The Black Swan: The Impact of the Highly Improbable

I have always loved books that have been written to drive a major point through. "The Black Swan" by Nassim Nicholas Taleb definitely is one of those books. It clearly has a clear mission of its own. The reading of this book was, in fact, one of the most remarkable events in my life in the past few years. Nassim Nicholas Taleb has not written this book from a very personal viewpoint just to make himself seem important, which of course is always a motive in writing any book. However, he has done it because he has to make his readers understand how the message in the book is based on deep personal learning and a grander vision over the state of things. A previously little known person who does bring revolutionary new ideas to the grand international market of ideas just must first convince his readers of his or her worthiness as a thinker. His main message is to make his readers to understand the true unpredictability of the complex systems that so pervade the modern world. In my eyes his other big issue is to bring to light the fallacies that have twisted the field of modern economics. The real universal lesson that was hidden in this book was, for me at least, realizing that there are and even need not be simple and neat explanations for everything. There really are issues that cannot be easily explained at all. All possible explanations for them are just shots in the dark. This is true even if we tend to choose the most authoritative soundings ones and even treat them as some kind of `truth'. After reading this book, I also realized how philosophy allows us to explore also those important areas of life that do not have any kind of definite or final explanations. After all, this blog is largely about presenting new ideas on things about which we will never have any kind of final knowledge. For example, we can never really know what motivated the writers of the Bible in their work. We can only speculate. "The Blaxk Swan" was also extremely important because thanks to it I realized that we simply must endure a certain level of uncertainty if we even try to find any kind of answers to many questions. Sometimes demanding certainty would preclude even the posing of those questions. This book is about black swans or large, unpredictable events that do change and mold our world to a degree that is difficult to fathom at first. Nassim Nicholas Taleb comes from Lebanon. He really has first-hand experience of a black swan of monstrous proportions. This was the civil war of Lebanon that started in the year 1975. It did quite unexpectedly and utterly destroy the society that was deemed as even the most stable and dynamic in the whole of the Middle East. When our societies have become more and more complex, there are more and more things that cannot be explained with a simple cause and effect -chain, Hundreds or thousands of simultaneous processes do affect the outcomes of large systems like complex modern societies. As Nassim Nicholas Taleb says `we are explanation-seeking animals' and we want our neat `because'-answers preferably before bed-time, even if it is often impossible really to have one. Nassim Nicholas Taleb operates in the book mainly in the field of economics, where the tendency to create simplistic models to explain complex phenomena is possibly the greatest of all of the fields of human enterprise. He attacks modern economics vehemently and without mercy page after page. He is after something very real. I have myself for a long time thought that most modern economics is just emperors without cloths. I have reached this conclusion after following for 20 years economics as a professional journalist concentrating on economics. In my mind, highly complex and authoritative looking systems are built to hide the fact that economical models do not explain or predict anything of real importance. So, it is always a pleasure to find a world-class thinker and writer who thinks . In the real world the big swings in markets are those which really make or brake whole economies. However, modern economics cannot predict them or even explain them. Anybody can predict the steady movements on cool markets just by looking at the charts equipped just with a sharp pen and a suit. Nassim Nicholas Taleb speaks about `empty suits' and in the field of economic theory, where they are perhaps more prevalent than in any other field of human endeavor. In the fine-looking equations of the economists there almost invariably are missing the "g"and "f" -factors. They are the amount of purely emotionally explainable "greed" and "fear" in the market. However, these to things will often largely decide the really big moves on the stock markets. However, if one misses this, all the rest of equations are worthless. This is true, even if they can predict with great mathematical accuracy the workings of rational beings acting in a rational way. Unfortunately humans acting in stock markets are not such rational beings at all. They are driven largely by herd instinct and emotions. The real role of emotions and psychology in general in economic decision making process have been all too often been bypassed in economics. However, emotions are extremely important in even this field of live, besides their very central role in helping us cope with other people from day to day and most of all to cope with all the ever-chancing and stressful situations we encounter in life. Emotions are an extremely important product of evolution and evolution does not as a general rule produce things that are unnecessary, even if some older things can become redundant with time. In economics, the role of emotions as a major motivator for decisions is all too often still bypassed. This happens perhaps because changes in emotions are extremely difficult to predict. However, many economists stubbornly love to pretend that they really can predict things. The other extremely important feature that is in my mind one of the main forces affecting economy is of course the herd instinct. A human herd does need to have any kind of physical contact. Herds were formed with the use of rumors only even before the advent of modern media. However, herds are now formed (and also dispersed) in a blink of an eyelid thanks to the new information technology. Nowhere else this forming of virtual herds is so instantaneous as in the stock markets. The preceding passages are strictly my own thinking. However, Nassim Nicholas Taleb stops his critique short of this level. Just perhaps this is because he is himself part of the economic establishment that does feed on the gullibility of the investors. However, this group is a new incarnation of medieval Catholic clergy which did lead pleasure-laden lives that was paid for by the gullible masses. They were duped into believing that paying for the upkeep of this unproductive part of the population would be paid back for them in the after-world. Now the gullible masses are of course promised happiness right here on earth, if they just give their money for these wheeler's and dealers to multiply. Nassim Nicholas Taleb has brought the ire of the system on himself by revealing some of the most gaping holes in the system. However, he has stopped short of really analyzing the real, deep structure of the stock markets. In the stock markets of the world the few big fish feed on the herds of small fry. The little investors are lured into this giant Ponzi-scheme during a longer rise in the markets. This Ponzi-scheme is fed by the enormous dividends that are achievable during the rising markets. All too often the little men end up paying for the crashes, when the big fish swim away scratch-free. This book was still one of the most refreshing and thought-provoking reading-experiences I have had in a long, long time. "The Black Swan" is one of those books that I would like everybody to read. Reading it will inevitably broaden your horizons, even if you do not agree with all of the ideas presented in the book.

