One Thing We Always Get Wrong About the Future: The Story of Invisible Risks

Introduction: The Illusion of Prediction

Imagine planning the perfect summer vacation. You book flights, reserve hotels, and even check the 10-day weather forecast. Everything visible is predicted and controlled. But you cannot foresee a sudden volcanic eruption in Iceland grounding all European flights, an unexpected airline strike, or a personal emergency. The predictable parts of the plan were perfect, but the unpredictable parts determined the entire experience. This is a microcosm of how the world works.

This leads to the core paradox in Morgan Housel’s book “The Laws of Human Nature”. We are remarkably good at predicting that tomorrow will be mostly like today. We can reasonably forecast traffic, quarterly earnings, or voter turnout. The problem is history is driven not by the predictable 99% of events but by the 1% of events that arrive as complete surprises. This is the paradox of prediction. We instinctively crave certainty and want to believe the world is predictable and controllable. So people are more swayed by experts promising certainty than by accurate information.

Here, Nassim Taleb’s concept of the ‘Black Swan’ becomes a perfect metaphor for unpredictable, game-changing events. Black Swans are extremely rare but cause massive shocks when they occur and are rationalized in hindsight as if they were predictable. Real risk is born not from what we expect but from the subtle unknown unknowns.

This article will journey through recent history to uncover this very ‘invisible risk’. We will examine moments when the world was supremely confident about the future but was completely overturned by unforeseen events. Through financial crises, technological revolutions, and global shocks, we will understand this recurring pattern.

Chapter 1: Cracks in the “Unsinkable Ship”: When Optimism Blinds Us

This chapter shows how overwhelming optimism and focus on visible positive trends create collective blindness to fatal structural flaws.

1.1 The Invisible Illness of the Asian Tiger (1997)

Predictable Future: Picture South Korea in the mid-1990s. Known as the ‘Asian Tiger’ and the ‘Miracle on the Han River’, the economy was booming, chaebols expanded globally, and the country was on the verge of joining the ranks of advanced nations. The prevailing belief was that this rapid growth would last forever, with rosy forecasts even predicting it would soon surpass Japan. This was the predictable future everyone saw.

Invisible Risk: But the fatal flaw was invisible to most observers and was a secondary effect of the boom itself. To fuel rapid growth, Korean companies and banks borrowed huge sums overseas. Crucially, most of this debt was short-term foreign debt with maturities under one year. This created a massive ‘maturity mismatch’, funding long-term projects with short-term loans. It was a hidden time bomb that depended entirely on continued foreign investor confidence. The core problem was the chaebols’ management built on astronomical debt and the maturity mismatch between foreign currency assets and liabilities caused by comprehensive financial companies.

Collapse: When the Thai baht collapsed in 1997, panic spread across Asia. Suddenly, nervous foreign creditors refused to roll over short-term loans to Korea. The ‘invisible’ risk became reality overnight. The country’s foreign reserves were depleted, leading to national default and IMF bailout. The IMF chief at the time pinpointed the root cause as chaebols like Kia, Jinro, and Hanbo built on astronomical debt.

The 1997 crisis showed that the deadliest risks can hide behind growth. The confidence and optimism created by the ‘Asian Tiger’ success story encouraged reckless borrowing. Visible high GDP growth created a powerful narrative of success, which led to overconfidence that growth would never stop. This overconfidence encouraged companies to borrow more short-term foreign debt assuming future profits would easily repay it. This structural vulnerability, invisible as long as trust held, turned into a fatal weakness that collapsed the entire system once the external shock from Thailand punctured the optimism.

1.2 The Fire That Was ‘Controllable’ Burns the World (2008)

Predictable Future: The early 2000s were called the ‘Great Moderation’ for the apparent global economic stability. Housing prices only rose, and financial innovation was believed to have dispersed risk and made the world safer. The world’s top financial experts were confident. You can hear this confidence from then-Federal Reserve Chairman Ben Bernanke. In 2007, he asserted that problems in the subprime mortgage market would be “contained” and did not expect them to seriously spread to the broader economy or financial system.

Invisible Risk: The real risk was not the subprime mortgages themselves but the financial alchemy used to package them: Collateralized Debt Obligations (CDOs). Imagine thousands of risky mortgages bundled and magically sliced into ‘safe’ (AAA-rated) and ‘risky’ pieces. The theory was that diversification made them safe because not all mortgages would default simultaneously. But this was an illusion. Risk was not dispersed but cleverly hidden and concentrated in a system where no one knew who held the ticking bombs. It was like mixing one skilled player into a team of ten poor players to make the whole team seem competent. Moreover, institutions like AIG provided credit default swaps (CDS) insurance on these toxic assets, encouraging even riskier bets.

