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The Black Swan: The Impact of the Highly Improbable (Incerto) [Hardcover]

Nassim Nicholas Taleb
3.7 out of 5 stars  See all reviews (891 customer reviews)

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Book Description

April 17, 2007 Incerto
The Black Swan is a standalone book in Nassim Nicholas Taleb’s landmark Incerto series, an investigation of opacity, luck, uncertainty, probability, human error, risk, and decision-making in a world we don’t understand. The other books in the series are Fooled by Randomness, Antifragile, and The Bed of Procrustes.

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. In this revelatory book, Taleb explains everything we know about what we don’t know, and this second edition features a new philosophical and empirical essay, “On Robustness and Fragility,” which offers tools to navigate and exploit a Black Swan world.
 
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.
 
Praise for Nassim Nicholas Taleb
 
“The most prophetic voice of all.”—GQ
 
Praise for The Black Swan
 
“[A book] that altered modern thinking.”The Times (London)
 
“A masterpiece.”—Chris Anderson, editor in chief of Wired, author of The Long Tail
 
“Idiosyncratically brilliant.”—Niall Ferguson, Los Angeles Times
 
The Black Swan changed my view of how the world works.”—Daniel Kahneman, Nobel laureate
 
“[Taleb writes] in a style that owes as much to Stephen Colbert as it does to Michel de Montaigne. . . . We eagerly romp with him through the follies of confirmation bias [and] narrative fallacy.”—The Wall Street Journal
 
“Hugely enjoyable—compelling . . . easy to dip into.”Financial Times
 
“Engaging . . . The Black Swan has appealing cheek and admirable ambition.”—The New York Times Book Review

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The Black Swan: The Impact of the Highly Improbable (Incerto) + Antifragile: Things That Gain from Disorder (Incerto) + Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets (Incerto)
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Editorial Reviews

Amazon.com Review

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



From Booklist

In business and government, major money is spent on prediction. Uselessly, according to Taleb, who administers a severe thrashing to MBA- and Nobel Prize-credentialed experts who make their living from economic forecasting. A financial trader and current rebel with a cause, Taleb is mathematically oriented and alludes to statistical concepts that underlie models of prediction, while his expressive energy is expended on roller-coaster passages, bordering on gleeful diatribes, on why experts are wrong. They neglect Taleb's metaphor of "the black swan," whose discovery invalidated the theory that all swans are white. Taleb rides this manifestation of the unpredicted event into a range of phenomena, such as why a book becomes a best-seller or how an entrepreneur becomes a billionaire, taking pit stops with philosophers who have addressed the meaning of the unexpected and confounding. Taleb projects a strong presence here that will tempt outside-the-box thinkers into giving him a look. Gilbert Taylor
Copyright © American Library Association. All rights reserved

Product Details

  • Series: Incerto
  • Hardcover: 366 pages
  • Publisher: Random House; 1 edition (April 17, 2007)
  • Language: English
  • ISBN-10: 1400063515
  • ISBN-13: 978-1400063512
  • Product Dimensions: 9.2 x 6.5 x 1.2 inches
  • Shipping Weight: 1.4 pounds (View shipping rates and policies)
  • Average Customer Review: 3.7 out of 5 stars  See all reviews (891 customer reviews)
  • Amazon Best Sellers Rank: #38,496 in Books (See Top 100 in Books)

More About the Author

Nassim Nicholas Taleb spent two decades as a trader and risk taker before becoming a full-time essayist and scholar focusing on practical, philosophical and mathematical problems with chance, luck, and probability. His focus in on how different systems handle disorder.

Taleb is currently Distinguished Professor of Risk Engineering at New York University's School of Engineering, but he spends most of his time in the intense seclusion of his study, or as a flâneur meditating in cafés.

He is the author of the Incerto (latin for uncertainty), accessible in any order (Antifragile, The Black Swan, The Bed of Procrustes, and Fooled by Randomness) plus a freely available Technical Companion, Silent Risk, in addition to technical works. Taleb's books have more than 100 translations in thirty-five languages.

Taleb believes that prizes, honorary degrees, awards, and ceremonialism debase knowledge by turning it into a spectator sport.

