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The Black Swan: Second Edition: The Impact of the Highly Improbable (Incerto Book 2) Kindle Edition
A black swan is a highly improbable event with three principal characteristics: It is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was. The astonishing success of Google was a black swan; so was 9/11. For Nassim Nicholas Taleb, black swans underlie almost everything about our world, from the rise of religions to events in our own personal lives.
Why do we not acknowledge the phenomenon of black swans until after they occur? Part of the answer, according to Taleb, is that humans are hardwired to learn specifics when they should be focused on generalities. We concentrate on things we already know and time and time again fail to take into consideration what we don’t know. We are, therefore, unable to truly estimate opportunities, too vulnerable to the impulse to simplify, narrate, and categorize, and not open enough to rewarding those who can imagine the “impossible.”
For years, Taleb has studied how we fool ourselves into thinking we know more than we actually do. We restrict our thinking to the irrelevant and inconsequential, while large events continue to surprise us and shape our world. In this revelatory book, Taleb will change the way you look at the world, and this second edition features a new philosophical and empirical essay, “On Robustness and Fragility,” which offers tools to navigate and exploit a Black Swan world.
Taleb is a vastly entertaining writer, with wit, irreverence, and unusual stories to tell. He has a polymathic command of subjects ranging from cognitive science to business to probability theory. Elegant, startling, and universal in its applications, The Black Swan is a landmark book—itself a black swan.
- LanguageEnglish
- PublisherRandom House
- Publication dateMay 4, 2010
- File size11450 KB
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- The payoff of a human venture is, in general, inversely proportional to what it is expected to be.Highlighted by 5,779 Kindle readers
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A bold work from the author of The Black Swan that challenges many of our long-held beliefs about risk and reward, politics and religion, finance and personal responsibility. | An investigation about luck–or more precisely, about how we perceive and deal with luck in life and business. | Through deep investigation and insight, Antifragile reveals how to thrive in an uncertain world. | With a rare combination of pointed wit and potent wisdom, Taleb plows through human illusions, contrasting the classical values of courage, elegance, and erudition against the modern diseases of nerdiness, philistinism, and phoniness. | The Incerto Series is an investigation of opacity, luck, uncertainty, probability, human error, risk, and decision making when we don’t understand the world. Makes the perfect gift for the perpetually curious. |
Editorial Reviews
Review
“The most prophetic voice of all.”—GQ
Praise for The Black Swan
“[A book] that altered modern thinking.”—The Times (London)
“A masterpiece.”—Chris Anderson, editor in chief of Wired, author of The Long Tail
“Idiosyncratically brilliant.”—Niall Ferguson, Los Angeles Times
“The Black Swan changed my view of how the world works.”—Daniel Kahneman, Nobel laureate
“[Taleb writes] in a style that owes as much to Stephen Colbert as it does to Michel de Montaigne. . . . We eagerly romp with him through the follies of confirmation bias [and] narrative fallacy.”—The Wall Street Journal
“Hugely enjoyable—compelling . . . easy to dip into.”—Financial Times
“Engaging . . . The Black Swan has appealing cheek and admirable ambition.”—The New York Times Book Review
About the Author
Excerpt. © Reprinted by permission. All rights reserved.
ON THE PLUMAGE OF BIRDS
Before the discovery of Australia, people in the old world were convinced that all swans were white, an unassailable belief as it seemed completely confirmed by empirical evidence. The sighting of the first black swan might have been an interesting surprise for a few ornithologists (and others extremely concerned with the coloring of birds), but that is not where the significance of the story lies. It illustrates a severe limitation to our learning from observations or experience and the fragility of our knowledge. One single observation can invalidate a general statement derived from millennia of confirmatory sightings of millions of white swans. All you need is one single (and, I am told, quite ugly) black bird.*
I push one step beyond this philosophical-logical question into an empirical reality, and one that has obsessed me since childhood. What we call here a Black Swan (and capitalize it) is an event with the following three attributes.
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. 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.
I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not prospective) predictability.* A small number of Black Swans explain almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives. Ever since we left the Pleistocene, some ten millennia ago, the effect of these Black Swans has been increasing. It started accelerating during the industrial revolution, as the world started getting more complicated, while ordinary events, the ones we study and discuss and try to predict from reading the newspapers, have become increasingly inconsequential.
