Philosophy / Science / Science / West

The Black Swan as Acausal Connecting Principle


No, this essay is not about the movie, Black Swan with Natalie Portman. By chance I recently  picked up Nassim Nicholas Taleb’s The Black Swan, and it reminded me on C.G. Jung’s Synchronicity: An Acausal Connecting Principle. Nassim Nicholas Taleb is a mathematician who has made a fortune by betting on highly improbable market events. Those markets, which symbolize repressed ambition, greed, ignorance, which undo our society. Carl Jung warned, that if societies do not attend to their collective shadow, a world crisis may result. Our era is one of failing elites and broken social covenants, which is fraught with the dangers of unleashed economic and social chaos. We each can do our part to safeguard each other by understanding black swans.  I want to apply C.G. Jung’s wisdom, an intuitive thinker, on Taleb’s book (The Black Swan) beneficial to analyze external events – and yes, I am afraid this has something to do with the financial crisis and current geopolitical risks.

BlackSwanThe Black Swan

As an engineer, interested not only in C.G. Jung but also in economic theories I have read NN Taleb’s book (The Black Swan). Both C.G. Jung and Taleb contain the same message: the assumptions underlying modern science models are wrong. Ever since nuclear experts said that a fatality due to radiation exposure from an accident at one of nuclear facilities should happen less than once per million years. That was the standard by which they were managing the reactors. From my profession, I never bought that. Today everybody and anybody knows,  what can go wrong at nuclear facilities, does – or did (Murphy’s Law). We were also told alpha, beta and gamma radiation differ in that alpha particles do not travel far through air, and thus were not easily picked up. Until Tokyo Electric Power Company (TEPCO) struggled to bring the leaks under control and after a string of blunders over the past few months released hundreds and thousands of liters of contaminated water into the Pacific Ocean. Three of the Fukushima plant’s nuclear reactors were damaged by an earthquake-triggered tsunami on March 11, 2011, which caused multiple meltdowns, most likely open fissions, and the largest nuclear disaster since Chernobyl. The risks posed by nuclear energy, both personally and to society, seem to be a classic case of black swan logic: so unlikely as to be unintelligible through normal statistical methods, but occurring often enough that they cannot be treated as outliers and ignored as spurious.

shot0001Uncertainty is building pattern of nature as the unlikely cross-disciplinary relationship  of psychoanalytic (and often alchemist) C. G. Jung and theoretical physicist Pauli discovered. Pauli, a “Wunderkind” may be called a pioneer of quantum physics and leading member of the group of theoretical physicists, including Niels Bohr, Werner Heisenberg and Erwin Schrödinger. The group transformed our understanding of the way matter behaves at the subatomic level encountering a new world where Einstein’s theories (and Newtons Laws) do not apply. Exploration of the Pauli-Jung collaboration is particularly interesting because of the holistic view of his major scientific work, which won him the Nobel prize.The Pauli exclusion principle explains how matters form and a variety of astrophysical effects. On the psychic side, the Pauli effect was named after the anecdotal bizarre ability of his to break experiments simply by being in the vicinity and his sarcastic remarks toward colleagues.  Despite his Jewish origins Pauli was baptised catholic. Pauli met with Jung, whom he consulted regularly till 1934 in a deep psychological crisis. Especially Pauli’s dreams, which were full of symbolism from alchemy, were extensively discussed.

That brings me to currently greatest alchemist experiment the Euro and FIAT money in general. There are some parallels evident in economic history, over thousands of years currencies failed, but according to experts Euro and Dollar will stay. “The Euro is irreversible, declares European Central Bank president Mario Draghi a Goldman & Sachs alumni. The European Central Bank will do ‘whatever it takes’ to preserve the currency. Ever since the 2008 financial experts tell us the economy is under control. Looking in financial history, I think we ought to know better, there was always a black swan.

Why didn’t I stock up food and emergency kits yet? Because, we tend to underestimate both the probabilities and the damage and, what is worse, we do not follow our intuitions or hunches anymore. Discovering black swan risks, create tremendous anxiety within us. And Western do not see not Paulis quantum physics world without an individuation process. Jung felt that our journey in life was one of striving for completion, or wholeness. This is also a difficult journey for there is so much that we are called to integrate within ourselves. But there is an important difference here. On the journey towards completeness or wholeness we become more aware and more open as we travel the road. With each step along the journey we enlarge consciousness. Becoming conscious of the suppressed knowledge of  risks is beneficial. Instincts work through us whether we are conscious of it or not. If we remain unconscious of the process, then we find life more difficult to understand. We are at the whim of the Fates (or markets). If we consciously work to make the unknown known, then we are part of (CW 9i, par. 278), “the production and unfolding of the original, potential wholeness…” within.

