While we Wait for the Black Swan

Article written by Eduardo Marson Ferreira and published in Revista Força Aérea (Air Force Magazine / May 2017)

Nassim Nicholas Taleb is a mathematician and Lebanese writer who lives in the United States and is the author of The Black Swan: the Impact of the Highly Improbable, 2007. He is also a mega investor, having made a large part of his fortune in moments of major crises in the global financial market.

In this book, he explains that before the advent of the occupation of the Australian continent by Europeans, they thought that the occurrence of a black swan in a population of these birds was a rare and extraordinary fact. Therefore, he used this term, “Black Swan”, to describe unexpected or unpredictable events, and of high impact, for good and for bad.

In this way, events such as the attack on the Twin Towers on September 11 in New York or the beginning of World War I, the advent of the internet itself, would be classified as “black swans”. After all, in spite of the risks inherent in the American military-diplomatic positioning in the world, which generates feelings of hatred in various regions of the planet, who in good conscience could believe that on September 10, 2001, a suicide attack of those proportions could happen in Uncle Sam’s garden the next morning?

Taleb also speaks in his book of the lavish human capacity simply to invent logic to explain the “Black Swan” after the “catastrophic” event had already occurred. This ability to join many pieces of information that supposedly were offset in the sight of all, that explain what happened, but that nobody would have had the ability to build a causal relationship between them before. Make comments and criticisms already knowing what happened is easy… a typical attitude of an “engineer of a ready-made project”, as we say here in the homeland. As Taleb reports, if any legislator had approved a law making mandatory the installation of costly armored doors in the cabin of all American aircraft, who knows if they would have prevented the worst. But, certainly, this character would not be remembered as a hero, but for bringing more costs to the debilitated air transport industry, since no major catastrophe would have occurred.

Finally, the logic of the black swan tries to teach the reader to understand the signs that precede events of this nature and prepare for them, who knows even to surf the wave that succeeds them. By the success of the author on the capital market, it seems that the formula has worked!

And what has all of this to do with the Defense Industry?

In Brazil, we emphasize the quiet character of citizens, the long period without conflict and the alleged absence of threats to our territorial integrity as an explanation for the small interest of the population in the theme of Defense. Since the advent of the Ministry of Defense (MoD), there are countless diagnoses made in this direction, which often end up occupying prominent spaces in the prologues of official documents, certainly produced to defend the investment in the industry! It seems that we have started these documents apologizing in advance for spending on the DEFENSE OF THE COUNTRY!

As a consequence, this lack of support of public opinion makes the sector a strong candidate to have its investments cut by the machete of the budget contingency every year. In 2017, it was no different, with 40% of the budget of the Ministry of Defense in this situation. The consequences we already know, and one of them is the focus of interest in this column: the weakening, destructuring and, often, the disappearance of several companies and entire production chains of the sector. I don’t need to exemplify this here, I know the reader will have in mind various such cases or have experienced the daily drama of them in their own companies.

The Armed Forces are already suffering the consequences of this destructuring of the industrial base of Defense in various projects. The signs are clearly there to anyone who is willing to understand them and neither are they as disconnected as those that preceded September 11. Soon we will see a torrent of black swans, and with much imagination we will classify them as unpredictable and come to the conclusion that the negative impact is relevant on the industrial capacities in the country. We will probably build an extremely rational explanation for the events, saying that we had everything to avoid them. But the reality is only one: the industry needs predictability and visibility of the financial flow of military programs, current and future. That is it! No black swan!

In times of revision of the National Defense Strategy and the White Defense Book, I recommend the preliminary reading of Nassim Taleb’s book.

Get out, swan!

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