|The Black Swan: The Impact of the Highly Improbable
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Bestselling author Nassim Nicholas Taleb continues his exploration of randomness in his fascinating new book, The Black Swan, in which he examines the influence of highly improbable and unpredictable events that have massive impact. Engaging and enlightening, The Black Swan is a book that may change the way you think about the world, a book that Chris Anderson calls, "a delightful romp through history, economics, and the frailties of human nature." See Anderson's entire guest review below.
Guest Reviewer: Chris Anderson
Chris Anderson is editor-in-chief of Wired magazine and the author of The Long Tail: Why the Future of Business Is Selling Less of More.
Four hundred years ago, Francis Bacon warned that our minds are wired to deceive us. "Beware the fallacies into which undisciplined thinkers most easily fall--they are the real distorting prisms of human nature." Chief among them: "Assuming more order than exists in chaotic nature." Now consider the typical stock market report: "Today investors bid shares down out of concern over Iranian oil production." Sigh. We're still doing it.
Our brains are wired for narrative, not statistical uncertainty. And so we tell ourselves simple stories to explain complex thing we don't--and, most importantly, can't--know. The truth is that we have no idea why stock markets go up or down on any given day, and whatever reason we give is sure to be grossly simplified, if not flat out wrong.
Nassim Nicholas Taleb first made this argument in Fooled by Randomness, an engaging look at the history and reasons for our predilection for self-deception when it comes to statistics. Now, in The Black Swan: the Impact of the Highly Improbable, he focuses on that most dismal of sciences, predicting the future. Forecasting is not just at the heart of Wall Street, but it?s something each of us does every time we make an insurance payment or strap on a seat belt.
The problem, Nassim explains, is that we place too much weight on the odds that past events will repeat (diligently trying to follow the path of the "millionaire next door," when unrepeatable chance is a better explanation). Instead, the really important events are rare and unpredictable. He calls them Black Swans, which is a reference to a 17th century philosophical thought experiment. In Europe all anyone had ever seen were white swans; indeed, "all swans are white" had long been used as the standard example of a scientific truth. So what was the chance of seeing a black one? Impossible to calculate, or at least they were until 1697, when explorers found Cygnus atratus in Australia.
Nassim argues that most of the really big events in our world are rare and unpredictable, and thus trying to extract generalizable stories to explain them may be emotionally satisfying, but it's practically useless. September 11th is one such example, and stock market crashes are another. Or, as he puts it, "History does not crawl, it jumps." Our assumptions grow out of the bell-curve predictability of what he calls "Mediocristan," while our world is really shaped by the wild powerlaw swings of "Extremistan."
In full disclosure, I'm a long admirer of Taleb's work and a few of my comments on drafts found their way into the book. I, too, look at the world through the powerlaw lens, and I too find that it reveals how many of our assumptions are wrong. But Taleb takes this to a new level with a delightful romp through history, economics, and the frailties of human nature. --Chris Anderson
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. Now, in this revelatory book, Taleb explains everything we know about what we don’t know. He offers surprisingly simple tricks for dealing with black swans and benefiting from them.
Elegant, startling, and universal in its applications The Black Swan will change the way you look at the 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. The Black Swan is a landmark book–itself a black swan.
- One of the best, readable books
This book is the easiest book on the subject of probability I have ever read. It is a delightful read. Yet, much of what Nassim writes is so true, and he reminds us of our fallibility. Everyone should read this timely book as it has major impact on our views of the world and its economy. ...more info
- Prediction is Uncertain - Even Behavioral Consistency
Imagine you are a turkey being fed comfortably on one of those mass production turkey farms. You may well assume that the good food, good company, and pleasant surroundings will go on forever. If you are a quant-savvy turkey, you might even gobble together a mathematical model that predicts good times well into the future, beyond not just Thanksgiving, but past Christmas and New Years as well. Suddenly in November, unexpectedly, with life-changing consequences...things change. You just didn't see it coming. Pass the cranberry sauce.
Financial planners, economists and other more sophisticated turkeys don't see it coming either, argues author Nassim Nicholas Taleb. His book highlights the danger of the unexpected. The unexpected will happen even if we have a comfortable model predicting only minor changes. After such a "black swan" catches us by surprise, we use our flawed hindsight to decide how we could have predicted the disaster using a better model. We are kidding ourselves, insists Taleb. We need better strategies to live in a world where truly random, unpredictable events occur. He goes to some trouble in this book, and his previous Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets, to educate us.