Just imagine how little your understanding of the world on the eve of the events of 1914 would have helped you guess what was to happen next. (Don’t cheat by using the explanations drilled into your cranium by your dull high school teacher). How about the rise of Hitler and the subsequent war? How about the precipitous demise of the Soviet bloc? How about the rise of Islamic fundamentalism? How about the spread of the Internet? How about the market crash of 1987 (and the more unexpected recovery)? Fads, epidemics, fashion, ideas, the emergence of art genres and schools. All follow these Black Swan dynamics. Literally, just about everything of significance around you might qualify.
This combination of low predictability and large impact makes the Black Swan a great puzzle; but that is not yet the core concern of this book. Add to this phenomenon the fact that we tend to act as if it does not exist! I don’t mean just you, your cousin Joey, and me, but almost all “social scientists” who, for over a century, have operated under the false belief that their tools could measure uncertainty. For the applications of the sciences of uncertainty to real-world problems has had ridiculous effects; I have been privileged to see it in finance and economics. Go ask your portfolio manager for his definition of “risk,” and odds are that he will supply you with a measure that excludes the possibility of the Black Swan–hence one that has no better predictive value for assessing the total risks than astrology (we will see how they dress up the intellectual fraud with mathematics). This problem is endemic in social matters.
The central idea of this book concerns our blindness with respect to randomness, particularly the large deviations: Why do we, scientists or nonscientists, hotshots or regular Joes, tend to see the pennies instead of the dollars? Why do we keep focusing on the minutiae, not the possible significant large events, in spite of the obvious evidence of their huge influence? And, if you follow my argument, why does reading the newspaper actually decrease your knowledge of the world?
It is easy to see that life is the cumulative effect of a handful of significant shocks. It is not so hard to identify the role of Black Swans, from your armchair (or bar stool). Go through the following exercise. Look into your own existence. Count the significant events, the technological changes, and the inventions that have taken place in our environment since you were born and compare them to what was expected before their advent. How many of them came on a schedule? Look into your own personal life, to your choice of profession, say, or meeting your mate, your exile from your country of origin, the betrayals you faced, your sudden enrichment or impoverishment. How often did these things occur according to plan?
* The spread of camera cell phones has afforded me a large collection of pictures of black swans sent by traveling readers. Last Christmas I also got a case of Black Swan Wine (not my favorite), a videotape (I don’t watch videos), and two books. I prefer the pictures.
* The highly expected not happening is also a Black Swan. Note that, by symmetry the occurrence of a highly improbable event is the equivalent of the nonoccurrence of a highly probable one.
What You Do Not Know
Black Swan logic makes what you don’t know far more relevant than what you do know. Consider that many Black Swans can be caused and exacerbated by their being unexpected.
Think of the terrorist attack of September 11, 2001: had the risk been reasonably conceivable on September 10, it would not have happened. If such a possibility were deemed worthy of attention, fighter planes would have circled the sky above the twin towers, airplanes would have had locked bulletproof doors, and the attack would not have taken place, period. Something else might have taken place. What? I don’t know. Isn’t it strange to see an event happening precisely because it was not supposed to happen? What kind of defense do we have against that? Whatever you come to know (that New York is an easy terrorist target, for instance) may become inconsequential if your enemy knows that you know it. It may be odd to realize that, in such a strategic game, what you know can be truly inconsequential.
This extends to all businesses. Think about the “secret recipe” to making a killing in the restaurant business. If it were known and obvious then someone next door would have already come up with the idea and it would have become generic. The next killing in the restaurant industry needs to be an idea that is not easily conceived of by the current population of restaurateurs. It has to be at some distance from expectations. The more unexpected the success of such a venture, the smaller the number of competitors, and the more successful the entrepreneur who implements the idea. The same applies to the shoe and the book businesses–or any kind of entrepreneurship. The same applies to scientific theories–nobody has interest in listening to trivialities. The payoff of a human venture is, in general, inversely proportional to what it is expected to be.
Consider the Pacific tsunami of December 2004. Had it been expected, it would not have caused the damage it did– the areas affected would have been less populated, an early warning system would have been put in place. What you know cannot really hurt you.
