'The Black Swan' by Nassim Nicholas Taleb (2007)

I’ve been taking my time reading Nassim Nicholas Taleb’s book ‘The Black Swan’ because I find it pretty rich with ideas. The thrust of the book is a look at uncertainty and risk, and it makes the claim that we really don’t do a very good job of understanding the risks that we may face. His claim is that many so-called experts are basing their judgments on the idea that most phenomena follow a bell-shaped curve, with outliers being extremely rare and even then having only nominal effects on the average. Taleb makes the case for the ‘black swan’ – that you can’t know the true risk profile of events in many cases, and that the appearance of the black swan (when all you’d ever seen were white swans, and you assumed that was all that existed) could overthrow all you thought you knew.

So far I’ve just read part one, on ‘how we seek validation’. Some of the ideas he covers are on the confirmation bias (we tend to look for confirmatory evidence to our theories, rather than looking for the evidence that will show us we’re wrong), the narrative fallacy (we respond to stories rather than data, and we make up stories based on partial evidence and then believe that the story is the whole truth), disregarding the silent evidence (we see the few survivors of a long process and assume they must have known what they were doing, forgetting that many tried the same strategies and lost along the way), and other such concepts.

Another intriguing point, as restated by Niall Ferguson in his review:

In any case, as President Bush has learned, you don’t get rewarded for trying to stop bad things from happening, precisely because if you’re successful they don’t happen. On his watch, after all, there hasn’t been another 9/11 (a classic Black Swan event). And Saddam Hussein will never invade Kuwait again. But is anybody out there grateful? Not even Bush himself can be certain that his strategy of pre-emption deserves the credit for non-events.

Taleb has little respect for most stuffed-shirt academics (he himself is a financial trader turned skeptical empirical philospher). Judging from the comments over on Marginal Revolution, many find him arrogant. I’d say he’s a smart man with an attitude, and I like it.

Part two of Taleb’s ‘The Black Swan’ is focused on the difficulties of predictions. There are a few important ideas here.

1.  “The problem is that our ideas are sticky: once we produce a theory, we are not likely to change our minds – so those who delay developing their theories are better off.” p. 144

2.  Taleb distinguishes between ‘experts who tend to be experts’ such as astronomers, chess masters, soil judges, etc. vs ‘experts who tend to be … not experts’ such as stockbrokers, psychiatrists, college admissions officers, intelligence analysts.  Not surprisingly, he throws economists into the second group.  As he puts it, “Simply, things that move and therefore require knowledge, do not usually have experts”. p.147

3.  “I believe that you can be dead certain about some things, and ought to be so.  You can be more confident about disconfirmation than confirmation….  The Black Swan asymmetry allows you to be confident about what is wrong, not about what you believe is right.” p. 192.