Shadows on the Wall

Right now our Europe leaders (more the ECB) claim they solved the Euro Crises this week and US did not default yesterday. The US “leaders”  are hopelessly divided and the European leaders scary brought in line, but both chase the  black swan back to the backwaters of their unconscious and ours. Depth psychologist Carl Jung called it the “shadow” It’s the weaknesses, imperfections, faults, and instincts which we hide from others and ourselves by repressing them into our unconscious. The elites’s shadow is the sinner within; the ctizens’s shadow is the saint within. The shadow or black swan is the disowned part of our psychological wholeness.

SwanChaser

SwanChaser

What we see today is not criminal stupidity of statistical science but an arrogant élite overpowered by a collective shadow. Financial and technical models told them something about normal events (that was the basic assumptions on financial weapons of mass destructions), but they cannot deal with unexpected, high-impact events. Some guy probably measured the risk according to a formula and said, “Well, it meets the one-in-a-million standard.” But we are incapable scientifically of measuring the risk of rare events. As Warren Buffet stated on Derivatives in the  Berkshire Hathaway annual report for 2002: The derivatives genie is now well out of the bottle, and these instruments will almost certainly multiply in variety and number until some event makes their toxicity clear. Central banks and governments have so far found no effective way to control, or even monitor, the risks posed by these contracts. In my view,derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal…Another problem about derivatives is that they can exacerbate trouble that a corporation has run into for completely unrelated reasons.

Because the world has become so connected, a crisis today quickly becomes global. As the nuclear situation in Japan, the EU crises and the US dept ceiling soap opera continues, you’re going to see a major disturbance of supply chains. When the interest rate goes up, and it will, one “butterfly can cause an earthquake”. Our connected world appears only to be more efficient. We have economies of scale, and layers of oversight which generate an organized inacountability bordering on synchronicity. But when there is a disturbance, the setback is much harder to handle. Not only are we building riskier systems, but also the risks involved in failure are a lot larger. C. G. Jung published an famous essay on Wotan, the Norse (and German) god of the war in the , Neue Schweizer Rundschau (Zurich March, 1936)

En Germanie naistront diverses sectes,
S’approchans fort de l’heureux paganisme:
Le coeur captif et petites receptes
Feront retour a payer la vraye disme.
— Propheties De Maistre Michel Nostradamus, 1555

Ring-Walkure-WotanWhen we look back to the time before 1914, we find ourselves living in a world of events which would have been inconceivable before the war. We were even beginning to regard war between civilized nations as a fable, thinking that such an absurdity would become less and less possible on our rational, internationally organized world. And what came after the war was a veritable witches’ sabbath. Everywhere fantastic revolutions, violent alterations of the map, reversions in politics to medieval or even antique prototypes, totalitarian states that engulf their neighbours and outdo all previous theocracies in their absolutist claims, persecutions of Christians and Jews, wholesale political murder, and finally we have witnessed a light-hearted piratical raid on a peaceful, half-civilized people.

No all swans are white

The term “black swan” is philosophical in nature. Eighteenth-century Scottish philosopher David Hume once stated, “No amount of observations of white swans can allow the inference that all swans are white, but the observation of a single black swan is sufficient to refute that conclusion.” Today the black swan definition is: An event or occurrence that deviates beyond what is normally expected of a situation and that would be extremely difficult to predict. In laymen’s terms, black swans are events that are typically random and unexpected

Black Swan Investing There is no way to know that somewhere out there a black swan is not hiding, disproving the rule and nullifying our “knowledge” of swans. Induction tells us that we cannot really learn from our experiences. It makes knowledge very problematic, if not impossible. And yet, we humans do behave almost without exception as though they believe that experience teaches us mono-causal lessons. This is forgivable; like classic physics it works but as science showed later not in quantum physics. C.G. Jung showed that humans seem, at every turn, have this critical self-awareness of collective archetypes.