Experts and “Empty Suits”
The inability to predict outliers implies the inability to predict the course of history, given the share of these events in the dynamics of events.
But we act as though we are able to predict historical events, or, even wore, as if we are able to change the course of history. We produce thirty year projections of social security deficits and oil prices without realizing that we cannot even predict these for next summer–our cumulative prediction errors for political and economic events are so monstrous that every time I look at the empirical record I have to pinch myself to verify that I am not dreaming. What is surprising is not the magnitude of our forecast errors, but our absence of awareness of it. This is all the more worrisome when we engage in deadly conflicts: wars are fundamentally unpredictable (and we do not know it). Owing to this misunderstanding of the casual chains between policy and actions, we can easily trigger Black Swans thanks to aggressive ignorance–like a child playing with a chemistry kit.
Our inability to predict in environments subjected to the Black Swan, coupled with a general lack of the awareness of this state of affairs, means that certain professionals, while believing they are experts, are in fact not. based on their empirical record, they do not know more about their subject matter than the general population, but they are much better at narrating–or, worse, at smoking you with complicated mathematical models. They are also more likely to wear a tie.
Black Swans being unpredictable, we need to adjust to their existence (rather than naïvely try to predict them). There are so many things we can do if we focus on anti knowledge, or what we do not know. Among many other benefits, you can set yourself up to collect serendipitous Black Swans by maximizing your exposure to them.
Learning to Learn
Another related human impediment comes from excessive focus on what we do know: we tend to learn the precise, not the general.
What did people learn from the 9/11 episode? Did they learn that some events, owing to their dynamics, stand largely outside the realm of the predictable? No. Did they learn the built-in defect of conventional wisdom? No. What did they figure out? They learned precise rules for avoiding Islamic prototerrorists and tall buildings. Many keep reminding me that it is important for us to be practical and take tangible steps rather than to “theorize” about knowledge. The story of the Maginot Line shows how we are conditioned to be specific. The French, after the Great War, built a wall along the previous German invasion route to prevent reinvasion– Hitler just (almost) effortlessly went around it. The French had been excellent students of history; they just learned with too much precision. They were too practical and exceedingly focused for their own safety.
We do not spontaneously learn that we don’t learn that we don’t learn. The problem lies in the structure of our minds: we don’t learn rules, just facts, and only facts. Metarules (such as the rule that we have a tendency to not learn rules) we don’t seem to be good at getting. We scorn the abstract; we scorn it with passion.
Why? It is necessary here, as it is my agenda in the rest of this book, both to stand conventional wisdom on its head and to show how inapplicable it is to our modern, complex, and increasingly recursive environment.*
But there is a deeper question: What are our minds made for? It looks as if we have the wrong user’ s manual. Our minds do not seem made to think and introspect; if they were, things would be easier for us today, but then we would not be here today and I would not have been here to talk about it–my counterfactual, introspective, and hard-thinking ancestor would have been eaten by a tiger while his nonthinking, but faster-reacting cousin would have run for cover. Consider that thinking is time-consuming and generally a great waste of energy, that our predecessors spent more than a hundred million years as nonthinking mammals and that in the blip in our history during which we have used our brain we have used it on subjects too peripheral to matter. Evidence shows that we do much less thinking than we believe we do—except, of course, when we think about it.
* Recursive here means that the world in which we live has an increasing number of feedback loops, causing events to be the cause of more events (say, people buy a book because other people bought it), thus generating snowballs and arbitrary and unpredictable planet-wide winner-take-all effects. We live in an environment where information flows too rapidly, accelerating such epidemics. Likewise, events can happen because they are not supposed to happen. (Our intuitions are made for an environment with simpler causes and effects and slowly moving information.) This type of randomness did not prevail during the Pleistocene.
A NEW KIND OF INGRATITUDE
It is quite saddening to think of those people who have been mistreated by history. There were the poètes maudits, like Edgar Allan Poe or Arthur Rimbaud, scorned by society and later worshipped and force-fed to schoolchildren. (There are even schools named after high school dropouts). Alas, this recognition came a little too late for the poet to get a serotonin kick out of it, or to prop up his romantic life on earth. But there are even more mistreated heroes–the very sad category of those who we do not know were heroes, who saved our lives, who helped us avoid disasters. They left no traces and did not even know that they were making a contribution. We remember the martyrs who died for a cause that we knew about, never those no less effective in their contribution but whose cause we were never aware–precisely because they were successful. Our ingratitude towards the poètes maudits fades completely in front of this other type of thanklessness. This is a far more vicious kind of ingratitude: the feeling of uselessness on the part of the silent hero. I will illustrate with the following thought experiment.
