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The Black Swan: The Impact of the Highly Improbable (Incerto) Hardcover – April 17, 2007
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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 its 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
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
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Will recommend to anyone who are willing to plough through.
Thus "models" have only very limited usefullnes, and help (normally) in "dull" systems.
This is the first time I've read an understandable explanation of fractal systems. And it also confirmed what I thought probable: Econometrics and economic systems analysis is either hot air or (as Nicholas Taleb puts it): Bull***t.
Combine liberal dollops of humour, deep thought and you have an engrossing book.
In the Second Edition there are great insghts into the 2008 Meltdown. This "crisis" doesn't fit in with a *real* Black Swan, since the people who thought about it saw it coming, but is a perfect example of how we need to totally rethink on how we manage risk in real systems. Basically, you can't predict risk, son you have to prepare yourself as best as possible (hedge your bets).
This is such a book.
This book makes the problem of knowledge come alive. It basically
addresses the question of what knowledge and the acquisition of
knowledge mean especially when it's what we don't know, the black
swans, that impacts us the most. This problem comes alive in the story
of Nassim Nicholas Taleb's (NNT) life and how he grew up in war-torn
Lebanon, a country reputed for its long-lasting peace. In turn, I can't help but
finding "black swans" in my life as well. I wonder how many people have
black swans in their closet so-to-speak.
The black swan problem leads to skepticism toward science and
causality. Religion and faith are the alternatives. Erudition is
necessary to keep an open mind. Scholarship w/o erudition leads to
disaster: platonicity and simplification. NNT does seem to take
pleasure to display his erudition.
While this book does not propose new theoretical paradigms for
predicting black swans (that wouldn't make sense), it gives some
practical advice for making decisions in an uncertain world. One such
advice is to "maximize the serendipity around you" and another is to
"worry less about embarrassement than about missing an opportunity."
In this context, the chance aspects of success ("success is a
cummulative advantage") are clearly exposed and for that, this book gets 4 stars.