The Black Swan Event

[David Harshbarger]

Tiger Woods emergence was almost literally a Black Swan event.  Not only did he challenge racial assumptions about golf, but he created interest in the game among large segments of the population who were not turning to CBS at 4 PM on Sunday before.

Maybe a Yao Ming or a great and compelling Mexican American player will change the demographic base underlying golf, and thus drive a new economic reality. 

Other Black Swans could come from radical equipment, political upheaval, agronomy, or anywhere there's a fundAmental assumption about the game that for some reason no longer holds.  Climate change could be one of those.  Ian, use much Papsalum, yet?

Tim, I remember everyone having high expectations for him, but did anyone really see him being so dominant that ANGC would renovate the course in response?  Or more on topic, that he would bring the number of new eyeballs to the game that he did?  What made him a Black Swan was that Tiger changed the economic model of pro golf and for many people, like my in-laws, made pro golf relevant in a way it never had been before.  My mother-in-law, a non-golfer, would tune in on Sunday to see how Tiger was doing.   

I will argue that as great as he was as an amateur, you could not predict how he would transcend golf to be arguably the most famous person on the planet, and how much his fame changed the dynamics of the industry.

Ian,

Climate change....paspalum....Canada....show a bro some love, man.

David-Just to play devils advocate didn`t everyone know that Tiger would be the sensation that he became. After the 3 Juniors and 3 U S Ams pretty much everybody knew about Tiger and what he was capable of. 

[Tim Martin]

Tiger Woods emergence was almost literally a Black Swan event.  Not only did he challenge racial assumptions about golf, but he created interest in the game among large segments of the population who were not turning to CBS at 4 PM on Sunday before.

Maybe a Yao Ming or a great and compelling Mexican American player will change the demographic base underlying golf, and thus drive a new economic reality.  

Other Black Swans could come from radical equipment, political upheaval, agronomy, or anywhere there's a fundAmental assumption about the game that for some reason no longer holds.  Climate change could be one of those.  Ian, use much Papsalum, yet?

Tim, I remember everyone having high expectations for him, but did anyone really see him being so dominant that ANGC would renovate the course in response?  Or more on topic, that he would bring the number of new eyeballs to the game that he did?  What made him a Black Swan was that Tiger changed the economic model of pro golf and for many people, like my in-laws, made pro golf relevant in a way it never had been before.  My mother-in-law, a non-golfer, would tune in on Sunday to see how Tiger was doing.  

I will argue that as great as he was as an amateur, you could not predict how he would transcend golf to be arguably the most famous person on the planet, and how much his fame changed the dynamics of the industry.

Ian,

Climate change....paspalum....Canada....show a bro some love, man.

David-Just to play devils advocate didn`t everyone know that Tiger would be the sensation that he became. After the 3 Juniors and 3 U S Ams pretty much everybody knew about Tiger and what he was capable of.  

David-You make some very good points and it had to benefit you exponentially that your mother-in-law became a golf fan.

[Mike_Trenham]

Worst interview of my life was with Eaton in 1999, I was interested in a staff finance position with one of their industrial entities. 

Halfway through the day I met with their head of business strategy and he was interested in hearing from me my thoughts on the golf segment as I had worked an internship with a familar name in golf.  I told him golf is in for trouble it is growing too quickly and there is a big supply and demand issue. He informed me that I was way off as all of their rescearch showed otherwise.  I insisted I was right and he insisted he was more right and so on and so for an hour.  I was back at the airport soon thereafter... Now the grip business may have been great the last 12 years but I still maintain I was right.  Personally I am long on golf if you look in my book cases, the trunk of my car, basement or through my bills but I would not invest in the game in the hope of any returns but fun.

I would also say the biggest black swan event in golf was the Pro V1, who predicted that or its impact?

[Stewart Abramson]

This is the Black Swan Event in Golf

http://www.youtube.com/watch?v=HInEgFk22WQ

[David Harshbarger]

Mike,

Guess I better get some of those.  

Tim,

If I get Pro V1s, any chance I won't still be a duffer?

Stewart, THAT is unexpected.

[Tim Martin]

This is the Black Swan Event in Golf

http://www.youtube.com/watch?v=HInEgFk22WQ

Buckle up because the season 8 premier airs tonight at 10:00 p.m. The anticipatory buzz is palpable.

[Stewart Abramson]

This is the Black Swan Event in Golf

http://www.youtube.com/watch?v=HInEgFk22WQ

Buckle up because the season 8 premier airs tonight at 10:00 p.m. The anticipatory buzz is palpable.