Assume that a legislator with courage, influence, intellect, vision, and perseverance manages to enact a law that goes into universal effect and employment on September 10, 2001; it imposes the continuously locked bulletproof doors in every cockpit (at high costs to the struggling airlines)– just in case terrorists decide to use planes to attack the World Trade
Center in New York City. I know this is lunacy, but it is just a thought experiment (I am aware that there may be no such thing as a legislator with intellect, courage, vision, and perseverance; this is the point of the thought experiment). The legislation is not a popular measure among the airline personnel, as it complicates their lives. But it would certainly have prevented 9/11.
The person who imposed locks on cockpit doors gets no statues in public squares, not so much as a quick mention of his contribution in his obituary. “Joe Smith, who helped avoid the disaster of 9/11, died of complications of liver disease.” Seeing how superfluous his measure was, and how it squandered resources, the public, with great help from airline pilots, might well boot him out of office. Vox clamantis in deserto. He will retire depressed, with a great sense of failure. He will die with the impression of having done nothing useful. I wish I could go attend his funeral, but, reader, I can’t find him. And yet, recognition can be quite a pump. Believe me, even those who genuinely claim that they do not believe in recognition, and that they separate labor from the fruits of labor, actually get a serotonin kick from it. See how the silent hero is rewarded: even his own hormonal system will conspire to offer no reward.
Now consider again the events of 9/11. In their aftermath, who got the recognition? Those you saw in the media, on television performing heroic acts, and those whom you saw trying to give you the impression that they were performing heroic acts. The latter category includes someone like the New York Stock Exchange Chairman Richard Grasso, who “saved the stock exchange” and received a huge bonus for his contribution (the equivalent of several thousand average salaries). All he had to do was be there to ring the opening bell on television–the television that, we will see, is the carrier of unfairness and a major cause of Black Swan blindness.
Who gets rewarded, the central banker who avoids a recession or the one who comes to “correct” his predecessors’ faults and happens to be there during some economic recovery? Who is more valuable, the politician who avoids a war or the one who starts a new one (and is lucky enough to win)?
It is the same logic reversal we saw earlier with the value of what we don’t know; everybody knows that you need more prevention than treatment, but few reward acts of prevention. We glorify those who left their names in history books at the expense of those contributors about whom our books are silent. We humans are not just a superficial race (this may be curable to some extent); we are a very unfair one.
LIFE IS VERY UNUSUAL
This is a book about uncertainty; to this author, the rare event equals uncertainty. This may seem like a strong statement– that we need to principally study the rare and extreme events in order to figure out common ones–but I will make myself clear as follows. There are two possible ways to approach phenomena. The first is to rule out the extraordinary and focus on the “normal.” The examiner leaves aside “outliers” and
studies ordinary cases. The second approach is to consider that in order to understand a phenomenon, one needs to first consider the extremes–particularly if, like the Black Swan, they carry an extraordinary cumulative effect.
I don’t particularly care about the usual. If you want to get an idea of a friend’s temperament, ethics, and personal elegance, you need to look at him under the tests of severe circumstances, not under the regular rosy glow of daily life. Can you assess the danger a criminal poses by examining only what he does on an ordinary day? Can we understand health without considering wild diseases and epidemics? Indeed the normal is often irrelevant.
Almost everything in social life is produced by rare but consequential shocks and jumps; all the while almost everything studied about social life focuses on the “normal,” particularly with “bell curve” methods of inference that tell you close to nothing. Why? Because the bell curve ignores large deviations, cannot handle them, yet makes us confident that we have tamed uncertainty. Its nickname in this book is GIF, Great Intellectual Fraud.
