The black swan that almost killed me

The water pressure suddenly dropped. It had been reduced to barely a trickle. I got out, dried myself, walked over to the sink, opened the window to let out the steam and began to shave.

When I opened the window, I noticed that something smelt odd, like someone was burning some non-organic substance at the back of their garden. This wasn’t an all too uncommon smell and happened from time to time. So I thought nothing of it.

As I continued, something else caught my attention – loud banging. The neighbours next door had just moved in and had been making some renovations. Again, it seemed easy to rationalise.

The banging got louder and louder, to the point that it seemed it was coming from our house. So I walked over to see what was happening and turned the door knob of the bathroom door.

The door flew open and I was hit will a wall of heat. Through a hazy white mist, I saw black smoke billowing out my bedroom door. Flames were licking the sides of the wall.

I slammed the door shut with all my strength. I took my bathroom towel, soaked it in water under the sink and stuffed it underneath the crack below the door where acidic white smoke was now seeping in.

I calmly put on my trousers – I didn’t have a shirt or socks because I left them in my bedroom. The temperature in the room felt like it was rising fast. I climbed onto the window ledge, clung onto the window frame and dropped myself over the cool side of the exterior wall, supporting myself with the soles of my bare feet.

I could hear the sirens in the distance and a commotion going on down below. A large nervous crowd had gathered – the whole neighbourhood.

I realised what was going on. They thought I was going to jump and I was two stories up. All I could think was that it was a good thing I had brought my trousers with me.

Some neighbours appeared with a ladder. It was too short. But, I had enough, so I jumped down onto it, which slipped momentarily, scraping the side of the wall, sending a shower of pebble dashed down below. The neighbours managed to hold the ladder firm and so I clambered down.

We walked around to the front of the house. Black smoke now filled the air as the fire raged on. The temperature rose, shearing the leaves of the nearby trees. Roof tiles exploded and debris was sent rocketing across the street, hitting other nearby houses.

The fire brigade arrived along with the police and several ambulances. They smashed down the front door, put on their masks and disappeared into the smoke. Within a short while they had managed to get the blaze under control and eventually put it out.

This event in my live was quite pivotal for me and I thought about it a lot in the months that passed.

In life the range of potential directions you can take are enormous. Statistically, you can’t predict where you are going to end up in the end, or the experiences that you will have on the way.

Most of us have experienced dramatic events in our life that have changed our perspective on the world. We perceive them as extreme events that are highly improbable, rare and should never have happened under normal circumstance. Yet these events do on aggregate for most people with a frighteningly regular and consistent frequency.

Famous modern-day statistical philosopher Nassim Taleb, referred to these as Black Swan events.

The concept of a black swan was once considered impossible. However, a couple of hundred years ago, black swans were discovered in Australia – the land of my birth.

Black Swan events are therefore, considered to be events that are undirected and unpredicted. They have three defining characteristics:

1. They have an enormous impact on your life

I was trapped in my mother’s burning house. I was living with her for about a year after having a messy break-up with an ex-girlfriend. I had bought a very nice apartment in a good part of London and I was due to move in a week before the fire.

All my furniture and possessions were temporarily stored in my mother’s house, so I lost everything. A week later I got the keys, I moved in and slept on the floor for about a month.

2. They are not predicted

I can safely say that I didn’t predict the possibility of my mother’s house burning down at such a pivotal point in my life. Two weeks later I sat my CFA Level II exam, which I unsurprisingly failed. If I had known, I would have probably not left all my notes, CFA syllabus material and Schweser books in my bedroom.

3. After the event, you can rationalise and explain why it happened

It was a faulty shower pump. It melted and lit my bedroom on fire. Statistically, one in a thousand shower pumps are faulty and can cause electrical fires.

The problem with Black Swan events is that they also happen more frequently than they are supposed too. The reason is that our concept of risk is flawed. We see risk as observable, which can be easily avoided if we are careful. In reality, as former U.S. Secretary of Defense Donald Rumsfeld described, there are unknown-unknowns – things that we don’t know that we don’t know.

I didn’t know there was even a shower pump in the house.

Stock markets are a bit like this. Sometimes you know that they will eventually crash or correct due to Irrational Exuberance. However, quite often they just crash anyway. You might be able to rationalise why it happened afterwards, but it’s virtually impossible to protect yourself against it because it was completely unpredicted.

What I learnt is that when you invest over the long term, expect the unexpected. Don’t ever take what you invest in for granted. Look at it as a case of que sera, sera. That’s after all, what happens in life.

I know that when I go to bed tonight, I might not wake up the next day. But you know what? I’m okay with that.