|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.
From the Hardcover edition.
- Very entertaining
Haven't finished it yet. But it has been a great book so far. Actually bought it because the library wouldn't let me renew their copy anymore, and ended up getting the prequel to it at the same time for quite a deal....more info
- Strong message, but kind of repetitive and tedious
Current circumstances obviously show the relevance of Mr. Taleb's point. That makes the central message of this book interesting and Mr. Taleb deserves credit for that. I would not recommend to read this book however. This is due to the fact that after about 50 pages the central point of the book is clear, but it still goes on and on. Further, (ironically) who needs to read theoretical warnings if we can see things happening in practice; just keep an eye on the financial pages to learn about " the impact of the highly improbable". ...more info
- Interesting...if you can get past his enormous ego
It's too bad Taleb's ego is louder than his thesis. While he puts forth many interesting and insightful concepts and thoughts, the price one must pay to find them amongst the egocentric drivel that fills most of the pages makes this read hardly worth the effort. I can't help but think that the basic arguments from such a pretentious elitist could only be hot air. It's hard to take him seriously. ...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
- Black Swan more of an ugly duckling
I bought this book after seeing Taleb on CNBC and being very impressed with what he had to say then. I was very disappointed in the book....probably one of the more poorly crafted books I have read in a long while. He claims in the introduction that the effort to write his book was effortless and that 'the book just wrote itself'.........and it shows. It was a chaotic read and at first I thought that that was his PLAN to keep us in chaos given the theme of his book and that somehow then it would resolve itself in a fun ending of some kind. Didn't happen. The author could have made his point well in about 20 pages (and don't get me wrong, there were EXCELLENT points in this book) but instead it just droned on . Frustrating as well would be he would introduce a subheading within a chapter as if he was going to address that topic, and then never did. If you want a much more enjoyable way to cover this same kind of material....and done so much more informatively.....I'd recommend the 1978 BBC video series of James Burke "Connections". It's amazing how much Burke covered in 1978 that still is relevant today and stated far much better than Taleb....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
- 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."
- They don't make them like this anymore
Though purportedly a book on skeptical empiricism by an author who clearly has an axe to grind, it is actually a lot more than that. In a broad sense this book looks at our habit of perpetually coming up with all kinds of little theories and models of reality, and how they can lead us astray. While Taleb does not disparage knowledge per se, he does warn us about taking it too seriously. Reality is not so elegant and neat as our equations and models would have us believe. It is forever changeable and our equations and theories can only give us rough approximations of it. If we mistake the approximations for the reality then we get into trouble with the Black Swan, that unpredictable event or thing that our models had all but ruled out and which we are thereby unprepared to handle.
Taleb characterizes this tendency of ours as Platonicity, he explains at length the problems with it, and takes us to its logical conclusion: the bell curve and the tragic consequences of overusing it. The book came out in early 2007 and it would have been clear to anyone in the financial industry who read it and "got it" about the pile of dynamite they were sitting on and the not so hidden dangers in the way they were "managing" risks. Unfortunately the message didn't get out on time, we had a financial meltdown that erased decades of profit by the financial industry and brought the world economy to the verge of collapse, which will take many years for us to recover from it. It may have helped to get the message across if he hadn't been so dismissive and even contemptuous of these folks, but he did his job pointing out that the emperor had no clothes.
In the process of explaining all this he takes us on a highly entertaining adventure through his lifestory and reflections, starting with his upbringing in Amioun, Lebanon, (fictional) author Yevgenia Krasnova, his own success as a hedge fund manager, the difference between the ignorant but streetsmart Fat Tony vs. the nerdy but clueless Dr. John, Helenus the seer, who could predict the past (a lot harder than it seems) the insights of the great (still living) mathematician Mandelbrot, and many more. I think these vignettes are what truly make this book, as they entertain, provide grounding for abstract conecpts that would otherwise be too difficult to explain, while at the same time exemplifying the author's empiricism. It is ironic that while he criticizes possessors of knowledge, the broadness of his scholarship and literary style shows that he knows and has read quite a few things himself, and while he shows particular scorn for bankers and financial people, he has done very well for himself with the hedge fund he manages, which makes his arguments all the more effective. Taleb is like the gentleman scholars of old, the type of intellectual there used to be from Greek and Roman times through the early twentieth century, successful in the affairs of the world to an extent that it gives him the leisure to pursue and reflect on many fields of knowlege (a philosopher in the true sense) and gain broad vision and insight, which they then communicate to a broad public, much unlike our contemporary crop of specialists, who see the trees and miss the forest, and their findings only make sense to other specialists. Even if you disagree with his conclusions you are bound to learn quite a few things and get an intellectual boost few contemporary books can give you....more info
- The emperor has no clothes on!