Collapse: When U.S. housing prices began to fall, the ‘impossible’ happened: defaults surged nationwide. The entire CDO structure collapsed. The supposedly ‘safe’ AAA securities became worthless overnight. Because these CDOs were sold worldwide, the fire that was expected to be ‘contained’ in the U.S. subprime market quickly engulfed the global financial system. Lehman Brothers collapsed, and the global financial system froze. Central banks worldwide had to cut interest rates to near zero to prevent total collapse.

The 2008 crisis showed that complexity and opacity are perfect breeding grounds for invisible risk. The financial system was not safer due to innovation but became so complex that no one could truly understand the real risk level. It was a fragile system built on collective delusion. The visible goal of creating ‘safe’ high-yield investments was realized through securitization, especially CDOs. This process created enormous complexity, leading to opacity. Credit rating agencies used models based on a predictable past without nationwide housing price declines to give these opaque products a false stamp of AAA rating certainty. The invisible risk was the ‘correlation risk’. Models assumed defaults were individual events, but nationwide housing price drops caused all loans to default simultaneously. This was the Black Swan.

Chapter 2: “It’s a Toy”: When the Future Arrives Without Warning

This chapter explores how experts judge new inventions by old world standards and completely miss paradigm-shifting ‘invisible’ innovations.

2.1 The Phone Without a Keyboard (2007)

Predictable Future: Recall the 2007 mobile phone market. It was dominated by Nokia’s solid hardware and BlackBerry’s iconic physical keyboard business devices. Experts agreed that a successful ‘smartphone’ required a physical keyboard for email, 3G for fast data, and a replaceable battery. This was the established formula for success.

Skeptical Reaction: When Steve Jobs unveiled the first iPhone, expert reviews were highly skeptical and almost dismissive. They focused on everything the iPhone lacked by old rules: “No keyboard?”, “No 3G?”, “Battery life is a joke,” “Too expensive,” “This will fail.” These reviews perfectly document how experts judge the future by the past. They saw the iPhone as a flawed product that couldn’t compete with BlackBerry for email or Nokia for call quality.

Invisible Risk (to competitors): But the real revolution was not the phone itself. It was the single icon on the screen Jobs casually announced: the App Store. This was the Black Swan. Critics saw the iPhone as a static hardware chunk. They missed that it was a gateway to a dynamic, ever-expanding software and service ecosystem. The risk to Nokia and BlackBerry was not a better phone but a completely new business model that made their business obsolete overnight. Business scholars admired Apple not for products like the iPhone or iPad but for creating a new mobile content market called the ‘App Store’. Apple didn’t just sell software; it created a platform where millions of developers could build businesses. Without innovating everything itself, Apple built a system where the world innovated for Apple.

Aftermath: The App Store’s growth was explosive and unpredictable. Starting with 500 apps in July 2008, it hit 10 million downloads in 3 days, 100 million in 2 months, and 1 billion in 9 months. This exponential growth birthed the ‘app economy’, and Nokia and BlackBerry, still focused on making better keyboards, faded into history.

True technological disruption comes not from improving existing features but from completely changing the game. The risk was hidden not in visible products but in the invisible business model. Competitors focused on linear battles over keyboard quality, call reception, and battery life. The iPhone was judged by these standards and found lacking by many experts. But the invisible factor was the App Store as a platform. It introduced nonlinear, exponential elements into the equation. The iPhone’s value was not fixed at purchase but grew daily as millions of third-party developers added new apps. This created powerful network effects: more users attracted more developers, who created more apps, attracting more users. Nokia and BlackBerry were not just competing with Apple but with an army of millions of developers. While they fought over features, Apple waged war over the ecosystem and won decisively.

Chapter 3: When Maps Become Useless: Shocks That Shake the Entire System

This chapter examines fundamental shocks that render existing worldviews useless.

3.1 The Empire Rotten from Within (Soviet Collapse)

Predictable Future: For 40 years, the world was defined by the Cold War. The Soviet Union was one of two global superpowers. Western intelligence, including the CIA, overwhelmingly focused on visible measures of Soviet power: nuclear weapons, military size, tanks, and geopolitical influence. The predictable future was continued stalemate or, at worst, military conflict.