I must admit that I approached reading this book with some trepidation. I had read Taleb's earlier book "Fooled By Randomness" and whilst I found that book very interesting I also found it very exasperating. This book was the same, only more so. The central theme of the book is that unexpected random events are much more likely to have far greater impact than is presumed by traditional statistics . In contrast he shows that there are domains where extreme events or values are more frequent and dominate overall. Taleb's arguments are convincing and he also shows why prediction in general is very difficult and describes human being's desires to post-rationalise events. Because prediction is thus impossible and because the impact of these extreme random events (the 'Black Swans') is so large his argument is that this makes a mockery of much of history, economics and financial theory. The main problem with the book is the tone of the author. Taleb clearly does not suffer fools gladly and it seems that he considers most people in economics, finance, statistics and academia as fools. He comes across as believing that he is the only one who really gets these ideas. His constant attacks on the 'dark suits' and academics (not to mention several strange jibes at the French) become very wearing. Also his dismissal of the normal distribution is overdone since there are clearly areas where it works well. All in all a very good book but I wish he would overcome his arrogance before the next one.

This is an amazing, nuanced book dealing with psychology, social science and meta-knowledge, as much probability. It is a worthy successor to his earlier work `Fooled by Randomness', and a book that can (and ideally should to get the most out of it) be read multiple times. The book will not appeal to everyone especially those whom are attacked within (largely experts in business, probability and mathematics). The book does not contain any specific information about how to get rich or increase ones wealth (though the ideas can be applied with some thought). It will appeal most to those interested in philosophy, epistemology and how we use knowledge. What I loved about this book I love books about ideas. The positive outlook the book has (about positive black swans as much as disasters). That is was even better reading it for the second time. It treats the reader with respect and does hold you with kid-gloves as some other social science books do. Though pointing out what appears obvious at first the way that each idea is dealt with sheds new light and is a real eye opener. That the ideas are more nuanced than they first appear. That there are many jumping off points for other ideas and books to read. That there is much of the author contained within and it is in part autobiographical. Some of the issues with the book: Some of the examples and metaphors could have been better explained or clearer. The ideas needed to fully appreciate the ideas within are contained within the book itself. It is only on second or third reading that the ideas become clearer. Depending on how you view this it is either a positive or a negative (personally I felt that this was a great positive). A reader can be highly prone to `the confirmation bias'. Leading to the likelihood that: either the reader will think that this is all obvious and the book is largely pointless; or that the author is full of it and the book is largely pointless. If you can see that the points that you are as likely to be fooled as anyone else the book becomes a lot clearer. The book is far from perfect, however it is an amazing read and this is why I give it 5 out of 5.