The emperor has no clothes on!
I believe this book could have been easily condensed to 15-20 pages.
The style of writing reminds me of Geroge Soros - confusing, didactic, and pompous.
It was like eating scramble eggs but with the egg shells included....more info
- Tantalising and frustrating.
The major ideas in this book are without question very important but unfortunately,in my view, poorly elucidated.The arguments are presented in a rambling confused way with lots of superfluous material that serves to obfuscate rather than clarify. The author seems unable to make a point clearly and succinctly and then leave it alone. The interminable stories, name dropping and confusing exemplars make reading large sections of the book sheer drudgery. In addition by basically calling everyone who disagrees with him a moron he casts himself in a very poor light.I also suspect that English is not Mr Talebs native language and this explains his awkward somewhat stilted prose. At the end of the book I could not help but feel that an opportunity for a great book had been squandered for want of a good editor....more info
- It's scary finding out the steering wheel is not connected to anything.
Let me start by saying this is a fantastic book, but I did not think that as I was reading it....why? because, the more I read, the more depressed I became, not with the book but with the tearing down of the illusions I have built up over many years about managing businesses and organisations. Realising that all the MBA models for this and that actually feed our futile desire to get control of the future, create certainty and create and illusion that we know what we are doing. These models have created an Illusion of control, far better to deal with reality and be prepared as best we can for big changes which traditional analysis tells us are highly improbable and creates a false sense of security. Taleb has shown that the highly Improbable is anything but.
Taleb deconstructs, (rips apart)very logically, the predictive probabilities associated with the ubiquitous bell curve in a manner a non statistician can understand and provides us with a language to use against the analysts, who are using highly sophisticated bell curve models in an effort to make business decisions. This predictive activity can now be revealed for what it is...nothing more than corporate tarot card reading.
For me, finding out that the steering wheel I have been holding onto to steer my company is not connected to anything is a revelation, and has forced me to see the world as it really is, not as the analysts would have us believe.
Well Done Taleb. ...more info
- Surprisingly personal diatribe
I just finished reading the Black Swan by Nassim Nicholas Taleb.
The book is about the disproportionate effect on our world of highly improbable events, and the difficulty of predicting those events. The name comes from David Hume's observation that many generations of Britons' only seeing white swans was not proof that there is no such thing as a black swan (which do, in fact, exist).
I found the book very disappointing. It started out with so much promise; I looked forward to reading all sorts of anecdotal stories of these so-called black swans, and about the disproportionate effect on our world.
Instead, what I got was a 300 page diatribe by one statistician against all the others in the world who disagree with him, punctuated by an occasional gratuitous insult of the French.
After enduring several hundred pages of personal stories about the author's quest to make his statistical theories known (which are not quite as controversial as he would make you believe, by the way), finally in Chapter 15 it seems that he will get to the meat of the matter. Unfortunately, even though the next three chapters were laden with graphs and figures, I encountered no such explanations. Or, if there were any, they were muddled at best.
Even the anecdotes were disappointing. I was excited to start reading about a great vindication of his - the collapse of LTCM in 1998 (which was run by several of his statistical nemeses) - expecting to find a wonderful explanation of what went wrong, and all the financial turmoil which resulted. Instead, he simply stated "it went bust." Duh.
I have no idea why this book has been so highly touted. Perhaps it is because it came on the heels of 9/11, and just before the credit turmoil which started in 2007. But it's not worth your time. ...more info
- Not a history of black swan events
I expected something different and I found the essay style hard to digest. I think readers might get a better deal if they read "Extraordinary Illusions and Madness of the Crowds", Irrational Exuberance" or "When Genius Failed"....more info
- a must read
It is an indisputable must read for a serious reader interested in history, economics and all other things social.