He's had so many funny golf episodes... The weatherman, the golf tip, the lesson from the golfing sex offender, the switched 5 wood in the Funkhauser coffin, interviewing for membership at the new club, Richard Lewis' putter, and the Black Swan. I wonder what's in store.

Sorry to threadjack. I must be turning into LD. Won't happen again.

[Tim Martin]

This is the Black Swan Event in Golf

http://www.youtube.com/watch?v=HInEgFk22WQ

Buckle up because the season 8 premier airs tonight at 10:00 p.m. The anticipatory buzz is palpable.

He's had so many funny golf episodes... The weatherman, the golf tip, the lesson from the golfing sex offender, the switched 5 wood in the Funkhauser coffin, interviewing for membership at the new club, Richard Lewis' putter, and the Black Swan. I wonder what's in store.

Sorry to threadjack. I must be turning into LD. Won't happen again.

Although I love them all I`m giving my vote to the switched 5 wood in the Funkhauser coffin. If someone is having a rough day any one of those episodes with lift them out of the doldrums.

[Kalen Braley]

I'd be curious to know how accurate this story is for those who over there on the ground.

Seems like "replacing" is quite a strong word.

http://www.cnn.com/2011/WORLD/asiapcf/07/11/china.polo/index.html?hpt=hp_c1

[Ryan Farrow]

I'd be curious to know how accurate this story is for those who over there on the ground.

Seems like "replacing" is quite a strong word.

http://www.cnn.com/2011/WORLD/asiapcf/07/11/china.polo/index.html?hpt=hp_c1

Kalen, I think its fair to say, their culture is in crisis. If they want to go back to their roots, there is real horse riding in Mongolia!

[Carl Rogers]

Tiger Woods emergence was almost literally a Black Swan event.  Not only did he challenge racial assumptions about golf, but he created interest in the game among large segments of the population who were not turning to CBS at 4 PM on Sunday before.
.....

I have to beg to differ .... TW could have changed golf, if he rejected the jet set lifestyle, did what Nelson Mandella advised him to do.  He is very straight forward marketer of high end Trump like golf.  If he went around to every major city donating significant resources to $30 golf, become a decent Dad, that would really begin to make a statement .... not hob knobbing in Dubai and all the other stuff.

Let's see how the TW Learning Centers pan out over time.

[Lou_Duran]

I’ve recently become very interested in Nassim Taleb’s idea of The Black Swan. The Black Swan is an unforeseen and unpredictable event that has an enormous impact on society. There is no way to predict the coming of a black swan event, but history has shown us again and again that these events occur with regularity. What is unknown is when.

Many, through hindsight, have suggested that some events like the financial crisis of 2008 were predictable, but we all know even with hindsight that timing the event was impossible. Therefore even the most minor of the events remain completely unpredictable. As a quick aside I don’t agree that a Black Swan Event can be a positive event such as the birth of the internet since the impact is far to long term for my definition. Only a devastating event has enough impact to change the “known” landscape in an instant.

The reason I bring this up is one of the interesting ideas that goes along with this is the notion of collective blindness leading up to the event. I personally think that to a large degree we have seen collective blindness as a contributing factor to why we had the financial crisis. Everybody enjoyed the endless growth, but nobody was willing to step back far enough and ask whether it was sustainable and what would happen when the music stopped.

Taleb’s basic theory is that all consequential events come from the unexpected. So thinking of all of this, I find it fascinating to look at the current state of the golf design business. I was reading about the level of work in the Far East and reflecting on how many architects are concentrated and busy in this region. A high percentage of that work is being done in China with a large percent of that on Hainen Island in particular. I kept thinking about this concentration of architects and projects and wondering what if the music stopped tomorrow?
What would happen to the golf design business if the government of China “enforced” the ban on new golf courses? What if the real estate market collapsed since nobody appears to play the game?

Hardly unforseen.  Many have been warning us for years.  I wouldn't be betting the farm on China, but if that's the only game in town, I suppose that rolling the dice there is superior to going to work for the Parks & Rec Dept. here.

Us ideologues tend to see things simplistically I suppose.  Something to do with what we learned growing up about the efficiency of spending.  Some may feel better that such things as Black Swans are out there.  I mean, who could have known that spending other people's money on things that we beileve are meaningful to our constituency groups might result in bubbles and a broken economy?

We teach our children to take care of things, that a penny saved is a penny earned, and not to steal.  We know from thousands of years of experience that humans hold dear in high esteem those things that are acquired through great effort.  Yet we divorce ourselves from human nature and reality when it comes to governing and spending other people's money on things we believe are important for ourselves.

