The Black Swan: The Impact of the Highly Improbable

This isn't an easy book to review because it's dealing with an idea that's at one time simple and yet so outside the regular paradigm that it is hard to grasp. It is derived in great part from the world of high finance, but it applies everywhere, to everything. The idea is this -- we have four areas of knowledge -- what we know we know, what we know we don't know, what we know we don't know, and what we don't know what we don't know. It's that 4th area where we get into the most trouble and where we try in all kinds of ways to predict, forecast, prognosticate, and otherwise reveal (which we can't, because we don't know what we don't know). Big events with big consequences come out of that quadrant, and the author names these Black show more Swans.

And if you're still with me, let me say that is a huge oversimplification of the ideas in this book. Taleb has written a huge personal essay on a highly practical yet nearly unconsidered area of human knowledge and endeavor. He's studied it, thought about it, talked about it (usually while walking), and written about it. He's found the places it most affects us. He's thought about and proposes methods for making ourselves robust against it (or taking advantage of it, because a Black Swan can be positive or negative, depending on one's preparation and response).

I am not qualified to review this book except to say how it affected me. It has exposed me to the idea that the most valuable part of my library are the books I have yet not read. It tells me not to let things get too big because everything and anything can (and eventually will) fail. Small, fast, and flexible tends to survive and even thrive. Conservative didn't mean what I thought it meant. I need to read this book again one day. show less

Amusing, anecdotal, insightful, and for the first while, sparkling: the narrative promotes new ways of thinking about how foolish it is to predict anything. Taleb was certainly prescient (it was just prior to the 2008 financial crash): an amazing example of his "Black Swan" metaphor for predicting the highly improbable event, an outlier, an unnoticed negative "what if" aspect, to evaluating probable outcomes. Ultimately, we get the message, and I for one, do agree ~ that good research with appropriate mathematical models to predict a trend, a possible endpoint result, etc., can all be flushed down the loo if a Black Swan appears.

A diificulty with the story is that Taleb's theme repeats throughout most of the book, The inability to show more predict outliers implies the inability to predict the course of history, which I found tedious. After several side trips in his narrative, reader engagement fell off, even though the author's writing was itself very engaging. Despite the caveats, I do recommend the book quite strongly because in many fields of research, not just the world of finance, an improbability overlooked can ruin an entire hypothesis. Food for thought, indeed. show less

O improvável, o quase impossível, o inimaginável vivem nos desafiando e acontecendo. Contra todas as expectativas o mundo é muito mais aleatório e imprevisível do que gostaríamos ou estejamos preparados para aceitar. Esse é o tema de Nassim Nicholas Taleb, em seu livro Black Swan onde desenvolve um longo ensaio sobre o impacto dos eventos altamente improváveis. A metáfora do cisne negro vem do fato dos europeus não saberem da existência de cisnes negros até observação de exemplares na Austrália. Antes dessa primeira observação, parece, era comum alguém dizer que algo era tão impossível quanto um cisne negro. Taleb lembra-nos que o fato de nunca termos visto alguma coisa não quer dizer que ela não exista, e apesar show more de isso parecer óbvio ele nos mostra exemplos do dia a dia que comprovam que realmente não entendemos isso. O livro culmina com uma severa crítica à curva de Gauss e a toda teoria estatística em torno dela que vem sendo fartamente usada em diversas áreas. O autor mostra que a curva de Gauss, ou curva do sino, tem uma aplicabilidade muito específica, mas o prazer psicológico que ela gera de previsibilidade e controle dos riscos tem feito com que seu uso se estenda por áreas em que definitivamente ela não poderia ser aplicada. O mercado financeiro, que é a especialidade do autor, é pródigo em eventos altamente improváveis, e lista os eventos que mais impactaram a lucratividade dos mercados e que respondem por um percentual significativo de todos os ganhos acumulados nos últimos 50 anos. São todos eventos que caem para lá dos 10 sigmas. Como lembra o autor, esses eventos segundo a teoria de Gauss só poderiam ocorrer a cada 10 milhões de anos. Mostrando que a curva normal não é preparada para lidar com enventos improváveis que porém ocorrem pelo menos a cada 10 anos. Com exemplos eloquentes e um estilo mordaz, o livro critica o mercado financeiro internacional que se farta de usar softwares baseados nesses modelos e conta o caso de uma empresa de investimento fundada pelos “maiores economistas do mundo” nobeis em modelos matemáticos de modelagem do mercado e que praticamente faliram quando o default da Rússia (um evento improvável) derrubou os mercados.
O autor mostra que o mercado se comporta muito mais como o modelo de Mandelbrot, que é usado para modelar sistemas caóticos, este porém não permite prever o futuro e por isso não agrada aos economistas. O modelo de Gauss apesar de não funcionar quando ele seria mais necessário ele serve para fazer previsões (erradas) e isso se adequa a um mercado que vive de comprar e vender previsões.
No geral Black Swan é muito divertido pelo modo irônico e sarcástico que o autor escreve e também pelos exemplos e comentários que faz. Além de um ensaio sobre a implausibilidade, é também um ensaio filosófico sobre a dificuldade de aceitarmos como a sorte e o azar tem muito mais relevância nos nossos destinos. show less

