“Why the Black Swan?”
It’s a question we are frequently asked. In this article we explain why we are named after it, or more accurately the Black Swan theory, how it reflects the way we operate and how it shapes our client service philosophy.
The name originates from an economic theory with interesting ties to history.
Across Europe, there are only white swans. Up until the 17th century, therefore, in Europe the fact that all swans were white was irrefutable. Scientists and those readers au fait with research theory will recognise this as the model of flawed hypothesis construction.
It took the sighting of one black swan by a European in what is now Western Australia in the 1600s to destroy that fact.
The Black Swan theory then is the theory of how one piece of data- the existence of a black swan in Australia in the 17th century- can destroy a hypothesis, a belief system and an entire model. It shows that economies can be, and indeed are, unpredictable and unstable because at any point in time whilst we may think we are operating on all the information and irrefutable truths, a new piece of information may render our truths, wrong. This is why we believe our independent investment advice is important. From our perspective in helping our international clients, it is not about predicting or controlling the events, it is about being prepared for their impact and being ready for the opportunities they may present.
Black Swan Events were named by Nassim Nicholas Taleb in his book The Black Swan, an interesting and recommended read if you would like to learn more about it. He defined a Black Swan Event as having three attributes:
First, that it is an outlier event and not a regular occurrence. A Black Swan Event is unlikely, and up until that point of time, maybe even not even considered as a possibility.
Second, it has extreme impact. Think the 1987 stock market crash, and its subsequent recovery.
Third, people tend to give it retrospective predictability (but never in advance).
A Black Swan event can be positive or negative. The invention of the internet, or of mobile communications could be considered Black Swan events. As could the invention of the Spinning Jenny or the internal combustion engine a couple of centuries earlier. An example of a negative Black Swan is the unravelling of the collateral debt obligations that led to the 2008 economic crisis.
We are Black Swan Capital because preparing for unexpected events is central to what we do when we advise, help, guide and prepare clients for their goals and plans. Whilst this is good practice and applicable to everyone, it is especially so for expats and internationals.
For expats, Black Swan events can be numerous and unique. An example our Netherlands based clients will recall is the now withdrawn proposal to retrospectively remove the Dutch 30% tax advantage for expats. A current Black Swan that many of our clients are dealing with right across Europe is Brexit. We are responding by adapting our advice for clients potentially affected by Brexit to consider the impact of volatile exchange rates as well as investment opportunities from new commercial market dynamics.
As an expat or international you may be better positioned to benefit from positive Black Swan events and you conversely may be exposed to other potentially negative ones that you might not face in your home country. The process of guiding our clients towards their goals whilst having contingencies for Black Swan events is vital in our service to our clients. To have it as our name is a constant reminder.
We aim to highlight risk which sometimes is hidden, to uncover opportunities that may otherwise be missed and to help clients to understand and manage the complexity of their international lives so they may achieve their financial and life goals.
We are Black Swan Capital