Even for ones who consider this view a trivially self-evident truth, this book provides some new tidbits here and there along with plenty of rather amusing examples. Everybody else will find a lot to think about.
Moreover, besides its serious side the book has a decent entertaining value.
Blemishes are few and do not spoil the general impression.
- agree with main points, but bothered by small points
I enjoyed reading the book, mainly for the reason that now I know I am not the only person in the nit-picking tribe. Like Taleb, I like to find fault in every sentence that I read or hear, and I used to think that I am the most annoying person on Earth. Was I glad to read that my way of thinking can be useful in some circumstances. It should therefore not surprise Taleb when I find fault with some of the things that he said in the book. For example, Taleb was angry with his teacher for interpreting a painting in a certain way, and rejected Taleb's reading of the painting. The teacher said that the characters in a 18th century French painting (I may have got the details wrong) put their mouths into the bowls because they were hungry, not because they were not taught manners, as suggested by Taleb. Well, if the teacher knew more about the background of the painter, such as if he was known to depict social ills in his paintings, then the teacher could very well be correct. In life, people do not couch their language in probabilities, since, for one, accurate probabilities are impossible to obtain in most circumstances and almost all social science circumstances, and second, the listeners have too many things that require their attention that they want to get the point quickly. It is because of practicality that people speak in shortcut forms and leave out the 'if' and 'but's in their statements. Of course, this habit often gets us in trouble, and leads some people to think that most issues can be described in one of two states, e.g. either right or wrong, true or false.
Another example. Taleb faulted a politician after 9/11 for saying that New York had overcome many adversities in the past, so it could come out of 9/11 stronger also. Taleb argues that the past does not predict the future. Merely because NY had overcome difficulties in the past does not guarantee that it would do so in future. Again, I think most people would realize that that guy was speaking as a politician, not as a prophet. My guess is that he was just trying to boost morale, and be inspirational. Taleb has to accept that often people say things not in a literary sense. If Taleb can see that, then he would be less worried about the future of humankind.
It is also not realistic to expect the majority of people to be critical thinkers, although there may be too few at the moment....more info
- A Major Achievement -- Don't Miss It!
Most of the criticisms of Taleb and this book seem reasonable:
- His confidence sometimes seems to reach the level of condescending arrogance.
- With a wave of the hand, he dismisses those he disagrees with, even Nobel prize winners. And perhaps he oversimplifies their positions in order to argue with their straw-man shadows.
- He often circles around his points without winding up finally making his points clear. Is this how a supposedly street-smart guy should talk?
- His frequent digressions make it hard for the reader to follow the thread of his narrative, sometimes giving the impression that there actually is no such thread, and that we're just witnessing his stream of consciousness.
- One could argue that the more technical chapters are written poorly and are therefore too unclear.
- Many of his ideas aren't as original as he seems to imply, so maybe he needs to explicitly give more credit to others.
- His suggestions on investing aren't very specific, and one wonders if they rely too much on luck or being rich in the first place.
- His references to his anger suggest a need for personal growth.
But this book easily deserves 5 stars and its bestseller status. Why?
- Taleb's erudition is undeniable, and a strong case can be made for his iconoclastic brilliance as well. In a book like this, perhaps the usual modesty and humility wouldn't make sense?
- His criticism of his opponents may have more validity than we normally want to admit in polite society. It's scary to think that economists and others in finance are generally as clueless as Taleb suggests, but recent events seem to have significantly (and unfortunately) vindicated him.
- His refusal to get right to the point pushes you to think more deeply about the implications of his ideas, rather than just quickly saying "yes, that's obvious, so what?" It's not enough to merely understand something; it has to sink in, in a way that genuinely changes your worldview and approach.
- Once you drop your preconceptions of how a book should be written, most of his digressions are fun and many are quite insightful. For an open-minded person with an intellectual inclination, this can be a tremendously entertaining book (it certainly was for me). Taleb deploys his own intellect and erudition for us with an unusual frankness which is worthy of our appreciation; instead of being put off by it, enjoy the ride!
- I do think the technical chapters are lacking but, alas, it's hard to write a perfect book, especially for an audience with varying technical background. I think we can cut him some slack here.