Our economy nor golf as a capital intensive segment depending on disposable income for its broad viability will prosper until we resolve these political issues.  Below are a couple links which I hope will be entertaining and educational.

http://www.youtube.com/watch?v=d0nERTFo-Sk

http://www.youtube.com/watch?v=GTQnarzmTOc  

[Ted Cahill]

I’ve recently become very interested in Nassim Taleb’s idea of The Black Swan. The Black Swan is an unforeseen and unpredictable event that has an enormous impact on society. There is no way to predict the coming of a black swan event, but history has shown us again and again that these events occur with regularity. What is unknown is when.

Many, through hindsight, have suggested that some events like the financial crisis of 2008 were predictable, but we all know even with hindsight that timing the event was impossible. Therefore even the most minor of the events remain completely unpredictable. As a quick aside I don’t agree that a Black Swan Event can be a positive event such as the birth of the internet since the impact is far to long term for my definition. Only a devastating event has enough impact to change the “known” landscape in an instant.

The reason I bring this up is one of the interesting ideas that goes along with this is the notion of collective blindness leading up to the event. I personally think that to a large degree we have seen collective blindness as a contributing factor to why we had the financial crisis. Everybody enjoyed the endless growth, but nobody was willing to step back far enough and ask whether it was sustainable and what would happen when the music stopped.

Taleb’s basic theory is that all consequential events come from the unexpected. So thinking of all of this, I find it fascinating to look at the current state of the golf design business. I was reading about the level of work in the Far East and reflecting on how many architects are concentrated and busy in this region. A high percentage of that work is being done in China with a large percent of that on Hainen Island in particular. I kept thinking about this concentration of architects and projects and wondering what if the music stopped tomorrow?
What would happen to the golf design business if the government of China “enforced” the ban on new golf courses? What if the real estate market collapsed since nobody appears to play the game?

Hardly unforseen.  Many have been warning us for years.  I wouldn't be betting the farm on China, but if that's the only game in town, I suppose that rolling the dice there is superior to going to work for the Parks & Rec Dept. here.

Us ideologues tend to see things simplistically I suppose.  Something to do with what we learned growing up about the efficiency of spending.  Some may feel better that such things as Black Swans are out there.  I mean, who could have known that spending other people's money on things that we beileve are meaningful to our constituency groups might result in bubbles and a broken economy?

We teach our children to take care of things, that a penny saved is a penny earned, and not to steal.  We know from thousands of years of experience that humans hold dear in high esteem those things that are acquired through great effort.  Yet we divorce ourselves from human nature and reality when it comes to governing and spending other people's money on things we believe are important for ourselves.

Our economy nor golf as a capital intensive segment depending on disposable income for its broad viability will prosper until we resolve these political issues.  Below are a couple links which I hope will be entertaining and educational.

http://www.youtube.com/watch?v=d0nERTFo-Sk

http://www.youtube.com/watch?v=GTQnarzmTOc  

Lou- how do you feel about the further concentration of wealth being transferred from the bottom 99% to the top 1%?  I know that stating this sets off the "socialism" alarms in some, but the wealth redistribution upward in our country is true and undisbuted.  How much weight would you give to this historic wealth transfer in contributing to our country's problems? 

[Paul_Turner]

I don't think Taleb thought the 2008 crash was a "Black Swan" to everyone,  particularly not himself.  But it clearly was a "Black Swan" to Bernanke, Greenspan and most of the financial mainstream.

[David Harshbarger]

I’ve recently become very interested in Nassim Taleb’s idea of The Black Swan. The Black Swan is an unforeseen and unpredictable event that has an enormous impact on society. There is no way to predict the coming of a black swan event, but history has shown us again and again that these events occur with regularity. What is unknown is when.

Many, through hindsight, have suggested that some events like the financial crisis of 2008 were predictable, but we all know even with hindsight that timing the event was impossible. Therefore even the most minor of the events remain completely unpredictable. As a quick aside I don’t agree that a Black Swan Event can be a positive event such as the birth of the internet since the impact is far to long term for my definition. Only a devastating event has enough impact to change the “known” landscape in an instant.

The reason I bring this up is one of the interesting ideas that goes along with this is the notion of collective blindness leading up to the event. I personally think that to a large degree we have seen collective blindness as a contributing factor to why we had the financial crisis. Everybody enjoyed the endless growth, but nobody was willing to step back far enough and ask whether it was sustainable and what would happen when the music stopped.