The flawed basis of many formal models is "the great intellectual fraud" of the bell curve. We learn that highly constrained variables like height and weight cluster around an average and that extreme variations from the average are unlikely. We just aren't going to meet anybody that's half a foot or half a mile tall. These "Mediocristan" models are fine until we misapply their assumptions to unconstrained "Extremistan" phenomena like stock values, book sales and such. We are slow to see this problem. We persistently commit the "Ludic Fallacy," clinging to our formal models because they seem more real to us than the messy, real-world events they are meant to explain. Taleb illustrates this point with examples ranging from the events of 9/11 to the "off model" problems that cost casinos money. S. I. Hyakawa warned us in the early `70s that "the map is not the territory," but we haven't learned.
Taleb also warns us of the narrative fallacy based on our love of stories. We feel we understand something when we can tell a story about why it happened--even after the fact, with only part of the relevant information. When musicians achieve fame and dramatic financial success, we backtrack through their histories, explaining success by what we see along the path. We don't see the hidden cemetery of failed garage bands and starving artists who did all the same things to no avail. Because we believe this artificial story, we don't have to face the role of randomness in success or failure. Or consider its impact on our own plans.
Taleb offers some suggestions--though fewer than I'd hoped for. He advises us to be open to positive black swans and guard against negative ones. Lending money at interest, for example, opens us only to a high impact negative. This worst case is that the borrower will go bankrupt and we won't get our money back. But the very best outcome is that the loan will be simply repaid. If the borrower's entrepreneurial effort is wildly, off-the-scale successful, the lender doesn't get any more than this. An investor, on the other hand, suffers the same risk of loss, but participates fully in an "Extemistan" success. Readers are left to ponder the implications--and perhaps to hire Taleb as an investment consultant.
Although Taleb does not venture there, some of his ideas are useful in applied psychology. Personnel tests, for example, rely on the principle of "behavioral consistency," assuming that our past actions best predict our future actions. If someone is a poor performer, the safe bet is that this person will perform poorly in future employment. This may be fit a general model, but employers--and psychologists who advise them--might consider whether we commit Taleb's fallacies. Are we so comfortable with are general predictive models, with our stories about how people "are," that we close ourselves to possible change? Wouldn't it be better to seek the occasional "gray swan" of improvement and hire the flawed job applicant? The author has convinced me that this is worth considering. My time reading this book was well spent.
One final note: The author's condescending tone has been mentioned by other reviewers. It's there all right. Yes, he is condescending. Yes, he sneers at his fellow financial analysts. Yes, his citations veer into name dropping. And, yes, he finds ways to not-so-subtly complement himself as he praises Benoit Mandelbrot. But none of this matters. Taleb's message is valuable. I recommend you ignore his tone--or perhaps even be entertained by it. Stay on task and learn something about the nature of randomness and prediction....more info
- A book to think about. I will be reading it again
The black swan is a book about us in the eyes of one of us that was able to stand aside and show us our behavior. The book is must for all those thinkers that debated about the human behavior and how to predict our behavior.
I gave it 5-stars although I did not understand many parts of the book. But not-understanding means to me to read it again....more info
- Critical Reading of The Black Swan
The premise of Nassim Nicholas Taleb's book on probability, "The Black Swan", is simple: humans are poor predictors of significant future events, because of the fallacy of our narrative organizational nature, the tendency to ignore outlier markers, and because of the presence (absence?) of silent evidence.
Having never read a book on probability, Black Swan reads easily--it is full of narration, stories--itself a strange fact for a book suspicious and critical of the narrative role in information organization and categorization. Oddly, if you were to remove all the "narrative" illustration, the book would be one-tenth as long and (in my non-scientific opinion) a million times less interesting.
I suppose I could summarize the book, but that would actually be the very hubris that Taleb is so critical of. And so, instead, I'll look at some of the fallacies of a book that is aimed at the identification of fallacies.
