Stop Believing Everything is a Black Swan and Start Looking for Neon Swans

In December 2024 I was working in the Middle East and seemingly without warning the Assad regime fell to a surprise offensive spearheaded by Hay'at Tahrir al-Sham (HTS). I was working with a group of analysts who were paying attention to the situation in Syria, and yet they were adamant that this development was unpredictable, that it was a Black Swan event.

A Black Swan event, as defined by Nassim Nicholas Taleb in his book The Black Swan, is a rare, unpredictable and highly disruptive or impactful event, that seems obvious based on hindsight but is unpredictable beforehand. For example, if Iran were to launch a nuclear strike against us tomorrow, that would be a Black Swan, because as far as we know Iran does not have a nuclear capability. That clearly, then, would be unpredictable.

Since the fall of Syria I have heard the term used by pundits in relation to the January 2025 announcement by DeepSeek that completely upended the AI world and President Trump’s April 2 announcement that the U.S. would levy tariffs on the entire world.

From my perspective, these were not Black Swan events, rather they are another category introduced by Taleb, but often overlooked, which are Neon Swan events, where there is a giant (metaphorical) neon sign telling us what is coming, and we choose not to pay attention to it. Taleb defines a Neon Swan event as a rare, impactful, and blindingly obvious event, meaning it is completely predictable and with even just adequate analysis should have been evident.

For a variety of reasons we choose to ignore the neon sign and forge ahead until we are caught off guard by a world changing event. Let’s look briefly at each of these events and the cognitive biases that led to their being missed.

Fall of the Assad Regime

I assume very few readers follow developments in Syria on a daily basis, yet the analysts I was working with in the Middle East did. And they completely missed the sign posts indicating that the Assad regime no longer had the support it had in the previous years to fight off an insurgency.

Namely, the Syrian Government was supported almost entirely by Russia and Iran. And Russia was mired in their misadventure in Ukraine and Iran was a bit distracted by the developments in Palestine and Israel’s expansion of that war to Iran’s proxy army Hezbollah in Lebanon.

Assad’s two main benefactors no longer had space for him and no longer had the resources available to support him against an insurgency.

HTS had breathing space over the past couple years to regroup, rearm, and plan. They had not gone away. And we had intelligence that HTS was planning something. There were reports of consolidation of forces, military drills, and logistical movements. All signaling something afoot.

So why did the analysts miss this?

I would argue this is quite straight-forward, a case of Status Quo Bias. Analysts had become accustomed to the regime's resilience and failed to recalibrate when the supporting conditions fundamentally changed. Simply, they relied on what they had been seeing rather than what they were now seeing.

When we don’t continuously recalibrate to changing conditions, resulting events feel like Black Swan events, despite that all the signals were there.

DeepSeek and the Changing World of AI

In January 2025, DeepSeek announced that they had radically changed the way they train AI, significantly reducing the cost of doing so, and by orders of measure reducing the energy requirements. This was deemed not only a Black Swan event but by one AI investor a “Sputnik moment”, where we were horrifically caught off guard by the technological developments of an adversary.

This felt surprising, but again, if you paid attention to what DeepSeek was doing, buying up massive amounts of NVIDIA chips, publishing their innovative "Mixture of Experts" training models, and showcasing their energy efficiency gains...all before January 2025…it should not have been a surprise.

Of perhaps greater significance, by 2019, China had reached parity with the U.S. on publication of impactful research on AI and by 2024, China had firmly established itself as a global leader in impactful research, surpassing the U.S. in several key areas (including AI). Nine of the world's top ten research institutions are in China and by 2024, Chinese researchers were producing a larger share of highly cited AI publications. There are still areas in which the U.S. leads in impact, but the field had more than levelled. It had tilted in the direction of China.

So this clearly was not a Black Swan event. This was completely foreseeable, the U.S. just chose not to see, existing in our own bubble, believing that the U.S. innovates and China copies. There were plenty of readily observable indicators, we simply chose not to see them or give them sufficient attention.

More than anything, we suffered from Superiority Bias, in this case the assumption that innovation flows primarily from West to East. The U.S. created IBM, Apple, Microsoft, Google, NVIDIA, Oracle and so forth. Absolutely the U.S. was dominant in this field, but beginning in the late twenty-teens, anyone with access to Google Scholar would have seen that this dynamic was changing.

