Bounding the “Black Swan” Probability

Abstract

On the surface, it may seem impossible to calculate the probability of rare unexpected events (so-called “Black Swan” events), for which there is seldom any contingency plan. After all, if an event is unexpected, how can you know enough about it to calculate its probability? Yet, examination and comparison of a few classic, and catastrophic, mishaps reveal a remarkable common thread. Namely, one unexpected event often precipitates other rare events, so that the overall probability is much higher than would be expected on the basis of independent events. This Mishap Chain Reaction (MCR) lies at the heart of Black Swan events, so that the probability of occurrence of any one safety-critical failure is essentially equivalent to the probability of multiple safety-critical failures. Ultimately, these multiple failures lead to catastrophic disruptions that are beyond the system capacity for compensation. In this chapter four Black Swan mishaps will be examined. These cases will point the way to the proper bounding of Black Swan probabilities.