A book: Black Swan by Nicholas Taleb

image– What’s the probability of meeting a dinosaur in the street?

– Around 50/50: you either see one or you don’t.

One of the most long-lasting books in my library: I’ve spent almost three months reading it. Not that it’s not interesting, or it’s very large, or something like that. It’s just that I needed to stop and think over what I’ve just read. Well, there was one thing which made it hard for me to read the book (I’ll tell about it later), but other than that it’s just abnormal. And, while there is little in the book I haven’t thought about myself there was much food for thought.

I’m not going to recapture the book for you, the main idea is that judging many events in our life with standard statistics, based on the normal distribution is futile if not plain stupid (well, NNT believes it’s stupid). Aaaand, that, actually, gets quite a range of subsequences. From unpredictability of what’s action will bring you success to “(almost) all Nobel prize winners from Economy are idiots”. You’d better read the book, because it seems to be quite close to the truth.

Meanwhile, here’s what I found out to be interesting aside of what I’ve mentioned already:

1) Taleb says we cannot forecast our future. Actually, we cannot even tell what and why happened long ago. It’s even more difficult. More distinctly it’s described with some kind of test: it is nearly possible to predict what kind of pool will create an ice cube. But it is totally impossible to judge the form of the cube, basing on the pool.

2) There was a mention of quite popular story about Umberto Eco’s ant library. Well, as attractive idea as it is, beware or else you’ll be buying books, but not reading them at all.

3) Why cannot we “predict” our own history? Well, even leaving aside what was described in Orwell’s “1984”, our brain is quite lazy and we are susceptible to the following fallacies when dealing with history:

a. Illusion of understanding. Everyone thinks he knows what goes on. Nah, we don’t.

b. Retrospective distortions. We see the past more organized than it was. It’s way too easy to find absolutely solid-state explanation of what just happened. Solid-state and incorrect. (I like a joke about it: during one of major financial crisis one economist calls his friend: “Hi Steve, do you understand what’s happening?”. “Sure, listen I can explain it to you…” starts Steve, but is interrupted: “No I can explain it myself. Do you understand what’s happening?!”).

c. Simplification of the reality (Taleb calls it “platonification”). We cannot take in, save comprehend, the whole complexity of the world. Our brain immediately starts creating models. As in “leave out nonessential details”. And often we don’t really know what’s nonessential in this particular situation.

4) Induction is, generally not the only and the safest way of forecasting the future. The central example of Taleb’s is a turkey which receives its food 100 days in a row, gaining wait. But on 1001 day there comes a butcher:

(illustration from the book)

Besides the fact that we cannot successfully predict the particular events, there is one more law I already mentioned in my blog (Russian): negative results don’t give us any answer in sense “the thing we don’t know don’t exist”. Just one observation of isolated fact or event will ruin the whole 2000 years’ experience.

5) Markowitz tricked everyone and wasn’t too right. Hey, I wrote a paper in my university on Markowitz! Hands off Markowitz! =)

6) Sometimes NNT uses metaphors in otherwise mathematically sound proofs. That’s rubbish and makes some places a bit less convincing. We see it Nassim, stop doing that 😉

7) For me the book has finally explained, why all the predictions are rubbish (from Gartner to everyone else). I felt it deep in my guts but wasn’t able to explain why.

8) Still I’d say a couple words in support of all those “predicting guys”. Average human like me should have some model to act. It’s better to do something according to the model which may not work (or may work for that matter) than looking for the absolutely correct model all your life without doing anything. And having at least some model is much easier psychologically. Just remember: there is day 1001. After all someone should have done all that stupid stuff on which Nassim Taleb made his observations.

9) One important consequence of the previous item: «Forecasting by bureaucrats tends to be used for anxiety relief rather than for adequate policy making». And it is sometimes really important and useful to know how to use it. Just be careful to use it fully understanding what and why you are doing.

10) We cannot predict future technological advances. Even theoretically. It’s all somewhat random.

11) We’re all lucky people. Why? I just cite the book here: “Imagine a speck of dust next to a planet a billion times the size of the earth. The speck of dust represents the odds in favor of your being born; the huge planet would be the odds against it. So stop sweating the small stuff. Don’t be like the ingrate who got a castle as a present and worried about the mildew in the bathroom. Stop looking the gift horse in the mouth—remember that you are a Black Swan.”

Have fun reading it even though it’s somewhat tough because it seems like mr. Taleb is very offended by the leading economists and their getting Nobel Prize. A bit too much venom for my taste, Mr. Taleb 😉

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One thought on “A book: Black Swan by Nicholas Taleb

  1. Pingback: Why “7 rules of smth.” should be 1 of the 7 deadly sins | Path of YeahManager

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