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Mini Black Swans

I am constantly reminded about the unpredictability of life. Yesterday one of my colleagues injured herself getting down from the bus and was on a week’s medical leave due to a fracture in one of her bones. Another colleague informed me that she was tendering her resignation because she wanted to pursue full-time studies to get her qualification.

What does these seemingly unrelated and yet coincidental occurrences have to do with the picture above?

A World of Mini-Black Swans

After reading Nicholas Nassim Taleb’s books on “Fooled by Randomness” and “The Black Swan”, I realised that the human understanding of the predictability of life is grossly over-stated. We think we know more about the world than we actually do. In Taleb’s language, a black swan event is characterised by rarity, extreme impact and retrospective predictability.

It’s quite rare in my case for both my colleagues (and there are only three of us including myself in the team) – one having a serious fall through an innocuous activity of getting down the bus and the other resigning around the same time. The impact on the office could be big because if my injured colleague is on long-leave, by the time my other colleague is clearing her leave, I will have to man the fort alone until the new staff comes in which from experience lags a few weeks to a month after the staff has left the organisation.

This occurrence only serves to strengthen my belief that life is totally unpredictable and huge shocks can happen. My own life is filled with that as less than a month ago, I was facing a crisis in my own life, that of separation from my spouse. While we are for the time being reconciled, I cannot but feel that my own mini black swan is also lurking behind the corridors of time, and thus it is important that my life be measured by the experiences I have gone through rather than about the x or y dollars I have amassed while I live.

Being Prepared for A Totally Unpredictable World

The more I think about survivalism or TEOWAWKI scenarios, the more I realise we take for granted most things in life. Running water, a functioning state, security and health, career etc. Only when truly black swan events occur right in front of us and impacts us through the value of our homes, our equity (stocks and shares) portfolio or our own lives that we take stock about what we already enjoy and prepare ourselves for possible challenges ahead.

Being prepared means to have a scout’s mindset of always being ready. We cannot predict 100% of what happens in life and in the world but we can control ourselves in acquiring the useful skills and abilities that can see us through whatever comes.

I start to realise keeping healthy and fit is one way to make my body resilient and stronger to withstand the challenges of life. I start to realise cherishing the existing family relationships allow one to savour the sweetness of being in a family when it can be taken away. I also start to realise that I don’t want to live a life of regret and to start enjoying small luxuries within my means NOW before I reach a point when I am too old to enjoy them.

Even though my work staffing situation appears to be dire, it was fortunate that I have made some preparations. For instance, I got my staff to document her work and processes in electronic form to facilitate handover. I also am familiar with most of the things she is doing so can take over while she is away and before her replacement comes in. This is not because I had foresight or could predict this possibility but some months back my staff’s family member was very sick and she contemplated resigning to help take care of her family member. Fortunately, I managed to get her to rethink her decision and her family member’s condition improved enough that she managed to last another 9 months since that episode and she is leaving for other reasons.

In relation to my journey towards financial freedom, I am now still having 33% of my net worth in equities. I think the volatility in the market will continue with a tendency for a correction given that the economic fundamentals of our key markets, US, Europe and China not looking too rosy. The risk of deflation and double-dip recession in the US is very real and I cannot see how Singapore can be unaffected given our export oriented economy.

I have kept my cash and cash equivalents high as ammunition to fight the upcoming challenges that the global economy throws at me.  I sleep better knowing my cash position and am comfortable even if my equities go south as I am in a net asset position.

What mini black swans do you think about and how do you think you are managing it?

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Be well and prosper.