- His ideas may not be entirely original, but the way he's woven them together and presented them with flourish certainly is. Ideas need to be communicated to have any value, and Taleb can surely deliver his ideas in a way that has lasting impact on the reader.
- This book is about black swans in general, not investing in particular, so let's not get carried away if the book doesn't provide a how-to guide on getting or staying rich. And Taleb's general advice to arrange safeguards against financial disaster, and also get exposure to potentially huge opportunities, certainly seems sensible.
- His anger surprises and even disappoints at first, but one eventually starts to wonder if it might not be at least partly justified. Things might be worse than we want to believe. After all, isn't that part of his thesis? Plus he does end on a very positive note.
The bottom line is that this book is truly unique in its ability to intellectually entertain while conveying some deep insight and wisdom. Few people in the world have the right intersection of ingredients to produce a book like this, so we should cherish the fact that the book exists. Even if you don't fully agree with him, Taleb is worth engaging with.
I've read this book in print and also listened to the excellent unabridged audiobook, and I look forward to returning to it at least a few more times in the future. This book changed my outlook in some fundamental ways, and I think that's about as much as we can hope for with any book.
Very highly recommended. Indeed, don't miss it!
- How compare to author's "Fooled by Randomness"?
The author has also written "Fooled by Randomness". Both books deal with the same matter; how low risk/chance events can have a major impact more often that realised. The book earns five stars because it forces the reader to think about a very important issue.
Which of the author's books should you buy?
1. What a big font, very easy read? Then go for "Fooled by Randomness"
2. Want a small font, more intellectual read? The go for this book.
There is absolutely no need to read both. Just pick the one the fits your temperament.
Any critique? The book is focusing on just one matter and the author is pushing it a bit too one-sided. However, it doesn't matter if the book isn't balanced. The book gets you thinking. You should expose yourself to the ideas. Stylistically the book is not very good. However, this is not poetry so I would not put much emphasis on this point either.
Who should buy? All social scientists, all people investing in the stock market, and all people involved in planning about the future.
- Very Similar to "Fooled by Randomness"
Yes Mr Taleb can be very loose with his arguments, yes he spends a third of the book rehashing the points in "Fooled by Randomness" and yes he spends another 30 or so pages bashing many philosophers, economists and general thinkers. With all that, this book is still quite enjoyable and, at times, a very real eye opener.
Once again we are warned of the dangers of examining the world as if it was gaussian - as if it was a simple model (or that idealized models actually give useful real world advice). This warning seems prescient given what happened to the world economies starting in late 2007 (the book came out before the collapse). He also gets bonus points for dissing game theory, especially when applied to economics. Well done Mr Taleb!
If this wasn't a rehash, or maybe if it was better presented (less an obvious rehash) I would have enjoyed this book much more. As it is, if you haven't read "Fooled by Randomness" you'd get the gist here (though I think that is a better book). If you have read "Fooled...", "Black Swans" is more of the same. Still enjoyable but with a strong deja vu. ...more info
- Surprisingly, this book is motivational literature--read on!
Well, this is the new Freakonomics [Revised and Expanded]: A Rogue Economist Explores the Hidden Side of Everything By that, I mean this book takes a rarefied subject--in this case, epistemology--and presents it in a popular format. You wouldn't expect something so highbrow as epistemology to be so much fun, but so it is. Amazingly, this book on Black Swans it itself a Black Swan.
Here's the nutshell: Black Swans are things that we don't know about (outliers) that have a tremendous impact. The terminology comes from the idea that for the longest time (back to Aristotle); we assumed that all swans were white--until we discovered black swans in Australia.
Two examples are the book Twilight (The Twilight Saga, Book 1) and Ulysses S. Grant. I never would have guessed that yet another vampire book about a young woman whose initials are B. and S., written by a 30-something Mormon Mom in Arizona would take the world by storm. Meyers has a superb style, but everything else in the book has been done before. But so it is!
And Ulysses S. Grant, a full-grown man who had to move back in with his parents and get a job with his brothers, and who was a mediocre West Pointer going up against Big Man On Campus, top-of-his-class Robert E. Lee would eventually win the Civil War. But so it is!