PLATO AND THE NERD
At the start of the Jewish revolt in the first century of our era, much of the Jews’ anger was caused by the Romans’ insistence on putting a statue of Caligula in their temple in Jerusalem in exchange for placing a statue of the Jewish god Yahweh in Roman temples. The Romans did not realize that what the Jews (and the subsequent Levantine monotheists) meant by god was abstract, all embracing, and had nothing to do with the anthropomorphic, too human representation that Romans had in mind when they said deus. Critically, the Jewish god did not lend himself to symbolic representation. Likewise, what many people commoditize and label as “unknown,” “improbable,” or “uncertain” is not the same thing to me; it is not a concrete and precise category of knowledge, a nerdified field, but its opposite; it is the lack (and limitations) of knowledge. It is the exact contrary of knowledge; one should learn to avoid using terms made for knowledge to describe its opposite.
What I call Platonicity, after the ideas (and personality) of the philosopher Plato, is our tendency to focus on pure and well-defined “forms,” whether objects, like triangles, or social notions, like utopias (societies built according to some blueprint of what “makes sense”), even nationalities. When these ideas and crisp constructs inhabit our minds, we privilege them over other less elegant objects, those with messier and less tractable structures (an idea that I will elaborate progressively throughout this book).
Platonicity is what makes us think that we understand more than we actually do. But this does not happen everywhere. I am not saying that Platonic forms don’t exist. Models and constructions are not always
wrong; they are wrong only in some specific places. The difficulty is that a) you do not know where beforehand (only after the fact), and b) the mistakes can lead to severe consequences. These models are like potentially helpful medicines that carry random but very severe side effects.
The Platonic fold is the explosive boundary where the Platonic mindset enters in contact with the messy reality, where the gap between what you know and what you think you know becomes dangerously wide. It is here that the Black Swan is produced.
TOO DULL TO WRITE ABOUT
It was said that the artistic filmmaker Luchino Visconti made sure that when actors pointed at a closed box meant to contain jewels, there were real jewels inside. It could be an effective way to make actors live their part. I think that Visconti’s gesture may also come out of a plain sense of aesthetics and a desire for authenticity–somehow it may not feel right to fool the viewer.
This is an essay expressing a primary idea; it is neither the recycling nor repackaging of other people’s thoughts. An essay is an impulsive meditation, not science reporting. I apologize if I skip a few obvious topics in this book out of the conviction that what is too dull for me to write about might be too dull for the reader to read. (Also, to avoid dullness may help to filter out the nonessential).
Talk is cheap. Someone who took too many philosophy classes in college (or perhaps not enough) might object that the sighting of a Black Swan does not invalidate the theory that all swans are white since such a black bird is not technically a swan since whiteness to him may be the essential property of a swan. Indeed those who read too much Wittgenstein (and writings about comments about Wittgenstein) may be under the impression that language problems are important. They may certainly be important to attain prominence in philosophy departments, but they are something we, practitioners and decision makers in the real world, leave for the weekend. As I explain in the chapter called “The Uncertainty of the Phony,” for all of their intellectual appeal, these niceties have no serious implications Monday to Friday as opposed to more substantial (but neglected) matters. People in the classroom, not having faced many true situations of decision making under uncertainty, do not realize what is important and what is not–even those who are scholars of uncertainty (or particularly those who are scholars of uncertainty). What I call the practice of uncertainty can be piracy, commodity speculation, professional gambling, working in some branches of the Mafia, or just plain serial entrepreneurship. Thus I rail against “sterile skepticism,” the kind we can do nothing about, and against the exceedingly theoretical language problems that have made much of modern philosophy largely irrelevant to what is derisively called the “general public.” (In the past, for better or worse, those rare philosophers and thinkers who were not self-standing depended on a patron’s support. Today academics in abstract disciplines depend on one another’s opinion, without external checks, with the severe occasional pathological result of turning their pursuits into insular prowess-showing contests. Whatever the shortcomings of the old system, at least it enforced some standard of relevance.)
The philosopher Edna Ullmann-Margalit detected an inconsistency in this book and asked me to justify the use of the precise metaphor of a Black Swan to describe the unknown, the abstract, and imprecise uncertain– white ravens, pink elephants, or evaporating denizens of a remote planet orbiting Tau Ceti. Indeed, she caught me red handed. There is a contradiction; this book is a story, and I prefer to use stories and vignettes to illustrate our gullibility about stories and our preference for the dangerous compression of narratives.