First, there is the fallacy of interpretation. In explaining what Taleb calls the narrative fallacy, he uses the story of an Italian Toddler in the 1970s to show how narrative compels. Taleb shows how the Lebanese people--entrenched in a period of sever war--were more in tune and engaged, more compelled, with the plight of this Italian child, thereby proving Stalin's statement, "One death is a tragedy; a million is a statistic" (80). The problem of interpretation is that it is not uncommon for individuals in places of extreme stress to fixate on places of insignificance or personal irrelevance, as a mechanism for dealing with an immanent threat. Severely wounded soldiers have been known to fixate on unrelated events in the moments leading up to their death: worried more about the dirt on their buttons, or the mud on their gun, or a dropped photograph, than on the immanence of their own demise.
Does the Italian child offer supporting evidence for narrative fallacy? Only if there are no other postulant alternatives to why a war-torn people would care about a child some 1300 miles away. Taleb in no way accounts for these interpretive differences. Nor does he give any evidential research--of which he is so proud and insistent in other examples. Which proves one thing: the narrative fallacy isn't just limited to the way we organize information; it's how we use stories to prove it.
Secondly, there is the fallacy of non-equivalent comparisons. In his section explaining the problem of silent evidence, Taleb takes a journalist to task for stating that Russian mobsters were more tough and brutal because they were hardened by the Gulag. Taleb writes, "The sentence jumped out at me as...profoundly flawed..." (107) He goes on to compare prisoners in a Gulag to rats subjected to radiation.
The problem is that rats are mere physicality (body) and impulse--and radiation both weakens and kills both. Humans are both philological and cognitive--but, while radiation kills us physically, it may actually harden us cognitively (ignoring for a moment the period of time that cognition continues past exposure). Gulags were (are) harsh, corrupt and brutal prisons in Siberia--which could, but do not necessarily kill (else we would never have an ex-Gulag prisoner).
If we accept that Taleb's comparison is accurate, we should be able to prove that to increase the amount of radiation (for the rats) and the time in a Gulag (for a Russian) proportionally with the same effects. I am certain of this: increase radiation to rats indefinitely, and 100% of the rats die as a result of the radiation. Increase the amount of time that a Russian spent in a Gulag proportionally and indefinitely, and (yes) the Russian would die (because all humans die)--but not necessarily as a result of time in the Gulag. The example of the rats would be more accurately compared to the World War II German labor camps: radiation and nerve gas are anti-life agents. Harsh conditions and environments in Sibera aren't necessarily (in punctiliar events).
As such, Taleb dismisses that certain harsh environment can harden the will, resolve, and intent of some humans, while also breaking or killing others. Of course, he can draw this conclusion because of his carte blanche endorsement of an evolutionary framework that under girds his premises (something I'll address toward the end). And yet--history is repute with groups, tribes, and individuals who are "hardened" by their exposure to difficult scenarios (the Islamic fundamentalists of 9/11?).
Thirdly, there is the problem of erroneous correlativity. In the same chapter of the book, Taleb writes, "Katrina...got plenty of politicizing politicians on television. These legislators, moved by the images of devastation and the pictures of angry victims made homeless, made promises of `rebuilding.' Did they promise to do so with their own money? No. It was with public money. Consider that such funds will be taken away from somewhere else... That somewhere else will be less meditated. It may be privately funded cancer research.... Few seem to pay attention to the victims of cancer lying lonely in a state of untelevised depression. More of them die every day than were killed by Hurricane Katrina; they are the ones who need us the most..." (111).
Note the assumed relationship: money spent right now to feed staring and shelter exposed people, and money spent on cancer research, are equitable and equally efficacious. However, as long as humanity has been researching cancer, we have yet to have a cure. In reality, the money spent on Katrina victims does in fact (provably) provide for their immediate needs: food today, shelter today, clothing today. On the other hand, all that money spent on dying cancer patients might produce new treatments, or might develop a new line of cancer-fighting drugs, or provide more insight into the origins of cancer. Then again, it might not. At the end of that money and the cancer research, there might be nothing to show for it--nothing but silent evidence that is. Sure, the people in New Orleans might be dead from hunger, exposure, and diseases that come from stagnant water and blight--but at least we now know something we didn't know about cancer two-hundred billion dollars ago: these treatments don't work.
That's the problem with temporal causality: we can't know any other outcomes for decisions that we didn't make--whether we call this the "road less traveled" (Robert Frost) or silent evidence. But there I go narrating again, offering cause where only data should be. Since I'm at, though, let's at least note the narrative language Taleb uses in his own story-telling. These aren't just people dying of cancer. They are "lonely" cancer patients, lying in "untelevised depression" (see the sensational effects of narrative on page 76). Insignificant? Not since "the Devil is in the details."