Taleb’s basic theory is that all consequential events come from the unexpected. So thinking of all of this, I find it fascinating to look at the current state of the golf design business. I was reading about the level of work in the Far East and reflecting on how many architects are concentrated and busy in this region. A high percentage of that work is being done in China with a large percent of that on Hainen Island in particular. I kept thinking about this concentration of architects and projects and wondering what if the music stopped tomorrow?
What would happen to the golf design business if the government of China “enforced” the ban on new golf courses? What if the real estate market collapsed since nobody appears to play the game?

Hardly unforseen.  Many have been warning us for years.  I wouldn't be betting the farm on China, but if that's the only game in town, I suppose that rolling the dice there is superior to going to work for the Parks & Rec Dept. here.

Us ideologues tend to see things simplistically I suppose.  Something to do with what we learned growing up about the efficiency of spending.  Some may feel better that such things as Black Swans are out there.  I mean, who could have known that spending other people's money on things that we beileve are meaningful to our constituency groups might result in bubbles and a broken economy?

We teach our children to take care of things, that a penny saved is a penny earned, and not to steal.  We know from thousands of years of experience that humans hold dear in high esteem those things that are acquired through great effort.  Yet we divorce ourselves from human nature and reality when it comes to governing and spending other people's money on things we believe are important for ourselves.

Our economy nor golf as a capital intensive segment depending on disposable income for its broad viability will prosper until we resolve these political issues.  Below are a couple links which I hope will be entertaining and educational.

http://www.youtube.com/watch?v=d0nERTFo-Sk

http://www.youtube.com/watch?v=GTQnarzmTOc  

Lou,

Ian and you are misreading the Black Swan event of 2008.  It wasn't the housing bubble.  What scared the bejeezus out of the powers that be was that the bubble pop was going to bring down every major financial institution, that the enabling institutions of the world economy would become insolvent, that we were facing the possibility of nationalizing the gears of the economy.  This situation arose largely due to the proliferation of a vastly under-capitalized shadow insurance market in the form of Credit Default Swaps.

What made it a Black Swan event was that before, the assumption that a company that took risks that came home to roost would go under, however, the carnage would be limited to that company and the stakeholders.  That assumption was shown to be no longer true, as it became clear that the shadow market for CDS left the underwriters exposed to unmeetable obligations should the imminent default events transpire.  This domino effect that would bring down the banking system was not expected or anticipated as a side effect of the bubble pop.  That makes it the Black Swan event.

Lou, I completely agree that when people use other people's money without consequence the risk of using it unwisely is amplified.  That's why we need our legislators to take account of human nature and put in place checks and balances on our markets to ensure that extra-market consequences with teeth are in place.  In some cases that is nothing more than ensuring transparent markets.  In other cases it is a regulatory or statutory framework in which markets must function.

Black Swan events really need to be unexpected.  In golf, that's why you have to be thinking in terms of the underlying assumptions.  Turf. Equipment.  Demographics. Climate.  Available time.  Gender roles.  Expected activity levels.  Water. Corporate tax rules. Look along any of these dimensions and think about what would happen if the status quo was upended.  Those are the black swan events that reshape golf.

[Lou_Duran]

Lou- how do you feel about the further concentration of wealth being transferred from the bottom 99% to the top 1%?  I know that stating this sets off the "socialism" alarms in some, but the wealth redistribution upward in our country is true and undisbuted.  How much weight would you give to this historic wealth transfer in contributing to our country's problems? 

Ted,

What wealth is being transferred from the 99%?  Is it the "country's" wealth?  The government's?  Or what each one of us is able to earn, save, and invest?  I know the feel-good, populist nonsense spewed by the collectivist class warriors which has the criminally greedy "rich" screwing the virtous, hard-working poor.  It is so much part of the popular culture that even the basketball genius, golfing basketcase Charles Barkley feels compelled to utter it in Feherty's entertaining show about golf.

Perhaps I can use sports to illustrate.  Does anyone look at Kobe Bryant and intimate that he is basically stealing his team's wealth?  During the 2010-11 regular season, the Lakers averaged 101.5 points.  Kobe "produced" on average 25.3 of those points.  Did the Lakers transfer those points to Kobe?  Did 93% of the Lakers transfer 25% of "their" production to one player?  We could monetize that and ask, is it "fair" that Kobe is paid 27% of the team's total payroll though he is less than 7% of the team (one of 15 players)?

I know the line of reasoning-  Kobe or any "rich, fat cat" couldn't average 25.3 points or make miillions of dollars without the support of his team or cadres of workers (or the structure and institutions of society).  There is really only one reason why Kobe and "the rich" are compensated as they are: they do something so relatively unique and rare that others are willing to pay them to do it.  Except when government fosters a system of crony capitalism or fixes the officiating in sports as occurs occasionally in international competitions, it is that simple.