You need a story to displace a story. Metaphors and stories are far more potent (alas) than ideas; they are also easier to remember and more fun to read. If I have to go after what I call the narrative disciplines, my best tool is a narrative.
Ideas come and go, stories stay.
THE BOTTOM LINE
The beast in this book is not just the bell curve and the self-deceiving statistician,
nor the Platonified scholar who needs theories to fool himself with. It is the drive to “focus” on what makes sense to us. Living on our planet, today, requires a lot more imagination than we are made to have. We lack imagination and repress it in others.
Note that I am not relying in this book on the beastly method of collecting
selective “corroborating evidence.” For reasons I explain in Chapter
5, I call this overload of examples naïve empiricism–successions of
anecdotes selected to fit a story do not constitute evidence. Anyone looking
for confirmation will find enough of it to deceive himself–and no
doubt his peers.* The Black Swan idea is based on the structure of randomness
in empirical reality.
To summarize: in this (personal) essay, I stick my neck out and make a
claim, against many of our habits of thought, that our world is dominated
by the extreme, the unknown, and the very improbable (improbable
according our current knowledge)–and all the while we spend our time engaged
in small talk, focusing on the known, and the repeated. This implies the need to use the extreme event as a starting point and not treat it as an exception to be pushed under the rug. I also make the bolder (and more annoying) claim that in spite of our progress and the growth in knowledge, or perhaps because of such progress and growth, the future will be increasingly less predictable, while both human nature and social “science” seem to conspire to hide the idea from us.
* It is also naïve empiricism to provide, in support of some argument, series of eloquent confirmatory quotes by dead authorities. By searching, you can always find someone who made a well-sounding statement that confirms your point of view–and, on every topic, it is possible to find another dead thinker who said the exact opposite. Almost all of my non—Yogi Berra quotes are from people I disagree with.
Chapters Map
The sequence of this book follows a simple logic; it flows from what can
be labeled purely literary (in subject and treatment) to what can be
deemed entirely scientific (in subject, though not in treatment). Psychology
will be mostly present in Part One and in the early part of Part Two; business
and natural science will be dealt with mostly in the second half of Part
Two and in Part Three. Part One, “Umberto Eco’s Antilibrary,” is mostly
about how we perceive historical and current events and what distortions
are present in such perception. Part Two, “We Just Can’ t Predict,” is
about our errors in dealing with the future and the unadvertised limitations
of some “sciences”–and what to do about these limitations. Part Three, “Those Gray Swans of Extremistan,” goes deeper into the topic of extreme events, explains how the bell curve (that great intellectual fraud) is generated, and reviews the ideas in the natural and social sciences loosely lumped under the label “complexity.” Part Four, “The End,” will be very short.
I derived an unexpected amount of enjoyment writing this book–in fact,
it just wrote itself–and I hope that the reader will experience the same. I
confess that I got hooked on this withdrawal into pure ideas after the constraints
of an active and transactional life. After this book is published, my
aim is to spend time away from the clutter of public activities in order to
think about my philosophical-scientific idea in total tranquillity.
Product details
- ASIN : B00139XTG4
- Publisher : Random House; 2nd edition (May 4, 2010)
- Publication date : May 4, 2010
- Language : English
- File size : 11450 KB
- Text-to-Speech : Enabled
- Screen Reader : Supported
- Enhanced typesetting : Enabled
- X-Ray : Not Enabled
- Word Wise : Enabled
- Sticky notes : On Kindle Scribe
- Print length : 672 pages
- Best Sellers Rank: #36,047 in Kindle Store (See Top 100 in Kindle Store)
- #1 in Statistics (Kindle Store)
- #16 in Statistics (Books)
- #17 in Business Management (Kindle Store)
- Customer Reviews:
About the author
Nassim Nicholas Taleb spent more than two decades as a risk taker before becoming a full-time essayist and scholar focusing on practical, philosophical, and mathematical problems with chance, luck, and probability. His focus in on how different systems handle disorder.
He now spends most of his time in the intense seclusion of his study, or as a flâneur meditating in cafés. In addition to his life as a trader he spent several years as an academic researcher (12 years as Distinguished Professor at New York University's School of Engineering, Dean's Professor at U. Mass Amherst).