Taleb shows an similar skepticism in the story of a trader who insisted that he should not worry about the fluctuating values of economic indicators. Indeed, Taleb proudly declares that, to this day, he remains blissfully ignorant of supposedly crucial “indicators” like housing starts and consumer spending and cholesterol level I might add. Even if these “common knowledge” indicators were predictive, they would be useless because everyone else is already accounting for them. They are “white swans,” or common sense. Regardless of their magnitude, white swans are basically irrelevant sometimes. In todays environment, one can only profitably concern oneself with those bets, which others are ignoring systematically. Bets on those highly unlikely, but highly consequential events that utterly defy the conventional wisdom. Black swan’s we have to worry about not the prospect of a quarter-percent rise in interest rates.

The thing with Black Swans is that they cannot be foreseen – only the ones, who chase him up. In the apocalypse – where chaos reigns, the wholly unexpected happens, power laws and quantum physics apply but the bell curve does not. We need to understand the risks we face more accurately. Risks can be framed in a certain way. When they tell us something could happen once every 1 million years (or we fix a problem by the same means it has been created), we’re going to take that chance, thinking the risk is periodic and we are safe in the short term. But C.G. Jung knew the world within is as real as the world outside. The risk of interrupting events hasn’t changed since mankind crawled out of cave . The archetype of the apocalypse has been always there.

Pauli himself had written an article called “The Influence of Archetypal Ideas on the Scientific Theories of Kepler” which appeared later in a volume with an essay of Jung’s on synchronicity. The Pauli-Jung collaboration aimed at explication of a unifying or connecting principle bridging the gap between mind and matter or (quantum) physics with psychoanalysis. Jung’s theory of synchronicity stipulated that certain events-often called coincidences-actually reveal the operation of a non-causal connection between mental and physical events through meaning. The history of Jung’s reception by the scientific and scholarly communities is cautious – they largely discredited theories of Freud are considered scientific, but although many Jung’s concepts are widely used his overall work is labeled often as unscientific.  Synchronicity has been the prime target for criticism of Jung, but is for me a natural extension of Jung’s view of the intuitive function.

Synchronicity and the Black Swan

Jung coined the word to describe what he called “temporally coincident occurrences of acausal events” or  “meaningful coincidence” and “acausal parallelism in which archetypes and the collective unconscious are governing a dynamic that underlies the whole of human experience and history — social, emotional, psychological, and spiritual.

snchronicitySynchronicity does not admit causality in the analogy between terrestrial events and astrological constellations … What astrology can establish are the analogous events, but not that either series is the cause or the effect of the other. (For instance, the same constellation may at one time signify a catastrophe and at another time, in the same case, a cold in the head.) … In any case, astrology occupies a unique and special position among the intuitive methods… I have observed many cases where a well-defined psychological phase, or an analogous event, was accompanied by a transit (particularly when Saturn and Uranus were affected). – Carl G. Jung

Jung’s paradigmatic example of a synchronicity occurred during a therapy session, and the connecting meaning in a synchronistic event is subjective, related to the individual’s psychological maturation, or individuation. Jung and Pauli believed, events like this occur too often enough to be only meaningless coincidence. Jung noted taking as usual phenomenological stance, while it would be “absurd” to consider the conjunction of dream material and life events to be causal, “it is wise to consider the fact that [these coincidences] do happen…The East…considers coincidences as the reliable basis of the world rather than causality. Synchronism is the prejudice of the East; causality is the modern prejudice of the West.”

Jung mentioned the concept again in his commentary to Wilhelm’s translation of “The Secret of the Golden Flower”. He concluded that “the causality principle” cannot explain “psychic parallelisms” that must somehow be connected but are not causally related and equated synchronicity with the Chinese Tao. Jung would write about this concept again, and when he did, his focus would shift from the empirical and phenomenological aspects of synchronistic phenomena to the ontological and archetypal nature of such events. Pauli thought that the probabilistic nature of quantum theory and the Uncertainty Principle offered the possibility of discovering something beyond the mind-matter gap which transformed Jung’s understanding of synchronicity. As a result of his interaction with Pauli, Jung gradually came to see this non-causal connecting principle as an explanatory theory must be seen in combination with causality to lead to a better understanding reality, rather than having only a subjective meaning. To me that is the narrative of Talib’s Black Swan.

However, swans can be chased up. “When the Last Tree Is Cut Down, the Last Fish Eaten, and the Last Stream Poisoned, You Will Realize That You Cannot Eat Money”, apparently an Indian Chief said.

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