We persisted in seeing China in the "fast follower" category rather than the "fundamental innovator" category, despite mounting evidence to the contrary and we missed a foreseeable event. In other words, we were suffering from what is known as Narrative Persistence. In this case, we had constructed a powerful narrative about China's technological development that went something like: "China excels at manufacturing, scaling, and iterative improvement, but lacks the innovative culture and intellectual freedom necessary for fundamental breakthroughs." We might have been wrong.

President Trump’s Tariffs

Finally we had President Trump’s world rocking tariff announcements on April 2 of this year, that the U.S. would impose global tariffs, literally tariffs on every country in the world, including small island nations that most people have never heard of.

And again, on Bloomberg, I had to listen to another commentator, whose other points were solid, describe this as a Black Swan event. It was not.

I’ll admit I could not have predicted that Lesotho, an impoverished and landlocked south African country with a GDP 136 times smaller than the amount of market capitalization that Apple lost after Trump’s announcement ($2.2 billion and $300 billion, respectively) would top the list of tariffed countries.  

But what I could have foreseen, did foresee actually, was the scope of the tariffs. Conventional wisdom was that they would be target to a short list of countries, e.g. China, Vietnam, India and the European Union countries. But he had been telling us all along exactly what his intentions were, if we had been listening.

Everyone was flummoxed by the uncertainty and ambiguity brought by the lead up to the announcement (see my previous post on that) but apparently almost no one was paying attention to the content of what Trump was telling us, almost all of which point toward exactly what he unveiled. Specifically:

·       His repeated statements that "the whole world is ripping us off" rather than focusing solely on specific countries.

·       His campaign rhetoric about "America First" on a global scale.

·       His consistent messaging about "the largest tariffs in the history of our country" without limiting the scope.

·       His consistent use of the term “Liberation Day” tied to a national emergency that rarely if ever specified the source of this emergency.

·       His February 18, 2025 statement that "No country will be exempt from paying their fair share".

·       His March 25, 2025 comments about "tariffs as national policy, not just trade policy".

I’m quite sure a more thorough analysis would have found or would find many more examples than that. And this is not a commentary on Trump’s tariffs, the point is, this also was not a Black Swan event. This was as foreseeable as the fall of the Assad Regime and the rise of DeepSeek.

We just chose to bury our heads in the chatter of uncertainty and ignore the Neon Swan in front of us.

So the question is why? I would argue the following cognitive biases play into this (and once again, this is not political commentary, or even economic commentary, this is about why we think like we do):

·       Normalcy bias: The tendency to believe things will continue as they have been, even in the face of evidence to the contrary. We have experienced nearly 75 years of the post WW II order and imagining that would change over night is nearly impossible. Yet in the past three months our entire relationship with our Five Eyes partners has changed significantly. For good or bad, that order no longer existed by April 2nd.

·       Scope neglect: Difficulty conceptualizing the true magnitude of what was being proposed. To my previous comment, who would have foreseen Lesotho at the top of the list and who would have considered tariffs being proposed on St. Kitts & Nevis or Vanuatu? Yet he told us “the whole world.”

·       Anchoring bias: People anchored to previous limited tariff policies and couldn't adjust sufficiently. Previous rounds of tariffs had been targeted and somewhat restrained, yet he told us “And we're going to have tariffs like no one has ever seen before!"  That was a clear signal to un-anchor.

·       Motivated reasoning: Economic stakeholders preferred to believe in a more limited approach because the alternative was too disruptive to contemplate. It is hard to imagine a U.S. president taking steps that devalue the premier U.S. corporation by $300 billion dollars, so we chose to believe that this was not a possibility,

Conclusion

It is easy to discount events as unforeseeable, as Black Swan events, and to fret beforehand that there is too much uncertainty and ambiguity to make sense of what is coming.

In the past few months we have indeed seen disruptions on an unprecedented scale, and these events feel like Black Swan events. Yet, as the next “unforeseen” event begins to unfold, if we step back and ask ourselves “why am I thinking about this in this way?” and “how else should I be thinking about it?” and truly push ourselves on these questions, that Black Swan will start to develop some pretty neon colors as we shed our cognitive biases.