The world constantly changes and pays no mind to our wants and needs. Because of this, Sovereign Individuals must focus on establishing Black Swan resilience. The ability to prepare, adapt, and survive changing times, come what may. To that end, although they frequently embrace the digital future, Sovereign Individuals don’t neglect the importance of hedging for an unexpected event that creates an analog reality.
A Black Swan event is a seemingly unlikely (low probability) event that seems predictable in hindsight. Think of a black swan as an outlier and the exception to the general rule. The recent severe cold weather and subsequent power outage in Texas and the pandemic lockdowns and subsequent supply chain disruptions are examples.
There was a low probability that Texas would experience such extreme cold weather. And it was unlikely that a viral outbreak would fundamentally disrupt global supply chains. But these events happened, and they created massive challenges to the daily lives of people exposed to these events.
You should expect black swan events. Because what can happen, will happen eventually. And Sovereign Individuals must think through and prepare for these scenarios in order to survive and thrive.
Digital Age Black Swan Resilience
What would you do if the modern world stopped working? If power went out, you couldn’t use Amazon, or food was no longer was available at the grocery store?
A Sovereign Individual emphasizes personal responsibility to prepare for this unlikely reality. Two immediate methods of preparation come to mind. 1. Staying fed and 2. keeping the power on which includes lights, heat, and internet access. This means basic disaster prep via food and vegetable seed stockpiles and embracing new battery storage and electrical generator technologies.
We learned from the pandemic that its not a great strategy to react in real time to a disaster. Supply chains are designed at global, just in time scales. Meaning that any systemic shock will create shortages of the goods that you might otherwise have easy access to. The extra chest-freezer, the vegetable seed stock, the generators at Home Depot, etc.
You don’t want to be making 1st order decisions during panic because that’s what the rest of the herd is doing. To be black swan resilient, you want hedge at first order levels so that you can be take decisive action for 2nd and 3rd order needs when the time arises. A proper hedge is a preparation to be one step ahead of the masses when circumstances suddenly change.
Analog Resilience
As mentioned, the simple steps you can take mean acquiring shelf stable food stock piles. And having an ability to grow a small vegetable garden. That simply means buying the seed stock, tools, and prepping the space to start a garden as needed. This is a great practice to provide fresh and healthy food for yourself even without a black swan event.
The Texas power outage showed an importance of analog resilience. Ie: despite the move to adopt digital infrastructure at a wide scale, you still need to carry fiat cash. When the power goes out, digital payments don’t work. As is evident from the chart below. You want to ensure that you have enough cash to ride out any type of moderately prolonged and system wide power outage. This is especially important for Millennials and Gen Z which don’t typically carry any cash anymore.
The Texas power outage also validates Fred Wilson’s point about the need to have a backup power source.
“A Sonnen Eco battery can store up to 20kWh. A Tesla Powerwall stores 13.5kWh. A fully electrified home, heated and cooled with energy-efficient heat pumps, would consume on average 20kWh per day to heat and cool the home in a moderate climate. Rooftop solar could produce that or more on most days on sunny days. A home that is fully electrified and has rooftop solar could operate off grid many days. Adding a battery means that the home could also operate off grid at night.”
Resilience by Opting Out via Flag Theory
In the event of a low probability event you have another choice. Whether you stay in place or opt to leave and go to your prepared back up location. Black Swan resilience comes from practicing the techniques of the Perpetual Traveler and Flag Theory.
When you practice Flag Theory you:
- Have at least one additional passport in another country
- Own a place to live in a tax haven separate from your primary residence
- Store assets in a country separate from where this primary home
- Find a country with low corporate tax to domicile your business
- Have a home in a country for leisure with low consumption tax.
Flag Theory is an extreme measure for most but the general point still holds true. In the case of the Texas power outage, you could have preplanned destinations that you travel to for extended stays during natural disasters.
The Black Swan is a Slow Decay
While it makes sense to have hedges against unlikely events, its most important to prepare for the slow demise of trusted institutions. It’s likely that these black swan events will happen over time. But it’s also likely that over time, our institutions will become less reliable in what Jay Graber describes as a mediocalypse. The progressive decay of infrastructure.
This seems like the likely route we take in the Sovereign Age. Similar in concept to the Roman Empire’s slow collapse. Many modern institutions and our previous way of life will decay as we transition from centralized governments to the decentralized Sovereign Age. Those that understand this will prepare for it. And those that do not, will experience a slow and prolonged suffering as a result.
Maybe Ayn Rand was right to some extent. Collapse will be slow and infuriating to the people who see it coming. The “we had a million opportunities to stop this” type of people. The people that had no clue that change was coming will become increasingly irate, confused, and punitive of the people their outgroups blame for the downfall they cannot explain or understand.
The moral of this story is simple. Its better to be safe than sorry, and its better to be prepared than unprepared. Take some time and a little investment to prepare for the low probability but high impact events that could happen. Having a little black swan resilience is never a bad idea.
I’m building a digital age worldview. Every Monday, I write and curate a publication called The Sovereign Individual. A weekly newsletter that includes news roundups and analysis to help digital age workers adapt and thrive in our changing society. Topics intersect at geopolitics, fintech, crypto, individual responsibility, and personal freedom. Don’t get left behind, subscribe below.
Great point about a slow decay. I think it is happening already. Worth incorporating in investing and overall life planning. Thanks for this post.