hurriedly leaving the company’s offices with boxes containing their belongings were played around the world. A Wall Street bailout package was approved in October 2008 to help ease the crisis, which included the government purchase of toxic assets and financial bailouts for Fannie Mae and Freddie Mac.

Ukraine-Russia War Escalation (2022)

The escalation of the Ukraine-Russia war occurred in February 2022 and continues to have an ongoing economic impact. It caused a significant increase in global food and energy prices in the first half of 2022, with prices for wheat, corn, and other staples reaching historically high levels. It also caused supply disruptions to commodities like wheat, maize, and sunflower oil. Russia is also one of the world’s top fertilizer exporters, with disruptions to this supply increasing the cost of agricultural production globally.

Not a black swan! COVID-19 Pandemic (2019) 

According to the World Bank, as the pandemic put the world into lockdown, global gross output fell by an estimated 3.4 percent in 2020. The result was one of the biggest price shocks the energy market experienced since the first oil shock in 1973. Oil prices fell below US$20 (Brent Crude) a barrel, losing nearly 70 percent in value. Storage capacity also approached its limits (OilPrice). Despite this impact and some labelling the event a black swan, Taleb, the author of the theory, has said it doesn’t constitute one as there was sufficient historical precedent to foresee the next pandemic. Taleb says it was actually a white swan event!

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