Isn't this a contradiction of the propensity that Taleb is so critical of? Of course it is. But Taleb is okay with contradiction. Consider on the one had his suspicion of evidence, and preferential treatment of silent evidence. While showing how predictive modeling actually allows for Black Swans, Taleb discusses a casino's attempts to prevent loss through the implementation of sophisticated technology. However, Taleb writes, "It turned out that the four largest losses incurred or narrowly avoided by the casino fell completely outside their sophisticated models.... Conclusion...these Black Swans, the off-model hits and potential hits I've just outlined, swamp the on-model risks by a factor of close to 1000 to 1. The casino spent hundreds of millions of dollars on gambling theory and high-tech surveillance while the bulk of their risks came from outside their models."
What is wrong with Taleb's evaluation? It doesn't account for the silent evidence to which he is so dedicated. Here's the real question: how many millions (billions?) of dollars did the casino save through the implementation of the high-tech surveillance? Suppose they had insured against random tiger attacks and angry contractors (two of the causes of these Black Swan events) but not against loss from cheaters? Would they be better off?
It's a question that can't be answered--and yet it is a question that very much lies at the heart of the argument of the Black Swan. A Black Swan is any significant event that lies outside whatever system you are using for predictability. This assumes that the events that can be seen--a random tiger attack--is a Black Swan because it was big and because it didn't fit into the model of prediction. But what if the real Black Swans--say, the total losses and collapse of the casino due to termites, cheaters, and sudden-flooding in Navada--were all avoided. In light off these things, the four Black Swans the casino actually faced were more White Swans with black speckles.
Let's suppose that the casino risk management had taken into account four of the events that resulted in their great loss--1000 to 1. Then let us suppose that an unpredictable event results in losses 500 to 1. That becomes the Black Swan. And what if that was prevented, but an event that resulted in losses 100 to 1--that becomes the Black Swan. At what point does the ratio cease to have Black Swan effects? 50 to 1? 25 to 1? 10 to 1? Maybe the "four largest losses" are Gray Swans, or Tan Swans, or White Swans that got a little muddy, when compared to the silent evidence of what causality served to prevent. Taleb at least accounts for this early in his text when he writes about "not knowing what we don't know".
The final issue with Taleb's argumentation is his aforementioned uncritical, non voco in dubium, acceptance of evolutionary theory. He becomes the myrmidon of that master, and rests much of his presuppositions. He mentions it regularly--for example, on pages 66, 67, 69, 85, 87, 94, 109, and 133 to list a few--and expounds on this philosophic-religious treaties on pages 117-118. Let it be known that in this day an age, to accept evolution as a working basis is as "clustered" an acceptance as deism was in the 15th century. All the more reason he should be critical of it.
And yet, he uses his argument from silent evidence to surmise the existence of humanity, and life in general: "Consider our own fates. Some people reason that the odds of any of us being in existence are so low that our being here cannot be attributed to an accident of fate... However, our presence in the sample completely vitiates the computation of the odds... The problem here with the universe and the human race is that we are the surviving Casanovas... So we can no longer naively compute odds without considering that the condition that we are in existence imposes restrictions on the process that led us here" (117-118).
The argument is a classic tautology. Regardless of the outcome, the conclusions would be the same. If we were a planet of one non-reasoning (single-celled) life-form, we would be the lucky 1%. But as we are a planet of such vast, diverse, and disparate life-forms, we are nevertheless still just the lucky 1%. There can be no proof for the supposition: we are the proof. And if we find life on another planet, that too is the proof.
It's at this point that we see Taleb stray farthest from his philosophical-mathematical predictive modeling. Despite his dismissal that "there are so many significant dangers to worry about down here on the planet earth," Taleb has a religious--as in narrative explanation of causation concerning the presence (or lack there) of life--agenda.
Taleb writes, "We are not manufactured, in our current edition of the human race, to understand abstract matters." I disagree. Our problem isn't abstraction. Our problem is that, as temporal beings, time and causation are linear. Maybe in the newest Star Trek movie, Admiral Spock and rogue Romulans can go back in time, destroy Vulcan, and utterly rewrite history. For the rest of us, there is only what happened (and what is). And what happened either has no meaning--the collection of words glued together to constitute a 500-page book" (68)--or it means something--like his own book.
