What is a black swan?

Alibaba CEO Daniel Zhang called the coronavirus outbreak a “black swan event,” warning of the damage it could cause to the global economy.

So what exactly is a “black swan?”

“First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility,” author Nassim Taleb wrote in his book "The Black Swan."

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“Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.”

In the case of the coronavirus, no one predicted a disease would cause more than 60 million people in China to be locked down during the Lunar New Year, the country’s busiest travel period, paralyzing the Chinese economy.

The outbreak, and its resulting fallout, caused Wall Street economists to slash their growth estimates for China, the second-largest economy on the planet. J.P. Morgan said Chinese economic growth would temporarily slow from its current growth rate of 6 percent to just 1 percent. In its adverse scenario, which includes the contagion not peaking until April, J.P. Morgan warned the Chinese economy could contract by 3.9 percentage points.

Looking back at the outbreak, it shouldn't have been completely unexpected -- a judgment frequently made in the aftermath of black swan events. China has grappled with similar situations in the past. The 2003 severe acute respiratory syndrome (SARS) epidemic, which infected more than 8,000 people and killed 774, according to the World Health Organization, shaved about 0.5 to 1 percentage point off of China’s GDP growth.

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Because black swans are outliers, they are of rare occurrence. Some of the most recent black swans include the 2008 global financial crisis, the September 11, 2001, attack on the World Trade Center and the 1987 stock market crash.