I have read the reviews after I read the book, and I am pleased I did. I might not have read it. The concepts in the book put it in my top three (non-fiction) books I have ever read. It's possible it's all c&@p, but I don't think so, clearly others do. Other reviews cover the content more than adequately, I will just say that it is as people/culture challenging as it is billed, if you buy in to it. And I pretty much have. However his style is very poor. NNT's method of a vaguely academic structure (the is a lot of "as I said in chapter 14" etc) does not make for easy going over often quite rough academic terrain. I sometimes had to dig for the good stuff, and frequently I found an argument made is more restatement than new interpretation, but hey-ho. And a lot of his narrative tales of Nero et al should have been left out. I agree with the reviewer who said the editor, whatever his name was, should have tried harder. Simply put it comes across as if written by someone who has been shouting at the deaf for a very long time, and has lost a little of his coherence in the process. But that doesn't make him wrong or not insightful or that you shouldnt listen just because he is out numbered. Like other reviewers I found elements extraordinarily enlightening, and often worked thinking on subjects I had been amateurishly exploring myself. I believe he underestimates the value of being frequently wrong but getting on with it and doing it together, which has shepherded us humans quite far so far. And he leaves religion and mental health well alone, both big targets for his narrative fallacy critique. Maybe he's got enough enemies already. Don't read this review. Buy the book, think about it, then check out the reviews. They add to the experience.

