Actuarial science is the discipline that applies statistical methods to assess risk of disability, morbidity, mortality, fertility, and other life-contingencies. Generally, actuaries are employed by insurance companies or risk management firms to calculate the “risks” associated with insuring individuals against life’s catastrophes. Actuarial science offers accurate and razor-sharp predictive power in order to prevent capital loss for those very companies.
There are always exceptions, of course, that confound even actuaries. These “outlier” events come unannounced. So rare are these exceptions that a theory was developed to explain their occurrence. The Black Swan Theory developed by Nassim Nicolas Taleb suggests that surprise events have major and long-lasting impact.(1) The 2001 terrorist attacks; the Pacific tsunami in 2004; the stock-market crash of 1987; not even a seasoned actuary could have predicted these events with any level of confidence.
The result of the unexpected can be a deep and pervading fear. In my own life, for example, I have come to fear airplane travel—particularly, I fear the worst possible scenarios regarding airplane travel—despite the fact that the odds are much higher for my getting in a car accident when I go to the grocery store. When I swim in the ocean, I fear a shark-attack more than I fear the more likely event of drowning. These are the “black swan” events that haunt me. They are rare and infrequent outliers but their impact on me is as significant as the potential sighting of a real black swan in my front yard, an unlikely but extraordinary occurrence, indeed.
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