This book was recommended to me as an examination of "how to think," but it would have been more accurate to characterize it as admonitions on "how not to think." It is a lucid and highly vernacular study of randomness and unknowability, debunking much of what passes for "social science," especially economics. The author is a statistically-trained trader of derivatives, a friend/disciple of Benoit Mandelbrot, and a foe of the Nobel-Prize-bearing intellectual establishment.

If nothing else, Taleb is a brilliant self-promoter who presents himself as a fascinating character. I can't imagine a mainstream talk-show producer reading this book without coveting him as a guest. (The fact that other reviewers have castigated him as "arrogant" only show more enhances this effect.) In an especially clever turn, he introduces the thinly-fictionalized alter-ego of "Nero Tulip," and describes Nero's spectacular facing down of his boss in an episode that could have been part of Palahniuk's Fight Club (98-99). Did Taleb really do that? Maybe.

One little fault I would charge against Taleb is his demonization of Plato. (xxv) He insists that he has read "more material from those I disagree with than from those whose opinion I share," (304) which is of course the intellectually upright approach for those engaged in argumentation. But there's no Plato in his bibliography, and his anecdote to demonstrate what he takes as "Platonicity" only cites a recent book on "handedness". (319) I suspect him of having ingested his distaste for Plato secondhand through Karl Popper. (Taleb lionizes Popper at length.) He insists that to "Platonify" is to see the world through predetermined categories and models. (257) But I think Taleb has a lot in common with Plato in his devotion to intellectual outsiders; and Plato shared Taleb's distrust of narrative knowledge, to the point of proposing that Homeric epics be outlawed.

A key message, and something of the spirit, of The Black Swan can be found in chapter 22 of Aleister Crowley's Book of Lies (1912): The Despot. Taleb writes: "Luck is the grand equalizer, because almost everyone can benefit from it." (222) show less

What you don't know is far more relevant than what you do know. The books you haven't read yet are more valuable than the ones you have read.

What we do know allows us to speculate and create forecasts about the future. What we don't know—the black swan—renders our patterns meaningless.

This truth comes painfully alive in Taleb's graph of a turkey's life. Every day the turkey receives food from the farmer and grows in size. Extrapolating from what the turkey knows suggests a rosy future for the bird. Thanksgiving dinner is the turkey's black swan.

Nassim Nicholas Taleb is a unique author. He is bluntly irreverent, with the sort of disdain for common opinion only Žižek could match! This book is equal parts scientific analysis on show more logical fallacies and philosophical reflection on the role of randomness in life. Taleb's prose is at the same time dense and page-turning.

The Black Swan will help you live well in a life where highly improbable events happen. show less

For my job, I work in a technical field with high-level people in medical research who make important decisions that impact many. Thus, though I am not a primary decision-maker, anything I can do to better understand their mindsets and the impact of their decisions benefits my organization and my career. It is with this perspective that I approach this book. In it, Taleb uses a rare philosophical approach to business by addressing how we think. Many high-impact events (like, say, 9/11), when forecasted, are immediately and instinctively dismissed as “highly improbable.” Yet they have the potential to shift the future dramatically, for better or for worse. These events, nicknamed “black swans,” receive the focus of this book.

This show more book’s central metaphor comes from an observation many in history made about swans. For a long time, Europeans observed that swans were always white and therefore never black. No one thought to do a conclusive study to prove or disprove the potentiality of black swans. They just made an immediate leap from observation to rule. And that leap was incorrect. Eventually, people saw black swans in Australia. Thus, a highly improbable event happened (fortunately without life-or-death impact).

