Any time a decision-making-adverse process-oriented manager asks for a QRA (quantitative risk analysis) where you know that the available data is most often ridiculously unrepresentative, give her this book, and tell her she needs to become antifragile.... (keep the handkerchief ready)

This book is a wonderful skepticism of modern life and will challenge your firmest beliefs in science, economics and statistics. To quote Mark Twain, "There are three kinds of lies: lies, damn lies, and statistics.

Once in a while, a book comes up that tell you something new.
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.

Mr. Taleb's views of randomness, luck and the impact of the occurrence of the highly improbable are fascinating and offer an unusual perspective on the world and human existence. The author demonstrates a droll sense of humor that had me laughing out loud several times. You will spend time imagining all the hero's that never were recognized because of all the things that never happened due to their unrecognized sacrifices. Mr. Taleb will make you think about what really was, and what might be in the future. A very enjoyable book.

This is a book that completely changed how I understand life. Those who denigrate this book do not understand it. Taleb has spoken some profound truths that have not been told before. Human perception and human understanding has made us blind to the truths that he explains in this book. Once you understand what he has to say, you cannot help but experience a change in your perception of everything around you. The book explains very simply and it does not require any special knowledge or education, either in philosophy or in economics to understand it.

Taleb's romp through the land of what we do not know, what we cannot know, and how we deceive ourselves into thinking we know so very much more than we actually do is both fun and insightful. He takes observations that he made as a trader and uses them as a launching platform into the many pitfalls and traps we fall into in considering any problem.

I bought this book with Mandelbrot's Behavior of Markets, and for the same purpose. I wanted to get a strong intuitive understanding of the consequences of the difference between the actual behavior (power-law) and the assumed behavior (Gaussian) of markets. I wanted to know what the power-law relationships were, so that I could build my own statistical models. And I wanted an analysis of real data showing that, in fact, markets in question do follow power-law relationships. Were I to rate this book solely on its ability to deliver on these expectations, I would have to give it two stars; for this book has nothing to do with the actual empirical facts. It is, instead, a highly rhetorical appeal to us to use empirical facts in making decisions about the market while it nevertheless manages to completely dodge the task of presenting any real market data.

The inquiry here is much broader. Taleb is painstaking, almost encyclopedic, in his enumeration of ways in which our understanding of information breaks down. He draws on ideas from Greek, Roman, Arab, French, and English thinkers spanning more than two millennia. He also draws from the fine work of contemporaries Kahneman and Tversky which demonstrates how - when guessing about things - we all systematically underestimate our probability of being wrong by about a factor of twenty. He asserts that people with MBA's and those running large financial institutions do so a great deal more than, say, taxicab drivers and trash collectors.

He visits physical models which prove that we cannot know much about the physical world, such as the three-body problem. The point is that when even physical systems that can be described very exactly in mathematical equations cannot be predicted with arbitrary accuracy, what's the hope of predicting things for which we don't even know the variables or the math one might use in describing them? Here he misses some opportunities by needlessly scoffing at the uncertainty principle, and by failing to include comments by one towering physicist of the twentieth century, probably Von Karman*, about how no physical phenomenon seemed spookier - i.e. more difficult to describe accurately using mathematics - than turbulent flow in fluids. This is an unfortunate omission since Mandelbrot actually uses the term "turbulence" to describe the fluctuations in market prices of goods and securities.

One reaction to Taleb's arguments about how little we can ultimately know and on what shaky ground our beliefs lie is to stand, like a deer in the headlights, waiting for better information. Taleb argues that this is a mistake. It might be a bit better to proceed, looking for evidence that would prove one's course of action wrong, then modify one's model of reality and repeat the process. Doing this has the advantage that one can learn quite quickly about how any problem is bounded, and get some sense for the shape of the space inside. He quotes Warren Buffet: it is a great deal better to be approximately right than it is to be precisely wrong. And when choosing among things to believe, he advises us to rank beliefs not by their implausibility but by the harm they might cause. Although there are robust methods that draw on both judgments, this is generally very sound advice.

The book is highly irreverent. In financial circles it is seen as blasphemous, not just because it flies in the face of conventional wisdom, but because the author has so much fun demolishing revered ideas. Anyone who can take it seriously and follow its advice ought to be much better at evaluating information and making decisions. This quality gives you a much better chance of becoming rich and famous like Taleb - though as Taleb might explain, there is still a vanishingly small chance of this happening. The down side is that following Taleb's advice is likely to make one a great deal less promotable (especially in financial firms) because - according to Taleb - reaching high levels of a company depends almost exclusively on making others believe you know things about which you are actually completely clueless; and only sociopaths and very self-deluded people do this convincingly.

This suggests that one would read the book for the sole joy of knowing that you're the only person in the room who is sane enough to understand how little you actually know about pretty much anything.

Good Reading

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*Taleb makes great use of footnotes, and I recommend reading them all. Some of the best material in the book is in them. Van Karman is most famous, perhaps, for his role in adjudicating what to do after the collapse of the Tacoma Narrows bridge - arguably a Black Swan event. One day not long after this long suspension bridge was erected, it began twisting and oscillating in a 50 MPH wind. Some minutes later it collapsed. Von Karman was called in to evaluate what happened. He told the town council that the vortex shedding frequency of the bridge in a 50 MPH wind happened to closely match the natural vibrational frequency of the bridge. The bridge had gone into harmonic oscillation which created stresses that were much higher than those created by static loads for which it was designed, and this was why it failed. Although it is to avoid collapsing bridges via harmonic oscillation that British soldiers fell out of step when crossing bridges over several centuries prior, the town council had never heard of anything like this happening before. They declared "It was a very well-built bridge" and therefore "we shall build it exactly as it was before." To which Von Karman replied "If you build it exactly as it was before, it shall collapse exactly as it did before." To their credit, they had the bridge re-designed.

This is a wonderful book for me; over the years I've met few people who think like me, and none in recent years in Brisbane. Taleb resonates: his understanding of the world is based on direct observation and a clear understanding of uncertainty, in a world where people live by rules and expectations which ignore the fact that "Black Swans" - unexpected events with major ramifications - dominate history and economics. Taleb derides economists, but I think he's thinking of forecasters. As an economic policy adviser, I have long argued that we don't know what will happen, we need to adopt policies which enable us to respond positively to changing circumstances; not to resist change, which is inevitable and largely unforecastable, but to embrace it. A message little heard prior to this excellent book.