To apply this further, Taleb's assessment must account for the possibility that the words of his 368 page book (plus indices and notation), randomly thrown together could become his book--without his help. Without the help of any author. Without error or mistake or omission. (Ironically, his book isn't even without error or omission--can you find the missing "have" in the first section of the book?)
In summary, if what happens (visible evidence)--even in the origins of life--matters, then maybe data isn't the most basic and unrefined (raw) assessment of reality, and narrative just a computational corruption of that information. Maybe it's the other way around. Maybe data only results when there is narrative causation which can be striped of detail and hermetically isolated for study. Maybe it isn't our dependence upon narrative, but our misinterpretation of it, and our further error-ridden reduction of that interpretation into spreadsheet data that is the greatest cause of Black Swans (158). ...more info
- Clearly biased essay
The book deserves attention, not necessarily for the qualities of the writer, but for introducing a biased opinion in the world that was supposed to pertain only to "un-opinionated" academics. Worth reading if you have an open mind, no matter of the direction chosen in career and life. It gives another type of perspective on improbability than the establishment....more info
- The White Swan
Nassim Nicholas Taleb opines in his book that a great honor that could be bestowed upon him is if some scholar took the time and effort to auther a rebuttal book titled "The White Swan." Unfortunately, I will disappoint Mr Taleb and offer only an on-line review written by a decided philistine and usurp the title for this brief critique.
Mr Taleb is certainly correct on many of his contentions: that improbable "off-the-radar" events shape our world, that "professionals" in the prognostication industries (e.f. financial analysis and advice, economics, CEO's) are collectively charlatans, and that the human mind is biased through millennia of mammalian evolution to believe in causality and embrace the narrative where only random events may exits.
But his book is lacking in a number of respects. The most prominent forms of evidence which he offers is to cite either his own superior intellect, life-experience, and erudite approach to life (and the repeated narcissistic autobiographic references do become very tiresome even within the first 20 pages) or to engage in demagoguery. He draws parallels between himself and those he respects and emulates (like Poincarre) and dismisses his critics and foes as philistines (hence my self-description above). Indeed, I have no doubt that most financial analysts and CEO's are philistines. But that fact and allusion to that fact does not constitute evidence to support Mr Taleb's arguments.
Second, he gets some concepts and facts painfully wrong.
He casually and repeatedly dismisses "the bell curve", and does so inaccurately. He implies that the bell curve does not allow for rare events. That is incorrect. The "tails" of the bell curve extend to infinity and encompass the numerically improbable, but inevitable events. Any element that can be quantified (wealth distribution as one example Mr Taleb reference several times) can and will have examples of rare outliers, which nevertheless exist within the bell curve. Bill Gates' wealth is at the far extreme right of the bell curve, multiple standard deviations from the mean. But it is not outside the bell curve. Some variables are not "normally" distributed but these two can properly be described by appropriate skewed methods, such as nonparametric analyses. Granted, the principal type of "Black Swan" that Mr Taleb describes is the qualitatively unpredicted event (e.g. jumbo jets crashing into the Twin Towers) that falls well outside the realm of the bell curve, but many, many of the "exceptions" that he cites are within the bell curve. He is simply wrong in dismissing the bell curve.
Though Mr Taleb dismisses facts and knowledge as irrelevant (and is thus free to draw any conclusions from any observation, no matter how incorrect his facts are), there are some readers who will insist that he gets his facts correct before he cites fictitious scenarios. To wit: at one point he states that doctors will avoid prescribing drugs which may be proven to offer benefit to a large proportion of patients because of the fear of uncommon side effects and their potential attendant lawsuits (the "Black Swan" of this example). He is wrong. In this era of evidence-based medicine, the entire medical profession has devoted enormous effort in exactly the opposite direction. The Federal government now scorecards hospitals on the same. The risk is much greater that a physician failing to prescribe such an effective medicine will be sued for failing to adhere to "standard of care" than be sued for the rare "Black Swan" side effect.
As another example: research and discovery. Correctly, Mr Taleb cites important examples of serendipity in scientific discovery (Alexander Fleming and penicillin). But Mr Taleb is clearly ignorant of planned discovery and development. Most medications which have emerged in the last two decades did not come about via serendipity but through a concerted process of target identification, receptor mapping, chemical synthesis (guided by knowledge of what side-branches impart what properties of absorption and solubility), with preclinical and clinical testing to follow.
