The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb
My rating: 3 of 5 stars
This was a smart book. The author, Nassim Nicholas Taleb, is one of these guys you come across sometimes who are smartasses and they know it, are in love with that smartass prestige of theirs, and who you can’t help but sit and listen to because they’re so damn interesting. Sometimes their smartassiness goes a bit overboard, similar to the scratching of an itch that at first is satisfying but can easily hurt if you don’t stop at the right moment. However, albeit barely, most of the time they keep it under control.
I have to tell the truth. Most of the Black Swan was too technical for me, too difficult. I caught the main idea but at some point I just didn’t know what I was reading anymore. I wonder if Taleb would have had a bigger impact with his book (and he did a big impact as far as I can tell) if he had made it easier to read for a broader audience. I have the impression that the more sophisticated an academic or a specialist is, the more resistant to books such as this he or she is, whereas
Anyway, Taleb’s idea, the whole topic of this book, is rather simple: life is full of Black Swan events, and…
Sod it, I’ll let Wikipedia do the talking for a sec:
The phrase “black swan” derives from a Latin expression; its oldest known occurrence is the poet Juvenal‘s characterization of something being “rara avis in terris nigroque simillima cygno” (“a rare bird in the lands and very much like a black swan”; 6.165).[4] When the phrase was coined, the black swan was presumed not to exist.
[…]
Juvenal’s phrase was a common expression in 16th century London as a statement of impossibility. The London expression derives from the Old World presumption that all swans must be white because all historical records of swans reported that they had white feathers.[5] In that context, a black swan was impossible or at least nonexistent. After Dutch explorer Willem de Vlamingh discovered black swans in Western Australia in 1697,[6] the term metamorphosed to connote that a perceived impossibility might later be disproven. Taleb notes that in the 19th century John Stuart Mill used the black swan logical fallacy as a new term to identify falsification.[7]
[…]
Based on the author’s criteria:
- The event is a surprise (to the observer).
- The event has a major effect.
- After the first recorded instance of the event, it is rationalized by hindsight, as if it could have been expected; that is, the relevant data were available but unaccounted for in risk mitigation programs. The same is true for the personal perception by individuals.
[…]
The theory was developed by Nassim Nicholas Taleb to explain:
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The disproportionate role of high-profile, hard-to-predict, and rare events that are beyond the realm of normal expectations in history, science, finance, and technology.
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The non-computability of the probability of the consequential rare events using scientific methods (owing to the very nature of small probabilities).
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The psychological biases that make people individually and collectively blind to uncertainty and unaware of the massive role of the rare event in historical affairs.
Basically, we can’t predict things. We think we can, but we can’t, and they are the ones we are most vulnerable to. What do we have to do to make ourselves more robust to Black Swans? Be aware of them. And screw banksters and speculators, they’re frauds. There, I just summarised the whole book!
Don’t give Black Swan a read if you’re a bankster or speculator and want to preserve your so-called self-respect. Do give it a read if you believe that the world is much more complex than any model we can come up with, but be prepared to skim, skim, skim.