In my former life as an engineering consultant, I advised companies on reducing their carbon dioxide emissions by storing it underground. In order to get regulatory approval for such projects, some municipalities requested guarantees that the carbon dioxide would remain underground for 1,000 years--and they were not being facile. How can one know that the carbon dioxide would stay sequestered for 1,000 years? Nassim Nicolas Taleb's (NNT) thesis is that we are very poor at prediction. The events that truly shaped our history such as the invention of the wheel, the invention of agriculture, the rise of Christianity, the invention of the steam engine and, more recently, the Great War and the invention of the computer, were not predicted; they were random events. Even when they were predicted, the impact of these events, which he calls Black Swans, was grossly underestimated. Therefore, according to NNT, we do not really know which events will definitively shape our future; yet, everyday on the news, we see `talking heads' predicting how the stock market will react or how the economy will recover and how China will be the great power of the twenty-first century--to the chagrin of many Westerners (any historian worth his salt has penned a book on the impending fall of the United States). How can these modern-day fortune tellers--there are even people who call themselves futurists--be so sure? Why do we not call these experts to account when their predictions are not fulfilled? Why did none of them foresee the last recession? NNT seeks to explore the reasons for our gullibility. His conclusions are manifold. They include the following: HUMAN NATURE. Due to the work of psychologists like Daniel Kahneman, we are now familiar with the confirmation bias. People tend to look for instances confirm their beliefs or models--and find them. If one believes that all women are lousy drivers, one would invariably find many lousy of female drivers, thereby confirming one's pre-conceived bias. One would convenient not notice all good female drivers, a fact that would falsify the theory. This tendency is so ingrained in human nature that it is only explainable by evolution. FALL FOR THE NARRATIVE FALLACY. We are a storytelling species. We dislike the notion that the world is a random place. Therefore, we are suckers for experts, who can make sense of all this randomness around us--weave reality into a coherent story. The 2008 recession, for example, seems so predictable in hindsight. How could banks have kept on lending to people who had no chance of repaying their mortgages? Is it not clear? Why didn't anyone see that? THE EXPERT PROBLEM. NNT reserves his most trenchant criticism for the academic economics establishment. (NNT is a successful options trader). On page after page, he questions the fundamental assumptions of modern financial theory: that stock market risk, narrowly defined as standard deviation of returns of a well-diversified portfolio, can be captured by the normal (Gaussian) probability distribution. He does not thrash the Gaussian; instead, in fairly detailed and technical manner, he explains that the Gaussian is only applicable to a narrow set of physical data. The key property of the Gaussian is that values for a given property will tend to cluster around the average (mean) and that values that diverge markedly from the average will have very low probabilities of occurrence as the population sample increases. For example, in a sample of 1,000 people, the weight of any individual person in the sample will not affect the average weight of the sample. However, in a sample showing the wealth of 1,000 random people, the addition of one person's wealth (say Bill Gates') can greatly change the average wealth of the sample. Therefore, if stocks returns do not vary very much, then the Gaussian is applicable. The problem, though, is that stock returns vary a lot. Once in a while, a Black Swan such as the October 1987 crash, and the 1997 Russian debt crisis, hits the markets without warning. None of these black Swans could have been predicted by modern financial risk management. However, the economics establishment, exemplified by Nobel Laureates such as Robert Merton, Myron Scholes resists this challenge to the efficacy of the Gaussian. All of this would have been harmless, except that modern portfolio theory undergirds much of the Western world's wealth management techniques. Instead, NNT shows that fractal statistics, developed by his hero, Benoit Mandelbrot--not Gaussian--is a better way to predict Black Swans. CRITICISM OF BLACK SWAN The book is written in an irreverent style. NNT seemed to take puckish delight in defrocking experts of all breeds: from the Defence Department to academia and government. He exposed their `epistemological arrogance', calling a few Nobel Laureates by name. Reading such irreverence is charming for ten pages, but after 180 pages, it becomes boring. Despite NNT's profound erudition, the book is poorly written. Every other sentence is paraphrased in parentheses. Did NNT need all those parentheses? One wonders what if he had an editor. He rambled on and on about the same idea--Black Swans from Extremistan--for 50 pages. "Ok, we get the point!", I wanted to shout as I read the book. While the book was made more difficult to read than it should have, I liked Black Swan. Its range is broad and touches on philosophy, astronomy, economics, finance, psychology, sociology and history. NNT tries to draw common themes from these disparate disciplines. NNT reminds us to put our thinking caps on every time we hear some expert mouthing off about global warming in the year 2300, Dow Jones Industrial Average or China's economic system. These complex systems do not yield themselves easily to the sterile, rigorous models so loved by economists--no matter how elegant the models are. Instead, complex systems seem to be governed by randomness and the Black Swan. All hope is not lost, however. Perhaps, I have a response for my clients, who wanted a 1,000-year guarantee: Take advantage of the upside of randomness and protect ourselves from its downsides. In a sense, we can convert the Black Swans to `Grey Swans'.

Simply one of the best non-fiction books I have ever read. I would have never guessed from the title or synopsis quite what to expect. I would describe it as a whole philosophy stemming from the theory that it is human nature to underestimate the unknown. Likewise, it is human nature to overestimate one's ability to estimate the unknown. Taleb's breadth of argument is stunning and, as with his later book, very much worth reading. He is seriously easy to read if like me, you are a normal person prepared to read about statistics only if it will teach you about life. And he gives a wonderfully eclectic tour of world thought, mixed in amongst his arguments, creating one of the most cultured, individual and educative books I have ever read (until I read his next book). It requires a philosphy to understand subjects such as the overestimation of the unknown, and Taleb provides this. For instance he traces back to Poincare, the French Mathemstician a hundred years earlier, the notion that there are simply some quantities which can by their nature never be captured in formulas but only in words. Through Taleb you can ponder and learn about the boundaries of maths, theoretical models and human knowledge. No doubt professional risk managers and statisticians may wish to cast dispersions on his theories: these are very much and pointedly against current theories and practice, which things he argues are generally conceptually flawed. But I find that a great deal of humanity comes through in Taleb's writing, as he explores for instance a compassionate humanist philosophy in the light of placing credit where credit is truly due, rather than where distortions may place it.