Managing risk is a central theme in the modern world. Rare events often prove to be a crux of history. Most of the time, those events are originally dismissed because they do not meet the center of a bell curve. Nonetheless, because of their potential to have great impact, planning for these events should be attended to. Through philosophical discussion, Taleb seeks to change our thoughts to instead focus on these events as potentially impactful. He relies on research of the mathematician Benoît Mandelbrot (of fractal fame) to illustrate how seemingly unlikely random events occur when looked at prospectively.

Professionally, I spend a lot of time with data and value Gaussian bell curves immensely for biomedical applications. However, I also recognize their limitations – especially, that the data has to be shown to be “normal” to begin with in order for Gaussian analysis to be valid. Many behavioral and financial researchers skip this step of rigor in their statistical analysis. Taleb is writing for a business/finance market that can dismiss outcomes as improbable. The biomedical world, of course, has its own black swans in the form of adverse health events (like cancer), but the threat of litigation and cultural accountability often keep these events on the forefront of diagnostic minds. Nonetheless, it’s good practice to consider potential outcomes when considering risk, regardless of small probabilities. Taleb addresses this thought process directly in this book and seeks to help us all manage an uncertain world more wisely. show less

If you're casually interested in economics or a reader of the Skeptical Inquirer, there is probably a fair amount of this rumination on randomness, specifically of the noncalculateable and very consequential kind - for good or bad - that will not be new.

For such a reader, confirmation biases, "silent evidence" or selection bias, narrative fallacies, retrofitting prophecies to events, and good old self-delusion are familiar concepts. What is fun and satisfying (speaking of confirmation bias!) is to see the target of the discussion not be psychic powers and reputed psychics but practitioners of the dismal science including some Nobel Prize winning economists. And, while Taleb is admiring of Frederich Hayek, his concept of "silent show more evidence" similar to economist Henry Hazlitt's observation that we never see what would have happened if government spending hadn't taken place, and deeply critical of central planning, he doesn't neatly fit into a conservative mold on economic matters. He takes Milton Friedman to task as one of many economists who thought any econometric model was better than none, regards globalization as a dangerous example of - to use the old engineering maxim - efficiency being the enemy of reliability, and thinks Wall Street bonus structures often are dangerous and reward bad behavior.

Taleb is not - as he makes especially clear in the essay "On Robustness & Fragility" added for the second edition - a statistical nihilist, someone who believes that statistics are of no use. While he calls the Gaussian bell curve, the "Great Intellectual Fraud" (while noting it was not really Frederich Gauss but Adolphe Quetelet who sought it everywhere), he also carefully notes that in the land of "Mediocristan" it does work. The problem is you don't always know when you've left Mediocristan and entered "Extremistan" where probabilities are unknown. Those who purport to chart courses for economies and stock portfolios usually don't know one territory from the other. Indeed, the recent track record of many prominent Wall Street financers and economists shows that not only are their predictions wrong - so is their math. Indeed, Taleb says, in his experience, the only profession that takes risk analysis and management seriously is the military, the origin of the "known unknowns" and "unknown unknowns" alluded to in the title of Donald Rumsfield's recent autobiography Known and Unknown: A Memoir.

Tabeb nicely demonstrates common real world examples of areas where Gaussian distributions and the precisely plotted probabilities of the casino don't apply, regions where it is often scalable probabilities that are at work. This explains the "winner take all" distribution of earnings for some professions like writers. He also briefly touches, in his footnotes, on some more sophisticated mathematical analysis of the problems often ignored by statisticians and economists.

The style of the book is an eccentric mixture of autobiography including his youth in Lebanon, anecdote, mathematics, psychology, accounts of Taleb's phone pranks and cocktail conversations, and clearly listed suggestions as to how individuals and institutions can benefit from tunavoidable black swans - which are not always bad. In fact, his advice to embrace randomness in life echoes one of the findings in The Luck Factor: The Four Essential Principles. And he doesn't talk about black swans just in relation to finances but things like health and diet, an idea he developed more in his recently co-authored The New Evolution Diet: What Our Paleolithic Ancestors Can Teach Us about Weight Loss, Fitness, and Aging.

The intimidatingly extensive and varied bibliography offers plenty of reading material for follow up. (Though I don't remember Marxist historian E. H. Carr's What Is History? being a pursuit of causation - quite the opposite, an argument for the futility of doing so - but it's been many years since I read it.) This bracing review and synthesis of a lot of ideas is usually an entertaining guide to seeing the world - and our ability to plan - in a more realistic way. show less