A few years ago I read a book called The Black Swan, by Nas­sim Taleb.  While the book is pri­mar­i­ly applic­a­ble to the finan­cial cri­sis (it came out before the cred­it cri­sis hit and accu­rate­ly pre­dict­ed the issues), it also applies to low prob­a­bil­i­ty, high impact events that shape our lives and our world. Taleb uses the Black Swan as a metaphor. This is fur­ther explained via the sto­ry of the Turkey and the Butch­er.  

The turkey is fed every day for 1000 days by a butch­er. Every­day, this feed­ing con­firms to the turkey and its risk man­age­ment depart­ment that the butch­er is act­ing in the turkey’s best inter­est.  And every day, each suc­ces­sive feed­ing con­firms the hypoth­e­sis caus­ing greater and greater con­fi­dence in that state­ment. Now on the one thou­sand and first day (T minus 2) or two days before Thanks­giv­ing, the turkey is not fed by the butch­er. We are going to have what? A sur­prise. For whom? The Turkey.  What hap­pened to the turkey? A black swan.

A black swan is metaphor for an extreme event that destroys long-held notions about the past and pre­dic­tions about the future.

This metaphor comes from an expres­sion used in medieval in Lon­don, “you will soon­er see a black swan than some sort of impos­si­ble event.” Such as, I don’t know, you will soon­er see a black swan than George Bush and Barak Oba­ma will share the Nobel Prize in Physics. “

That idea came from the notion that all swans were white.  In the eyes of those in the UK, it was seen as true until the mid-17th cen­tu­ry when Eng­lish explor­ers dis­cov­ered Aus­tralia, where an ugly, black bird was dis­cov­ered to be a swan. Just like with our afore­men­tioned turkey, it took one obser­va­tion, one event to destroy the notion that all swans were white.  Just as with the turkey, it only took one stroke of the axe to dis­pel the notion that the butch­er is the turkey’s best friend.

As with all metaphors, the black swan is imper­fect. For the con­text of our dis­cus­sion, the black swan has three prop­er­ties:

1)   First, it is an out­lier, as it lies out­side the realm of reg­u­lar expec­ta­tions, because noth­ing in the past can con­vinc­ing­ly point to its pos­si­bil­i­ty.
2)   Sec­ond, it car­ries an extreme impact (unlike the bird).
3)   Third, in spite of its out­lier sta­tus, human nature makes us con­coct expla­na­tions for its occur­rence after the fact, mak­ing it explain­able and pre­dictable.

In the con­text of prep­ping, unpre­dictable, extreme events hap­pen and we must be pre­pared to sur­vive them.

Anoth­er point about black swans must be made. A black swan in your life may not be one in mine. You may lose a job or your spouse may die. That will not impact my life. A local or region­al black swan may affect large num­bers of peo­ple in an adverse way. The tru­ly unpre­dictable, high-impact events are black swans.

It is high­ly math­e­mat­i­cal, but frag­ile and com­plex sys­tems are vul­ner­a­ble to mas­sive fail­ures.  The addi­tion of debt makes sys­tems even more frag­ile — think the ongo­ing finan­cial cri­sis. It was debt plus com­plex­i­ty that caused fragili­ty and inevitable fail­ure. In your own life, the addi­tion of debt makes your finances frag­ile. When you are in debt, a small issue like a car break­ing down or an air con­di­tion­er fail­ure will cause a bank­rupt­cy.

There are ways to avoid black swans, both big and small. First, you must cut or elim­i­nate your debt. That is a must. Until you do so, you are vul­ner­a­ble to black swans. Sec­ond, sim­ple things fail less often than com­plex things. What­ev­er sys­tem you rely on for life and pros­per­i­ty, make it sim­ple. In oth­er words, KISS reduces your expo­sure to black swans. Third, redun­dan­cy cre­ates resilien­cy. Hav­ing mul­ti­ple means to stay alive will increase your odds of sur­viv­ing a black swan event.

I know what you are think­ing. This phi­los­o­phy is all well and good, but how does a prep­per prac­tice black swan resis­tance? Here are some exam­ples:

Finan­cials:
‑Absolute­ly cut your cred­it card and non-house debt to zero. As quick as you can. Don’t do any­thing beyond a 72 hour kit before your debt is noth­ing. Don’t buy that pre­fect BOB or con­cealed gun, get out of debt!
‑Have a six month, cash emer­gency fund, in the bank.
‑If you have house debt, save cash until your sav­ings account or oth­er liq­uid assets equal your debt. Some peo­ple will not have the dis­ci­pline, so pay­ing extra on your mort­gage each month and get­ting out of house debt is the next best thing. The rea­son I do not pay off my mort­gage is the inter­est rate is very low and the tax deduc­tion is great. I cur­rent­ly have 60% of my house note in a com­bi­na­tion of bank accounts and after-tax invest­ment accounts. My goal is to get to 70% in a year and 100% in 5–7 years. Effec­tive­ly, my house will be paid off.
‑Have sev­er­al store­hous­es of val­ue — cash, gold, sil­ver, Cana­di­an dol­lars, and Chi­nese Yuan in your port­fo­lio (for exam­ple). If the US dol­lar becomes val­ue­less, you won’t imme­di­ate­ly starve.

Water:
‑Have 1–2 gal­lons per per­son per day stored for five days sur­vival, min­i­mum.
‑Have a way to col­lect, fil­ter and puri­fy water.
‑Have a sec­ond ways to col­lect, fil­ter and puri­fy water

Food:
‑Have as much food stored as you can.
‑Grow as much food as you can in your yard, deck or patio. If you wait until the SHTF to grow food, you’ll fail.

Shel­ter
‑Have plans to shel­ter in place at your home or office.
‑Have a tent or oth­er emer­gency shel­ter.
‑Have a third pos­si­ble shel­ter.

You get the pic­ture. Have plans and back­up plans nest­ed inside anoth­er that work as redun­dant lay­ers of pro­tec­tion. This gives you the best chances of sur­viv­ing a black swan, what­ev­er its form.

Last­ly, you must real­ize that swans are not only black, they are white. White swans are pos­i­tive, ran­dom, high impact events. You must look at for those events and take advan­tage of them. The white swans are what make life worth liv­ing.  The essence of prep­ping is prepar­ing for the unpre­dictable black swans while being exposed to and tak­ing advan­tage of the white swans.

Be pre­pared. Build redun­dan­cies. Be resilient. Adapt. Sur­vive!