Nassim Nicholas Taleb, “The Black Swan”, 2007, Random House.
(xvii)
One single observation can invalidate a general statement derived from millennia of confirmatory sightings of millions of white swans.
Black Swan (BSw) is an event with the following three attributes:
• It is an outlier. It lies outside the realm of regular expectations. Nothing in the past can convincingly point to its possibility. (rarity)
• It carries an extreme impact.
• In spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. (retrospective, though not prospective, predictability)
(xviii)
The combination of low predictability and large impact makes the BSw a great puzzle. Add to this phenomenon the fact that we tend to act as if it does not exist!
Almost all “social scientists”, for over a century, have operated under the false belief that their tools could measure uncertainty.
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 BSw.
(xix)
Life is the cumulative effect of a handful of significant shocks.
BSw logic makes what you don’t know far more relevant than what you do know.
Many BSw can be caused exacerbated by their being unexpected. 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 may become inconsequential if your enemy knows that you know it. It may be odd that, in such a strategic game, what you know can be truly inconsequential.
(xx)
What you know cannot really hurt you.
We act as though we are able to predict historical events, or, even worse, as if we are able to change the course of history.
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.
Our inability to predict in environments subjected to the BSw, 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 the subject matter than the general population, but they are much better at narrating. They are also more likely to wear a tie.
BSw being unpredictable, we need to adjust to their existence (rather than naively try to predict them)
(xxi)
Almost no discovery, no technologies of note, came from design and planning – they were just BSw.
The strategy for discoverers and entrepreneurs is to rely less on top-down planning and focus on maximizing tinkering and recognizing opportunities when they present themselves.
I disagree with the followers of Marx and Adam Smith: the reason free markets work is because they allow people to be lucky, thank to aggressive trial and error, not by giving rewards or “incentives” for skill.
We tend to learn the precise, not the general. (What did people learn from the 9/11? What did French do after the Great War to prevent reinvasion?)
The problem lies in the structure of our minds: we don’t learn rules, just facts, and only facts.
(xxii)
Evidence show that we do much less thinking than we believe we do – except, of course, when we think about it.
We are living in an increasingly recursive environment. 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.
There is a very sad category of mistreated heroes who we don’t 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 of – precisely because they were successful.
(xxiii)
Assume that a legislator manages to enact a law that imposes continuously locked bulletproof doors in every cockpit – at high costs to struggling airlines. The legislation is not a popular measure among the airline personnel, as it complicates their lives. But it would certainly have prevented 9/11.
In the aftermath who got the recognition? Those you saw in the media, on TV 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 NY stock Exchange chairman Richard Grasso who “saved the stock exchange”. All he had to do was be there to ring the opening bell on TV – the television that is the carrier of unfairness and a major cause of BSw blindness.
(xxiv)
Who is more valuable, the politician who avoids a war or the one who starts a new one (and is lucky enough to win)?
Everybody knows that you need more prevention than treatment, but few reward acts of prevention.
To this author, the rare event equals uncertainty.
To understand a phenomenon, one needs first to consider the extremes – particularly if, like the BSw, 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. 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.
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 tamed uncertainty. Its nickname in this book is Great Intellectual Fraud (GIF).
(xxvi)
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.)
(xxvii)
Living in our planet, today, requires a lot more imagination than we are made to have. We lack imagination and repress it in others.
It is naive 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.
(xxviii)
In spite of our progress and 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.