Reading Taleb is like having dinner with that beloved friend that happens to be too loud for a posh restaurant. The main concept of the book (the black swan) is clever (not original) and it is an important concept that we humans ought to be reminded about often (before the next Covid, if possible). From that point of view, the book is necessary. Now, Taleb has in my modest opinion three vices. First, he is too boastful (and I doubt he'd have issue with this assertion). Second, he often walks the tight rope of impertinence and through the borders of credibility. Those two, one can live with. However the third vice is more difficult to understand. As a "modeller" he despises the normal distribution (and who wouldn't) but he intriguingly puts enormous amounts of faith on an alternative class of human-made probability models (fat tail models). His point is that those are the only models capable of entertaining black swans. That is true. But in the context of forecasting it does not matter if you have Skinny Gauss or Fat Tailed Bayes; you cannot predict future events from past data. The future is essentially non-identifiable from data alone. This books mixes a good core idea, an entertaining prose (albeit often embarrassing) and an intriguingly self-defeating (modelling) solution. The book was published before Kahneman's "Thinking...", but if you have read the latter, you will recognise many of the themes in this book too. I don't think both books are substitutes... so... Should you buy?... May be, but don't take it with you to a posh restaurant.

So how do you define a book that is basically saying that everything you think about the potential for the pear shaped to happen to you at some point in the future is wrong? Well lets start with the tone of the book. It is agressively written, which is both entertaining and keeps your attention....the French seem to get a bit of a kicking now and then. It just sounds like the written frustratyion of someone who has is a Lighthouse keeper marking the Danger while the ships just keep sailing past onto the rocks. It is clearly brilliantly researched and referenced and is obviously a complete labour of love, which make the reader want to love the ideas also. There is no doubt that it is not a straight forward read there is an enormous amount packed into 350 odd pages but it is worth the time and effort to grasp the ideas that NNT is try to get across. The biggest issue though is not the reading….or the eventual agreeing with what is written it is the putting into practical effect what is being suggested….it is the complete change in mind set to risk and predictability that is easy to read about and affirm but I suspect really much more difficult to put in place in your daily dealings. However it is going to be fun trying…..i recommend you have a read and have a try also. Perhaps the biggest thing about the book Black Swan is that perhaps it can be considered its own Black Swan…..is this book its own “highly improbable consequential event”?

I am an Economist , needless to say i felt attacked a bit reading the book (if you read it you will get it), however you see that the point he is trying to make is very very powerful, so managing that he goes overboard and exaggerate on some things (various actually) will make you understand him more and understand his point of the power of the unknown which do seems to be forgotten about as if everything was predictable and expected, his style of writing is interesting, funny (sometimes) and clever, would recommend is an excellent book from NNT, its like opening a cookie jar who has an excellent cookie but slaps you a bit before you get it.

I recommend this book without restriction to every conscious reader. Having read his first book "Fooled by randomness", I must say that this book is not as concise as the previous in making his point. This book has a more personal touch, where more of his character shines through. With respect to his first book, this one seems more mature as far as the formulation of his thoughts is concerened. I have the feeling that he wrote everything he wanted to write, whereas in the first, I had the feeling that he just rushed through the material. I do not want to write a short summary, because his ideas may have a big impact to everyone. In fact, everyone should have read this book. For its ideas can change the way one looks at the world and the things that happen everyday...

Utilizamos, realizamos todos os testes que vieram à nossa mente e entendemos que cumpriu com o que prometia e com o que nós estávamos necessitando.

Es un libro de impacto. Muy recomendable para aprender a gestionar el impacto de lo imprevisible en todos los ordenes de la vida, tanto social como laboral y comercial. Responde perfectamente a la pregunta de porque las previsiones fruto de la experiència adquirida al final no sirven para nada.....

Mkt intressant. Dock ganska tungläst