He insists that the automobile and the atom bomb are the results of accumulated serendipity. Perhaps that is true for one or more of the key elements that led to the invention, but let's not ignore the Manhattan Project nor the incremental engineering developments that have evolved the automobile from the Model T to its modern counterpart.
For Mr Taleb, facts are inconvenient items because they fail to support his hypotheses.
Finally, the writing in general is quite poor. Again, Mr Taleb invokes an intellectual giant such as Poincarre to make the point that digressions and other irrelevancies are an example of a superior mind and only an ignoramus editor would dare suggest otherwise. Ever the philistine, I will offer that flight-of-ideas is also a symptom of some forms of psychiatric disorders. A poorly constructed chapter with random allusions transparent only to the author is a form of literary autism.
In conclusion, worth a read, but borrow this book from your library, don't buy it.
- Throwing modelling to the wind in a maudlin mewling (du cote de chez Swann)
It is obviously a difficult exercise to write a popular book about (applied) Science without turning into a populist pamphlet, especially for an upper class intellectual, and it is almost inevitable to end up oversimplifing one's discourse by emphasizing a few examples over others and making theories out of those examples, but I think the book overdoes it! By a fair margin. Worse, by attacking modelling tools like the Gaussian, models and modelers (as a conglomerate of "charlatans"), the Black Swan contributes to the anti-Scientist discourse that is unfortunately so prevalent today. Being a skeptic is commendable and scientists should never cease questioning their models, but throwing all models to the winds and using only "facts" to drive one's decisions is not very helpful. As put by George Box (or by someone else before him), "all models are wrong, but some models are useful" and statisticians can devise tools to assess how wrong and how useful without falling into the "statistical regress argument" (p.310). Encouraging a total mistrust of anything scientific or academic is not helping in solving issues, but most surely pushes people in the arms of charlatans with ready answers. ...more info
- Not As Good As One Would Hope
After seeing Taleb interviewed on television, I thought I would give his book a try. After 60 pages I realized how much I was hating this book. His cutesy style, the digressions and occasional partial sentences started to drive me to distraction. He needs a better editor to show him how to write clearer. I returned my copy to the library without completing it....more info
- Black Swan (Daffy Duck)
I'll save you the trouble and the money. Here's the message (if that's what you'd call it): Crazy things happen...be prepared...if you can. There, aren't you happy you didn't waste any piece of your life reading this book, like I did?...more info
- How Lucky Do You Feel?
Taleb's explanation/rationalization of risk and how it has failed to be fully accounted for in the financial markets is startling. Going forward, as the current financial markets meltdown is (hopefully) resolved, all investors will want to consider Taleb's thoughts in developing strategies that will account for the the inevitable and unforeseeable outliers, Taleb's Black Swans, that are few but impossible to avoid. Failure to plan for the outliers reduces investment and money management to high stakes roulette.
There are certainly many fine points in the book to argue and Taleb lacks neither ego, humor or irony in his writing. This is not a technical manual for economists, but a narrative intended for the layman to illustrate the effects of risk, seen and unforeseen.
The importance of the book is the big picture concepts that are developed and their impact, which are conveyed meaningfully and often colorfully. Nit picking the finer points is rearranging the deck chairs on the Titanic.
This is a great volume to help understand where all our money went and how to minimize the possibility of a replay....more info
- Fascinating and revolutionary ideas
I found this book to be one of the most fascinating books I have read recently, and I have been reading a lot of similar books. I will not summarize the book here -- you can read one of the other 479 reviews for that. Suffice it to say that Taleb presents new and fascinating ideas that I had never heard before and backs them up with logic and evidence.
Some complain about Taleb's tone, that he sounds smug or angry. I was a little taken aback by his tone initially, but after a while I found it refreshing. It wasn't pandering or condescending. If you are the type of person who limits your reading by the tone of the messenger, this book is probably not for you. But if you are open-minded, this book is well worth you while.
This book was life changing for me. It has changed my thinking about a lot of different things. As an economics major, I am even more suspicious of economists. More importantly, I have recently retired and have a large amount of my money in a 401k. I always agreed with those who said the stock market was the best place to put your money because it has historically always out performed all other investments over the long term. I now realize that perhaps I am being a turkey and have changed my investments....more info
- Don't start here... but don't finish till you're done.