""Imagine someone with the erudition of Pico de la Mirandola, the skepticism of Montaigne, solid mathematical training, a restless globetrotter, polyglot, enjoyer of fine wines, specialist of financial derivatives, irrepressible reader, and irascible to the point of readily slapping a disciple." La Tribune (Paris)

A giant of Mediterranean thought ... Now the hottest thinker in the world", London Times

"The most prophetic voice of all" GQ

Customer Reviews

Most Helpful Customer Reviews
1,457 of 1,579 people found the following review helpful
5.0 out of 5 stars Lost in Extremistan with nothing but a Bell Curve April 18, 2007
Format:Hardcover
If, as Socrates would have it, the only true knowledge is knowledge of one's own ignorance, then Nassim Nicholas Taleb is the world's greatest living teacher. In The Black Swan, Taleb's second book for laypeople, he gives a full treatment to concepts briefly explored in his first book "Fooled by Randomness." The Black Swan is basically a sequel to that book, but much more focused, detailed and scholarly. This is a book of serious philosophy that reads like a stand-up comedy routine. (Think Larry David...)

The Black Swan is probably the strongest statement of enlightened empiricism since Ernst Mach refused to acknowledge the existence of the atom. Of course, in theory, everyone today is supposed to be an empiricist - all right-thinking intellectuals claim to base their views solely on positive scientific observation. But very few sincerely confront the implications of rigorous empiricism. Specifically, few confront "the problem of induction," illustrated here by the story of the black swan.

Briefly: observing an event once does not predict it will occur again in the future. This remains true regardless of the number of observations one adds to the pile. Or, as Taleb, recapitulating David Hume, has it: the observation of even a million white swans does not justify the statement "all swans are white." There is no way to know that somewhere out there a black swan is not hiding, disproving the rule and nullifying our "knowledge" of swans. The problem of induction tells us that we cannot really learn from our experiences. It makes knowledge very problematic, if not impossible. And yet, humans do behave -almost without exception- as though they believe that experience teaches us lessons. This is forgivable; there is no better path to knowledge.
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934 of 1,012 people found the following review helpful
Format:Hardcover
Starting with the good (chapters 15 - 17), within chapter 15 Taleb explains where the Bell curve works and where it does not. The Bell curve captures well variables that don't deviate much from the mean. Otherwise, it does not work. Taleb suggests we often fool ourselves in believing that correlation, regression coefficients, or standard deviation convey much information. This is because those coefficients are unstable (and can flip sign when possible) depending on the time selected. This is because the underlying variables are often not stationary enough for these coefficients to be stable.

Chapter 16 is excellent as an introduction to Mandelbrot's fractal geometry as an alternative to Gaussian based investment theory. He supports well that these mathematical tools do capture randomness (of non-stationary variables) far better than the Normal distribution. However, he admits that Mandelbrotian models are not predictive. When looking at the same data set, he and numerous colleagues each came up with different underlying parameters to build fractal-like models. And a small difference in such parameters makes a huge difference in outcome. That's why you will not hear much of fractal geometry within the quantitative financial community. Nevertheless, this is a fascinating subject that deserves further exploration. For this purpose, I recommend Mandelbrot's The Misbehavior of Markets

Within Chapter 17, Taleb further elaborates on the flaws of the Normal distribution. He underlines that half of the return of the stock market over the past 50 years was associated with just 10 days with the greatest daily change.
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986 of 1,086 people found the following review helpful
Format:Hardcover|Verified Purchase
This is an entertaining and enlightening book, and fairly easy to read. It has an important message regarding how the world works; that the world is governed not by the predictable and the average, but by the random, the unknownable, the unpredictable -- big events or discoveries or unusual people that have big consequences. Change comes not uniformly but in unpredictable spurts. These are the Black Swans of the title: completedly unexpected and rare events or novel ideas or technologies that have a huge impact on the world. Indeed, Taleb argues that history itself is primarly driven by these Black Swans.

It is convincing argument, entertainingly presented with plenty of sarcasm, and indeed, anger, by Taleb. For example he rails against the academic community, economists (including specific names), and Nobel Prize committee. Considerable numbers of his arguments "ring true" to me, that is my experience in life confirms that they are more accurate than the traditional approach. Like any important work, 90% of what is in the book is not original; that does not make it less important. Taleb's contribution is in integrating the material together, and showing how these different ideas are tied to the Black Swan.

