Tuesday, September 09, 2008

Sarah Palin--Black Swan rising

A Black Swan, according to philosopher/stock trader Nassim Taleb, is an intrinsically unpredictable, completely unexpected event with major consequences.

Based on a lifetime of studying and trying to deal with Black Swans, Taleb believes that in our highly dynamic, intimately interlinked, and intensely non-linear world, these rare but extremely potent bolts-from-the-blue actually dominate most human affairs, including economics and history.

We may be seeing a Black Swan in the making in John McCain's selection of Sarah Palin as the Republican candidate for Vice President of the United States.

Given that the current race appears extremely close, and that McCain is 72 years old and has a history of a potentially life-threatening form of skin cancer, Palin is arguably a few key votes--or voting machines--plus a few rogue skin cells away from becoming the 45th President.

Palin, a 44-year-old self-described "hockey mom," attended a string of community colleges before earning a bachelor's degree in communications, with a minor in political science, from the University of Idaho. She was a very competitive basketball player in high school, the runner-up, and winner of the Miss Congeniality Award, in the Miss Alaska pageant of 1984, and worked as a sports reporter and in her husband's business before entering politics.

Her rise in the political world can only be seen as meteoric. She served on the Wasilla, Alaska city council for two terms, as mayor of Wasilla for two terms, and became the governor of Alaska on December 4, 2006.

Wasilla is a town of 7,025 inhabitants. As mayor, Palin oversaw a budget of $6 million and a staff of 53. Alaska is the largest state in the U.S. in terms of area, but the 47th in population, with fewer than 700,000 inhabitants.

Not surprisingly, not a lot is known about Palin's character or politics. She appears to be a deeply committed Christian conservative who appeals strongly to the Religious Right, a crucial voting block that McCain has had difficulty inspiring. She clearly is a powerful speaker who effortlessly conveys the common touch that so strikingly eluded Al Gore and has bedeviled Democratic presidential candidates from Adlai Stevenson to Barack Obama. At least some Alaskans see her as determined, even ruthless, in getting her way.

It's also clear that despite Palin's lack of national or international experience and, until now, visibility, she has dramatically energized the Republican base and sapped any momentum that the Democrats gained from their convention. Since Palin's nomination, McCain has surged ahead of Obama in national polls.

This commentary is not meant to criticize Palin or bemoan her candidacy. Rather, it is to alert readers to a Black Swan taking wing as we watch.

According to Taleb, totally unpredictable high-impact events--Black Swans--increasingly dominate economics, politics, and other aspects of human affairs. He argues that pretty much all of us, including key decision makers, blind ourselves to the existence and impact of these rare, but world-changing surprises. We blissfully go on making plans and predictions as if Black Swans didn't exist, leaving ourselves vulnerable to enormous unforeseen risks.

Even when a catastrophe like 9/11 shocks the world, Taleb notes, leaders may learn enough lessons to ward off an exact repetition, for example by increasing airport security, while learning nothing at all about the inevitability of future, equally unforeseen Black Swans, such as the mortgage meltdown that started here and is now rippling through the global economy.

So here we are, in September of 2008, with a planet full of problems from shaky economies to edgy international relatiions, with climate change and shortanges of energy, food, and water looming ahead. On January 20th, 2009, we may see John McCain take the oath of office, and, quite possibly within the next few years, Sarah Palin.

For Palin to take the reins of the most powerful nation on Earth would indeed be a striking Black Swan.

She might, of course, be a great president. The relatively inexperienced Harry Truman took office following the death of Franklin Roosevelt in April, 1945, with World War II still raging. Truman had the grace to admit that he felt "like the moon, the stars, and all the planets" had fallen on him. Yet many historians now consider him one of America's best presidents.

Or, the McCain-Palin ticket may lose, and the U.S. will have a different, yet also relatively young and inexperienced President.

The point is not to try to predict who will be President, nor how good or bad he or she may be. It's to join Taleb in recognizing, really facing the fact that despite the best efforts of pundits, politicos and professors, the unfolding of history is truly unpredictable.

If Palin does become President, I'll certainly feel some satisfaction that I recognized a Black Swan before it was fully fledged, and may have helped alert others to it and to Taleb's fascinating--and frightening--view of the unpredictability of human affairs.

Still, as Taleb writes about how he felt when the stock market crash of October 19, 1987 shocked even the savviest of his fellow traders--"I felt vindicated intellectually, but I was afraid of being too right and seeing the system crumble under my feet. I didn't want to be that right."

Me neither!

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