He is the author of the Incerto (latin for uncertainty), accessible in any order (Skin in the Game, Antifragile, The Black Swan, The Bed of Procrustes, and Fooled by Randomness) plus a technical version, The Technical Incerto (Statistical Consequences of Fat Tails). Taleb has also published close to 55 academic and scholarly papers as a backup, technical footnotes to the Incerto in topics ranging from Statistical Physics and Quantitative Finance to Genetics and International affairs. The Incerto has more than 250 translations in 50 languages.
Taleb believes that prizes, honorary degrees, awards, and ceremonialism debase knowledge by turning it into a spectator sport.
""Imagine someone with the erudition of Pico de la Mirandola, the skepticism of Montaigne, solid mathematical training, a restless globetrotter, polyglot, enjoyer of fine wines, specialist of financial derivatives, irrepressible reader, and irascible to the point of readily slapping a disciple." La Tribune (Paris)
A giant of Mediterranean thought ... Now the hottest thinker in the world", London Times
"The most prophetic voice of all" GQ
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The book is divided into three parts. In the first part, Taleb introduces the concept of black swans and explains why they are so important. He argues that black swans are rare, high-impact events that are impossible to predict, yet have a profound effect on our world. He uses examples from history, economics, and other fields to illustrate the impact of black swans on our lives, and explains why we tend to underestimate their importance.
In the second part of the book, Taleb explores the concept of "antifragility" - the idea that certain systems actually benefit from stress and volatility. He argues that many of our current systems, from financial markets to political systems, are too fragile and vulnerable to black swan events. He offers strategies for building antifragile systems that can better withstand the shocks and disruptions of the modern world.
In the final part of the book, Taleb provides readers with practical advice for navigating a world full of black swans. He offers tips for managing risk, making decisions in uncertain situations, and living a more fulfilling and meaningful life.
One of the strengths of the book is Taleb's engaging and accessible writing style. He has a talent for explaining complex ideas in clear and understandable language, making the book easy to follow and enjoyable to read. He also has a keen sense of humor, and his writing is often peppered with amusing anecdotes and observations.
Another strength of the book is its relevance to our current world. The COVID-19 pandemic is a perfect example of a black swan event, and Taleb's insights and strategies for managing uncertainty and risk are more relevant now than ever before.
However, the book is not without its limitations. Taleb's writing style can be overly repetitive at times, and some readers may find certain sections of the book to be overly technical or dense. Additionally, while Taleb's insights and strategies are certainly valuable, they may not be applicable or accessible to everyone.
Overall, The Black Swan is a thought-provoking and engaging book that challenges readers to think differently about the role of randomness and uncertainty in our lives. The book offers valuable insights and strategies for navigating a rapidly changing world, and is sure to be of interest to anyone looking to gain a deeper understanding of the complex systems that shape our world.
I bought this book with Mandelbrot's Behavior of Markets, and for the same purpose. I wanted to get a strong intuitive understanding of the consequences of the difference between the actual behavior (power-law) and the assumed behavior (Gaussian) of markets. I wanted to know what the power-law relationships were, so that I could build my own statistical models. And I wanted an analysis of real data showing that, in fact, markets in question do follow power-law relationships. Were I to rate this book solely on its ability to deliver on these expectations, I would have to give it two stars; for this book has nothing to do with the actual empirical facts. It is, instead, a highly rhetorical appeal to us to use empirical facts in making decisions about the market while it nevertheless manages to completely dodge the task of presenting any real market data.
The inquiry here is much broader. Taleb is painstaking, almost encyclopedic, in his enumeration of ways in which our understanding of information breaks down. He draws on ideas from Greek, Roman, Arab, French, and English thinkers spanning more than two millennia. He also draws from the fine work of contemporaries Kahneman and Tversky which demonstrates how - when guessing about things - we all systematically underestimate our probability of being wrong by about a factor of twenty. He asserts that people with MBA's and those running large financial institutions do so a great deal more than, say, taxicab drivers and trash collectors.
He visits physical models which prove that we cannot know much about the physical world, such as the three-body problem. The point is that when even physical systems that can be described very exactly in mathematical equations cannot be predicted with arbitrary accuracy, what's the hope of predicting things for which we don't even know the variables or the math one might use in describing them? Here he misses some opportunities by needlessly scoffing at the uncertainty principle, and by failing to include comments by one towering physicist of the twentieth century, probably Von Karman*, about how no physical phenomenon seemed spookier - i.e. more difficult to describe accurately using mathematics - than turbulent flow in fluids. This is an unfortunate omission since Mandelbrot actually uses the term "turbulence" to describe the fluctuations in market prices of goods and securities.
