Friday, June 25, 2010
Long Tails, Black Swans, and 3-Day Tennis Matches
I've read a fair bit about the subject. As a fast summary, the bell curve distribution of events is what we think of as "normal". But in reality some distributions have a very long tail, the graph extends very far to the right. This is what Mr. Talibi calls a "black swan" event. And we've just had an instance of it in the 3-day tennis match at Wimbleton. It's much, much longer than any previous match. Don't know what the British bookies would have given as odds, before this week, because no one ever considered the possibility of such an event. Just as no one really considered the possibility of a big eruption from a broken oil well in the Gulf.