Exploring the Unforeseen Consequences of Rare Events: The Black Swan

Pedro: Yet another great work from Taleb. He brings numerous pearls of wisdom throughout the book, which are reason enough to read it, even if he doesn’t add any theoretical knowledge to you repertoire: his discussion alone of the applicability of a number of theoretical concepts (mostly derived from Hume’s “Problem of Induction”) is worth the book. I would also highlight:

- his explanations on the different estates of reality and how it’s difficult to assess luck (a more refined explanation of the main topic of “Fooled by Randomness”)

- how nonlinear effects are prevalent in modern society.

- How Gaussian statistics may be an elegant, but wrong, description of reality and how using it can be downright dangerous

- Multitude of examples on how our behavioral biases reinforce those phenomena and lull us into a false sense of security and control.

- Discussions on the “ludic fallacy”, the limited capability we have in forecasting and mistaking absence of evidence for evidence of absence.

If you’re looking for the “best” blend between practical advice and philosophical inquiry in Taleb’s works, I would recommend this book....

Brazil on Jun 30, 2020

Bobby Matherne: "All swans are white" was an unassailable truth up until the discovery of Australia — it was something everyone knew to be a fact. But it was neither true nor a fact. All it took was the sighting of one black swan in the new southern continent to turn the Old World upside down on its head. Taleb, a cagey Lebanese-born philosopher and thinker, has grabbed onto the "black swan" as a synecdoche for an abruptly appearing, totally unexpected event which has a great impact on the world, but for which the world conjures up ex post facto explanations which makes it all sound reasonable and predictable. Sure, antiseptic procedures for doctors sound reasonable today, but the black swan Dr. Ignaz Semmelweis was imprisoned in a mental institution by the head of his hospital, even after his procedures had saved over a hundred-thousand women in Vienna from dying in childbirth! I have made a vocation of seeking out such black swan innovators, both those like Semmelweis whose contributions grace history books and some whom I have been fortunate to meet and or converse with, such as Immanuel Velikovsky, Richard Bandler, John Grinder, Joseph Newman, Andrew Joseph Galambos, Doyle Philip Henderson,...

United States on Apr 25, 2013

Miles Saltiel: It may not be fun for forecasters to admit it, but NNT (his abbreviation) is onto something: those of us in the business (I spent many years as a stock analyst) are often doing little but making up stories (what NNT stigmatises as "narratives"). Indeed it is the business of a good analyst to weave a story out of recent price movements, valuation anomalies and other news, as well as estimates of future earnings. As NNT stresses, the last of these is the most unknowable. Surprises catch us out. NNT is onto something else as well: his "Black Swan" concept, the unlikely event with extreme consequences, is not captured by the bell curve of normal distribution underlying much investment theory.

But we have to plough through a heck of a lot of anecdote, self-serving reminiscence and repetition to learn that there isn't much more to NNT's book than these two--not desperately startling--points; and that his approach to the consequences of his insights is so banal as to recommend that we avoid big risks and put ourselves in the way of big rewards. It is also inherent in NNT's view of these things that the tiny amount of maths presented is offered in such a tentative spirit as to make...

United Kingdom on Feb 09, 2008

C. E. Carter: Taleb has been bewildered and perhaps embittered by his experience of growing up in a seemingly civilised society that suddenly and permanently found it self in turmoil and war. And who can blame him? His message is that for some classes of systems, such as the Christmas turkey, past experience is no use in forecasting the future. The stock market is one such system, therefore mathematics and the bell curve, of which the normal distribution and standard deviation is an example, are entirely useless.
The swan's colour; black is, coincidentally perhaps, associated with negativity. The author does seem more concerned with negative consequences than positive ones. This leads him to offer certain financial advice to the reader without knowing her personal circumstances or attitude to risk. The advice (page 205 Barbell strategy) is to adopt either of two strategies. One strategy is for her to invest all her funds in high risk companies in order to benefit form positive black swans, whilst at the same time hedging against a drop in the value of their combined assets of more than 15%. This does not sound financially practicable. Is it not like trying to have your cake and eat it too?...

United Kingdom on Oct 22, 2007

ntevanza: Taleb's life story is so improbable, his practical adherence to Popperian philosophy so unfashionable, and his style so quirky, that most people will ignore his ranting about fatal bias as the squeaking of a hobby horse ridden by a crank. He is probably better described as a contrarian among contrarians. And boy does he know it.

Still, we should be grateful that Taleb's taste for fame exceeds his avidity. For in exposing the inadequacy of how we model the non-material world, Taleb risks the erosion of the causal blindness arbitrage opportunities from which he claims to have made a living.

The good news is that people are just as stubborn when they are wrong, so there is plenty of time to exploit to your advantage the insights Taleb is offering you here - although an uncharitable reading is that he is simply arguing for a wider use of insurance.

Taleb's Popperian probabilism will eventually enter the mainstream, whereupon it will all seem rather obvious, and you (and he) will be assailed by bores who claim to have been Talebistes all along, just like the traders and pundits Taleb lampoons for triumphantly predicting the past.

If you are content to live...

United Kingdom on Sep 08, 2007

Serghiou Const: The author is very bright, erudite, original and incisive in his thinking and engaging, entertaining and caustic in his writing.

He was born in Lebanon to a patrician family and grew in a highly cultured environment. His remarkable abilities were honed through attending the prestigious and highly competitive Wharton School of Management.

His professional life is devoted to problems of luck, uncertainty, probability and knowledge. Part literary essayist, part empiricist, part no-nonsense trader, he is currently the Dean's Professor in the Sciences of Uncertainty at the University of Massachusetts at Amherst.

The gist of the book comprise the ecologies of 'Mediocristan' and 'Extremistan' and vey particularly the latter.

'Mediocristan' does not attract much the attention of the author because in this area the bell curve is admirably suited; this area includes for example biological variability such as the variation in the height and weight of people which fit excellently in the bell curve.

The author reserves his wrath, scorn and irony when the bell curve is incorrectly used in 'Extremistan' that is in the area of SocioEconomics, inhabited...

United Kingdom on Jul 31, 2007

Amazon Customer: 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...

United States on Apr 26, 2007