One reaction to Taleb's arguments about how little we can ultimately know and on what shaky ground our beliefs lie is to stand, like a deer in the headlights, waiting for better information. Taleb argues that this is a mistake. It might be a bit better to proceed, looking for evidence that would prove one's course of action wrong, then modify one's model of reality and repeat the process. Doing this has the advantage that one can learn quite quickly about how any problem is bounded, and get some sense for the shape of the space inside. He quotes Warren Buffet: it is a great deal better to be approximately right than it is to be precisely wrong. And when choosing among things to believe, he advises us to rank beliefs not by their implausibility but by the harm they might cause. Although there are robust methods that draw on both judgments, this is generally very sound advice.
The book is highly irreverent. In financial circles it is seen as blasphemous, not just because it flies in the face of conventional wisdom, but because the author has so much fun demolishing revered ideas. Anyone who can take it seriously and follow its advice ought to be much better at evaluating information and making decisions. This quality gives you a much better chance of becoming rich and famous like Taleb - though as Taleb might explain, there is still a vanishingly small chance of this happening. The down side is that following Taleb's advice is likely to make one a great deal less promotable (especially in financial firms) because - according to Taleb - reaching high levels of a company depends almost exclusively on making others believe you know things about which you are actually completely clueless; and only sociopaths and very self-deluded people do this convincingly.
This suggests that one would read the book for the sole joy of knowing that you're the only person in the room who is sane enough to understand how little you actually know about pretty much anything.
Good Reading
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*Taleb makes great use of footnotes, and I recommend reading them all. Some of the best material in the book is in them. Van Karman is most famous, perhaps, for his role in adjudicating what to do after the collapse of the Tacoma Narrows bridge - arguably a Black Swan event. One day not long after this long suspension bridge was erected, it began twisting and oscillating in a 50 MPH wind. Some minutes later it collapsed. Von Karman was called in to evaluate what happened. He told the town council that the vortex shedding frequency of the bridge in a 50 MPH wind happened to closely match the natural vibrational frequency of the bridge. The bridge had gone into harmonic oscillation which created stresses that were much higher than those created by static loads for which it was designed, and this was why it failed. Although it is to avoid collapsing bridges via harmonic oscillation that British soldiers fell out of step when crossing bridges over several centuries prior, the town council had never heard of anything like this happening before. They declared "It was a very well-built bridge" and therefore "we shall build it exactly as it was before." To which Von Karman replied "If you build it exactly as it was before, it shall collapse exactly as it did before." To their credit, they had the bridge re-designed.
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I am blessed and live a generally good life. Yet, the profound wisdom that NNT imparts in this book is not just relevant to any random process (like the investment industry where I make my living), but the life itself that we all live, with its joys, heartbreaks and uncertainties. We live in an uncertain world. And Taleb not only makes us appreciate the black swans that we tend to overlook at our own peril, he shows us the phenomena that hide in plain sight (the silent evidence, the narrative fallacy, survivorship bias etc.). He goes into the hardly enviable mental software that runs us imperfectly in the modern world. Just being aware of our imperfections allows us a leg up in a world full of people having little clue about the wisdom in this book. We cease to be the haughty ignoramuses, and transform into the more humble ignoramuses, making do the best we can while working with our imperfect selves.
The Black Swan is not an easy read. It also requires (in my humble opinion) some mental readiness to absorb the lessons that come in rapid succession. I was not ready to read it 20 years ago, even 15 years ago. Stochasticity and black swans were was not the words my younger self was ready to understand in earnest. It was with the passage of time, and my increasing alarm at finding the world filled with unexpected outcomes that transformed me to be the student who was ready for the master.
The Black Swan is therefore one of the most important books I have ever read. It is transformational. Along with the rest of the books in the Incerto series, The Black Swan awakens us to a completely different world; which surprisingly, happens to be the very same world where we were living in before. Read it today, or read it when you are ready for it. It will change your life for the better, as it has changed mine.