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Black Swan Theory

Aug 04, 2023


Author: Jeff Blundell

A fireside story about seeing and believing

On one exceptionally hot summer afternoon in Rome, a young man named Quintus walked into his classroom.

It wasn’t really a room… just a sunshade made of wood with a thatched roof. It was open on the sides to allow for a breeze but covered on the top to protect the teacher and his four students from the unforgiving mid-day sun.

Quintus had just returned from a trip to the north and his classmates and his teacher were all eager to hear what he had seen.

He told them of the foods he had eaten, the music he had heard, and even of the lovely women he had met: “Their hair is lighter and their skin paler than the girls here in Rome,” he told them. He had his audience nodding and listening intently, for although they had never seen these things, they had heard of them before from other travellers.

They could all imagine the tastes of the food and sounds of the music for they had of course eaten and heard music before. And the women, well, they allowed their imaginations to build on what they knew and created colourful fantasies of their own.

But then Quintus told them about a walk in the countryside he took. He had followed a seldom-used trail that led from the village he was staying in to a small lake in the hills. This story was greeted with nodding heads, just as the others were. But then he told them what he saw there.

“A black swan,” he said.

There was a moment of silence, followed by laughter.

“Oh, my friend Quintus, you almost had us there,” one of his classmates responded. “Your stories are wonderful but that is a little too wild. We all know that swans are white.” And it’s true. They all knew swans very well. They had seen dozens of them at the nearby swimming pond their entire lives. And every one they ever saw was white.

“Perhaps it was a turkey with very dark feathers?” one of his friends offered. “Or a very large duck? Or goose?” suggested another.

“No, no,” Quintus insisted. “It was in every way imaginable, a swan: The way it swam, the food it ate, even the other birds it associated with. This was very definitely a swan, but it was black.”

Still, his classmates refused to believe him. “What you are saying is impossible. That can’t exist,” they told him.

Their teacher, Numerius, had stayed silent through the discussion. He listened intently as his students debated the possibility that this bird could have been a swan. But when the young men in his class had clearly reached an impasse, he raised his hand for them to be silent.

“I am much older than any of you,” he began. “I have travelled far and wide. I have seen many things that you have not.”

The old man paused for effect, then continued, “But I have never in all my life seen a black swan.”

Quintus was crestfallen, while his classmates were elated. But after another brief pause, Numerius continued.

“But despite all I have seen, I believe there is much more that I have not seen. Indeed, if your only argument that a black swan cannot exist is that you have never seen one before, you really don’t have an argument at all.”

“You have mistaken the absence of evidence, for the evidence of absence.”



That conversation, or one similar to it, took place almost 2,000 years ago. But the lessons from it continue to resonate today. It’s known as the “Black Swan Theory.” In more blunt terms, it is simply phrased as, “Stuff happens.” It is an acceptance that randomness and extremes do exist in the world, even ones that are counter-intuitive.

People are remarkably bad at believing something they’ve never seen before. We can imagine derivatives or variations, but something that is starkly unique is hard for us to grasp. If something is black when it’s supposed to be white, our instinct is to claim that it is impossible.

It is a huge issue in the investment world. Investors looking at opportunities instinctively try to fit them into a box. They try to compare each company they are considering to others that they already know. If it is similar to one that succeeded, it gets a thumbs up. If it is similar to one that failed, they walk away. But occasionally they are confronted with something that is truly unique… a black swan.



So, what does the Black Swan Theory have to do with Scimar? Well, Scimar is a thing that most people have never seen before. It is a “for-profit” company that is 100% focused on a public good. People will often look at Scimar’s Wellness Transformation Network, or its partnerships with Indigenous communities, and assume it’s a charity like Diabetes Canada.

Other people look at the financial profits that could be realized by bringing a game-changing treatment for type 2 diabetes to market and picture Scimar as a high-risk / high-ceiling biotech start-up hoping to be bought up by Big Pharma.

And still, other people look at the last name of the founders, the CEO, and the chair of the board, and think it’s a family company operating from the kitchen table.

But what Scimar is, if you are willing to look at it with clear eyes, is a black swan. It’s a surprising thing that doesn’t fit neatly into any existing box. But once you accept that it exists, you realize how amazing it really is.

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