The themes include: winner-take-all phenonomen, numerous effects of randomness on the world, the invalidity of the Gaussian Bell Curve to most things in world, concepts of scalablity, numerous instabilities in the world, especially the modern world where information travels so quickly, the fallacies about people's inability to predict the future.
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Most Recent Customer Reviews
4.0 out of 5 stars Four Stars
Makes you analyze a little more careful the action you will take
Published 1 day ago by Pius Ottiger
1.0 out of 5 stars Read Kahneman, Not Taleb
I first encountered Nassim Taleb when another author cited his research on Long-Term Capital Management. Read more
Published 2 days ago by Kevin L. Nenstiel
4.0 out of 5 stars There are Black Swan books, and then there are Black Swan events!
Interestingly, this book WAS a Black Swan!! The paper jack said "The Black Swan, the Impact of the Highly Improbable". Read more
Published 7 days ago by Sapere Aude
5.0 out of 5 stars Five Stars
Purchased as a gift for my husband and he loved it!
Published 8 days ago by Reading lover
5.0 out of 5 stars Five Stars
Great book
Published 9 days ago by joseph mugisha mushoka
4.0 out of 5 stars A Powerful Message But Too Verbose
The main message from the book concerning Black Swans, that is, low probability - high impact events is well conveyed by Nassim Taleb. Read more
Published 10 days ago by Joao Cortez
5.0 out of 5 stars Five Stars
This book radically changed my world view.
Published 11 days ago by Ronald D. Barry
2.0 out of 5 stars By unreadable I mean that this man is so full of himself that the...
I confess that this review is only based on the first forty pages of this book, but those forty pages were enough to convince me that Taleb's prose is unreadable. Read more
Published 12 days ago by Zachary Robert Olsen
5.0 out of 5 stars This is, by far, the best book on risk and risk management out there.
This is, by far, the best book on risk and risk management out there. Informative, enlightening and entertaining; this book takes a profound look at the impact of the unexpected,... Read more
Published 15 days ago by Evan Leybourn - Author of Directing the Agile Organisation
5.0 out of 5 stars Essential Reading -- Maybe later.
I suspect that "Black Swan" has been in the lexicon of statistics for a while. But, this book seems to have raised awareness to a global level. Read more
Published 16 days ago by B. Volkert
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The Black Swan and What's Wrong with Nassim Taleb's Viewpoint.
George Box :: `all models are wrong, some are useful'

As a statistician, we never say our models are right but often just that they are useful. Assumptions are made and any (good) statistician would acknowledge this. Further, it's never a question of whether the assumptions hold -- we assume... Read More
Feb 5, 2008 by David |  See all 53 posts
What you need to understand about the bell curve before you can...
Michael,

Thanks for the facts. Your post demonstrates exactly why people DON'T understand or appreciate the bell curve. We all learned these facts in statistics. The empirical rule, etc. However, most people don't understand the practical application. It's similar to understanding algebraic... Read More
Apr 24, 2007 by Patrick R. Bowman |  See all 11 posts
Don't you have to understand the Bell Curve before you can appreciate...
The real question that needs to be answered is whether or not the actual time series data in a particular field satisfies some kind of goodness of fit test.The Chi-Square test for goodness of fit is the simplist to use.
Shewhart and Deming demonstrated ,in their work on quality control,that... Read More
Apr 24, 2007 by Michael Emmett Brady |  See all 9 posts
If Amazon would please care to explain the difference
Taken from his personal website (http://www.fooledbyrandomness.com/):
"I added close to 100 pages to The Black Swan (new material On Robustness & Fragility) for the paperback version (May 2010). The addition will be published as a separate book Réflexions philosophiques in France (Les... Read More
Jul 4, 2010 by A. V. Jónsson |  See all 2 posts
Is this book practical?
Shockingly, Taleb's advice is catastophically flawed. He uses the example of Pascal's wager (the argument that a person should practice Christianity regardless of how improbable, because of its infinite payoff in the afterlife.) He writes, that while this is bad theology, it is good for worldly... Read More
Sep 10, 2008 by A. Allinger |  See all 5 posts
Monte Carlo simulation software Be the first to reply
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