Start with Fooled by Randomness (Taleb's first book), The Logic of Life - similar idea (less business oriented not as technical) and Against the The Gods. Then take on The Black Swan. An amazing book (Thank you Taleb for allowing us to leverage for $25 all the hours and brain energy you put into making these concepts cohesive - high ROI). This publication offers facinating insight into how much of what we don't know about what we don't know can/may/will affect us and helps hedge against the unknown - all the while respecting that there will always be an element of the unknown that simply can not be predicted. And the impact of the highly improbable lurks. Irreverant and written with humor it's surprisingly readable for its heady content. You will be changed.
The only thing I didn't care for was the title of the book. I get its application, but I think there could have been a more applicable name - but who the hell am I to say?
After you're done with The Black Swan, if you're musically inclined, go grab This is Your Brain on Music - these authors must meet. Different industries - interesting applications to ideas from both.
Just keep reading! Literacy = Knowledge = Empowerment = Peace...more info
- Avoid Crossing the Street Blindfolded
Remember a few years ago when some REITs promoted the idea that the REITs had a near-zero correlation with most other investments? Then, during this latest financial crisis, all investments had a correlation of nearly 1? To fully value Nassim Nicholas Taleb's THE BLACK SWAN: THE IMPACT OF THE HIGHLY IMPROBABLE, I encourage everyone to read this along with Satyajit Das' TRADERS, GUNS, & MONEY & Derman's MY LIFE AS A QUANT. For example, on page 165 of TRADERS, Das lists 15 Black Swan events between 1987 & 2005 alternated with "normal market" conditions.
How to prepare yourself for Black Swan events? The strategy Taleb recommends is "to tinker as much as possible" & "take the exceptional as a starting point" while "treating the ordinary as subordinate". You have to read all these books to flesh out these generalizations.
More specifically, start with Taleb's Decision-making rule which incorporates El-Erian's advice in WHEN MARKETS COLLIDE to buy cherries. Quoting Taleb, "In the end it is those who derive consequences . . . who win the day."
- Too much ego, too much information, too little value
Spectacular tour de force on the nature of the real world of probability. Highly intellectual fare, peppered with too many examples and gratuitous references, and ending with (spoiler alert) a grand over-simplification of advice: "don't sweat the small stuff". My feeling is that he could have cut the content by half and have done a better job. Mr. Taleb is obviously a very intelligent man, and I sense that he enjoys displaying that fact. However, it was a useful read. I'm glad I borrowed my copy to read. I would have regretted buying it. The Black Swan: The Impact of the Highly Improbable...more info
- This Book is Deadly - Read at Your Own Risk!
Taleb manages to be boring, arrogant, and uninformative - all at the same time.
A Black Swan is a highly improbable event that is unpredictable, has a massive impact, and after the fact, we invent an explanation that makes it appear more predictable than it was. A small number of Black Swans explain almost everything in our world. The rise of Hitler and the subsequent war, the precipitous demise of the Soviet bloc, the rise of Islamic fundamentalism, the spread of the Internet, and 9/11 all follow Black Swan dynamics.
Alternatively, one could say that much of "The Black Swan" criticizes for inability to forecast the future. He's not the first - Jack Welch of G.E. famously scrapped his company's extensive planning procedure for just that reason, instead choosing to focus on fast reaction. Others, including General Eisenhower, have made similar comments about war, etc.
Taleb goes on to claim that globalization is good for the U.S. because we obtain the largest benefits of manufacturing - eg. shoe design. Tell that to the thousands of U.S. shoemakers now unemployed, or the shoe designers who soon will be replaced by Asians using software and computers.
On business leaders, "being an executive does not require very developed frontal lobes, but rather a combination of charisma, a capacity to sustain boredom, and the ability to shallowly perform on harrying schedules. Adding to these tasks the "duty" of attending opera performances" shows an incredible ignorance of what separates successful from unsuccessful leaders.
And on and on and on.
How should one prepare for, avoid being fooled by black swans? Taleb doesn't say....more info
- Thought provoking
Taleb's book takes some challenging and complex topics presents them in a way that one can integrate them into one's own world view. Very valuable book in that it adds depth and perpective to the conventional view presented by mainstream media and financial professionals....more info
If you are able to put aside your conventional way of thinking you can understand Black Swans as presented by Taleb in this wonderful book....more info