There are any number of studies on the concentration of wealth.  The left can arrange its data points to demonstrates what it wants.  There are a couple of threads on this site citing analysis that the concentration is overstated when looking at income and wealth on an after-tax basis, and income transfers to the lower socioeconomic groups.

To answer your question, the biggest danger to our economy is not that wealthy people are making too much money- OUR ECONOMY IS NOT A ZERO SUM GAME, and God knows the Fed knows how to run those printing presses- but that our expectations have grown much faster than our means or desire to meet them.  We all want 35 hour work weeks, 6 week vacations, 12 paid holidays, free healthcare, all sorts of freebie insurance and benefits, a six figure salary, and a secure retirement at age 65 (55 or less if you're a government worker).   Us and some 6+ billion people!

Unfortunately, Friedman is right that the world is indeed getting flatter- no great revelation here.   And the so-called unknown unknown that we all really know is out there somewhere, but think if we call it a "Black Swan" it excuses our lack of preparation (inability to postpone gratification), will with some certainty come to bite us in the ass.

In the past, our margin for error was substantial.  Today, with government spending at 24+% of GDP and trending upwards greatly when Obamacare "benefits" really come into effect, where do we go?  Historically, tax collections have been in the 18 -19% of GDP.  As the WSJ demonstrated, you can tax "the rich" at 100% of their income and it doesn't get us out of the pickle.
 
Our economy has long moved from brawn to brain; physical labor to knowledge.  Despite doubling over a relatively short period of time our per capita "investment" in educating our kids , the majority are stuck in mediocrity.  This, some very unfavorable demographic trends, and a self-indulgent, self-perpetuating ruling elite are the real dangers.  Keep promising to the masses more of what they must know they can't deliver.  Keep kicking the can down the road.  As Keynes said, "in the long run we are all dead".  Blaming things on those who produce might make some of us feel better, but unless the non-"rich" are going to start creating their own jobs and accumulate some of their own wealth, we will eventually earn our just desserts.  Reality can be a real bitch.  Perhaps we can at least appreciate the beauty of its simplicity.

Now, aren't you sorry you asked?

[B. Mogg]

I don't think Taleb thought the 2008 crash was a "Black Swan" to everyone,  particularly not himself.  But it clearly was a "Black Swan" to Bernanke, Greenspan and most of the financial mainstream.

The China property/golf market coming to a grinding halt will not be a black swan event - more like a black duck event.

The only thing keeping the market going now is government intervention and the fact that for Chinese, there are no reasonable investment alternatives. You can put your money in the bank and get bugger all for it (and expose yourself to scrutiny), you can invest in the stockmarket (which is basically rigged/insider trading) and that is pretty much it. Or you can invest in real estate and make 20% a year (without renting) while the party lasts.


A crash/slowdown (don't know which) is entirely expected and WILL happen (its happened before) and is simply a matter of time - of course the party can (and probably will) go on longer than anyone expects - maybe another year or 2?. We have been expecting work there to hit a wall every year for the last four years! Long term I think there will be continuing work in China, just not at the rate we are experiencing now.

The time is now 5 minutes to midnight, everyone at the party is doing tequila shots and those just arriving late are likely to be disappointed when they see the punch bowl whipped away. This is a long, long party that has been going on off and on since 1992-3, with a few interruptions of course. Since 2003 its all been an upward curve - one that seems to have gone parabolic in the last year or 2.

For golf architects there will be some hangovers I am guessing.

[Mike McGuire]

Taleb has a very active Facebook page.

http://www.facebook.com/pages/Nassim-Nicholas-Taleb/13012333374

[Ted Cahill]

Lou-I'm glad I asked- I appreciate your explanation- though I disagree. I doubt you believe that everyone in the 1% is as uniquely tallented in their endeavors as Kobe is in his. Heck, look at many on wall street the past 5 years- they were uniquely bad at their jobs- but deemed to big to fail and got a taxpayer bailout- hardly a free market. I believe our political/financial system is to blame for the historic transfer of wealth.  Some call it Neoliberalism- and were at the tail end of a 40 year development.  Our country will either correct itself and return to a more 1950s/60s distribution of wealth- or we will be facing an ugly schism in our nation that will make today's political battles look friendly.. Frankly, it would be wise for the 1% to help tame the disparity in wealth distribution- because if radicalism (right or left) gets ahold of the levers- it will be the 1% who has the most to lose.