Invisible Risk: The real threat to the Soviet Union was internal, not external. Decades of military spending under a central planned economy hollowed out the civilian economy. Basic necessities were chronically scarce, the system was rife with corruption, and beneath forced unity simmered deep ethnic conflicts. The empire was rotting from within.

Collapse: The collapse came shockingly fast. When Mikhail Gorbachev introduced Glasnost (openness) and Perestroika (reform), he didn’t fix the system but merely opened the lid on a boiling pot. State authority crumbled, republics declared independence, and the powerful Soviet Union quietly vanished in 1991 with a whimper, not a bang. The world’s top experts were stunned. Even a 1989 CIA report failed to grasp the speed and completeness of the collapse. They predicted instability but not disintegration. A 1998 report even wrongly predicted North Korea would collapse within five years, illustrating how difficult such forecasts are.

Focusing on visible, traditional power metrics like military strength can blind us to invisible, nontraditional weaknesses like economic and social cohesion. Systems may appear strong externally but suffer fatal internal diseases. The dominant Cold War metric was military power, so Western analysis and intelligence heavily focused on counting tanks, missiles, and spies. This distracted attention from less visible metrics like economic health or social morale. The slow, gradual failure of the Soviet consumer economy was less dramatic than new missiles and thus underestimated. The invisible risk was that the Soviet system’s legitimacy depended not on military might but on the promise of a better life—a promise that failed miserably. Gorbachev’s reforms catalyzed the visibility of hidden corruption, leading to rapid loss of trust and system collapse that military power could not prevent.

3.2 Pandemic and Broken Chains (COVID-19)

Predictable Future: The world knew pandemics were a risk. The World Health Organization (WHO) and governments had detailed pandemic preparedness plans. These plans were mainly based on decades of experience with influenza-like pathogens, focusing on disease surveillance, vaccine development, and healthcare capacity. The pandemic risk was not a Black Swan but a known and anticipated threat.

Invisible Risk: The Black Swan was not the virus itself but the collision of a new, highly contagious virus with a global economic system optimized perfectly for uninterrupted flow. The hidden vulnerability was the Just-in-Time (JIT) global supply chain. For decades, companies minimized inventory and sourced parts from the cheapest locations, relentlessly pursuing efficiency. This created a fragile, hyperconnected web. One factory shutdown in Wuhan could halt car production in Germany.

Collapse: When COVID-19 hit, influenza-based pandemic plans were inadequate. But the real shock was the immediate, total paralysis of the global economy. The JIT system, designed on perfect predictability, shattered. Suddenly masks, computer chips, and car parts vanished. The pursuit of efficiency eliminated all buffers and safety margins. This supply chain management strategy exposed huge weaknesses during the pandemic. The world learned that systems optimized for best-case scenarios are tragically defenseless in worst-case scenarios.

Extreme optimization for a predictable world is a formula for catastrophic failure in an unpredictable world. The visible and praised goal of modern business over the past 30 years was efficiency, epitomized by the JIT model. This model works perfectly in a stable, predictable world. But the invisible consequence of this optimization was the removal of buffers, redundancies, and slack within the system. It became a vulnerable system with no safety margin. Pandemic plans existed but were mostly medical and public health documents and failed to fully integrate the secondary risks of how a pandemic would interact with this fragile economic structure. The COVID-19 shock revealed this hidden vulnerability. The failure was not just a health crisis but a supply chain, logistics, and economic crisis caused by a system with zero resilience to absorb shocks.

Conclusion: Living with the Invisible

Let’s revisit the common thread in all these stories. In 2008, we took financial stability for granted and were blinded by the risk of complexity. In 2007, we took mobile industry rules for granted and missed the risk of a new business model. In 1991, we took military power as a metric and overlooked the risk of internal decay. In 2020, we took global trade efficiency for granted and missed the risk of its fragility. The greatest risks never make headlines. They lie in assumptions we don’t even realize we are making.

Lessons from the Past: The Gap Between Prediction and Reality

Our goal is not to better predict Black Swans—that’s impossible. The goal is to build systems and lives that can survive when Black Swans arrive. This means valuing adaptability, humility, and balancing short-term and long-term thinking. Nassim Taleb’s investment strategy is a metaphor for life: keep 90% of assets safe and invest 10% in high-risk, high-reward ‘Black Swans’. This means building a strong, resilient foundation while leaving room for unexpected opportunities and shocks.

The future will always be full of surprises. The most important question is not “What will happen next?” but “Can we survive when our predictions are wrong?” The answer lies in embracing humility, avoiding over-optimization, and always, always leaving room for error. This is the only enduring lesson in a world full of surprises, now and forever.