(Susan Boyle of Youtube fame is another--it will be fun watching this ugly ducking rise as a black swan.)
The book has a conversational tone, almost chatty. Therefore, the layman can understand the arcane subject. But the chattiness makes the book needlessly long. At times, I felt that NNT was talking in circles.
Also, the subject matter was nothing new (like "Twilight"), but it is he format that makes it exciting (like "Twilight"). I had read Bastiat's That Which Is Seen and That Which Is Not Seen: The Unintended Consequences of Government Spending with the Parable of the Broken Window (not to be confused with Wilson's Broken Window Theory of Crime). I had read Poppers The Logic of Scientific Discovery (Routledge Classics) and The Poverty of Historicism (Routledge Classics), so I knew the limits of knowledge. My critical skepticism came from Socrates (Republic, and the Four Dialogues). Logic was taught to me by Thomas Sowell's The Vision of the Anointed: Self-Congratulation as a Basis for Social Policyand Fischer's Historians' Fallacies: Toward a Logic of Historical Thought.
This last one is important, since the Narrative Fallacy is a key component to Black Swans.
I do have two criticisms, both metaphysical. First, our world is both Extremistan and Mediocristan. They are like Augustine's Christians, who simultaneously live in the City of God, and daily interact with the City of the Devil. They are the same place, but overlapping, with the City of God (like the Black Swan) embracing a more comprehensive paradigm. Yet both models are valid. Yet he presents them as rivals, which I thing exacerbates the Black Swan problem.
The other one is lightly touched upon in the book, but needs a fuller explanation: What is the metaphysical engine of Black Swans? Simple: irreversible, exponential proliferation, driven by the economy. Read and please re-read the slim volume Hurtling Toward Oblivion: A Logical Argument for the End of the Age. This book illustrates the potential catastrophes that can come from Black Swans.
These second two criticisms are pinprick issues. On pages 192-193, NNT describes Poppers off-the-cuff response to someone who asked if falsifiability could be falsified. NNT needed a footnote pointing out that Poppers reaction was what logicians call an "ad baculum," and a ham-handed one at that.
Second, in a footnote NNT asserts that both computers and cars were the products of an "aimless process." The individual sub-components may have been, but hasn't he ever seen schematics and blueprints before? Please read "I, Pencil" for a better treatment of how separate ideas come together to form a new whole, and then watch the Coppala/Lucas film "Tucker: The Man and his Dream."
On a personal note (and in conclusion), this book resonated with my heart in two ways. I understood perfectly the dismissiveness, arrogance, and infantile temper tantrums he describes in Part 3. I've seen the same things. The idealized world that Sagan describes in The Demon-Haunted World: Science as a Candle in the Dark is itself a demonic fiction.
Second, throughout the book, NNT makes passing references to best-sellers not being Bell-Curves, but being Black Swans. All authors should understand this. Dale Brown's manuscript for "The Old Dog" was rejected 100 times. Black Swans work to your advantage. I pray something like this will happen to my book, Consider My Servant Job, and see the book The Black Swan as motivational, even devotional literature.
So NNT's book is really a Double Black Swan.
The Black Swan: The Impact of the Highly Improbable
This book is especially relevant in these "turbulent" economic times. In a way, this book is an example of the subject which it discusses, in that it is far removed from the conventional or "normal" book on the role of chance in our lives, including the financial realm. It will make you think harder than you ever have before about your comfortable assumptions concerning "randomness". But more than that, it will teach you to be a better critical thinker by practicing skepticism daily. I have been using selected readings from this book in an informal "seminar" on the current financial "crisis", and it has provided many very useful contributions to the discussion. As an engineer in aviation safety, I am very interested in the unexpected and the unanticipated, and the tradeoffs between the costs of preventing accidents and the costs of having them happen. Although this book does not directly discuss this particular area, the principles it espouses are very relevant. I highly recommend this book for a thought-provoking and enjoyable read....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
- Fantastic and very different view of things...
Taleb reminds us that we need to remember how little we know. Science is philosophy at best, and facts are volatile. The book is not for everyone, especially those who are married to a particular paradigm... but for those who would like to learn and question what they think they know, this is a great start. ...more info