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Book Review #69 – The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb

Interesting, unique and enticing—The Black Swan, that you can buy here, is an absolute treat for everyone! Taleb has a unique way of concocting words to deliver the most thought-provoking ideas. Only he can write a book on predictability, probability, statistics and make it so interesting that you won’t put it down.

Taleb is a financial professional, a trader and a quantitative analyst. He is well-known for writing ‘the smartest book of all time’, Fooled by Randomness. The Black Swan (2007) is another bestseller by the author.

These books are a part of his five-volume work, Incerto. The series includes:

  • Fooled by Randomness (2001)
  • The Black Swan (2007)
  • The Bed of Procrustes (2010)
  • Antifragile (2012)
  • Skin in the Game (2018).

So, what is a Black Swan?

The Black Swan is the “unknown, the abstract, and imprecise uncertain” event.

Everyone in the world believed that there were only white swans in the world until the discovery of mutant black swans.

Taleb artistically uses the metaphor to describe unpredicted events in the history of the world.

According to him, there are three characteristics of the black swan:

  • They are rare and unexpected, and, “nothing in the past could point to it being likely to happen.”
  • Their impact is huge, dramatic and widespread.
  • We try to explain to them and find a cause for them.

Every event that startled the world was a black swan, like the 1987 financial crisis, the 9/11 attacks and the rise of the Internet.

Narrative Fallacy:

According to Taleb, that the power of prediction is actually based on our ‘fallacy.’ We look at the past to predict the future. While many people think that is a good idea, Taleb claims that it never prepares us for the Black Swan.

As he continues narrating his ideas with interesting anecdotes and analogies, Taleb says that when we rely on history, we miss a lot of information. Like a turkey, who feeds and feels happy about his life where people care for his interests. But, the day of Thanksgiving is his black swan and it calls for a ‘revision of belief’.

Our Mental Blind Spots:

The black swans have a different effect on everyone. They bring catastrophe to some and glory to others. Some may stay unaffected by them. But what we learn from the black swans in history is that everyone has a ‘mental blind spot.’

Most people are unable to see reality when acknowledging a black swan. Some fail to acknowledge it, others forgot it too soon. Whatever the case, the reality is that we have a ‘psychological’ as well as ‘biological blindness’. Therefore, everyone perceives the black swans in their own unique way and according to their own unique situation.

Lucid Fallacy:

Another human folly when it comes to predicting is to think and assess life as it is a game. In life, there are no rules, nothing is controlling the factors or introducing changes.

A black swan comes in the most unexpected situations. It has some randomness different than the controlled randomness of a game-world. We live all our lives in ‘Mediocristan’, but the black swan comes from ‘Extremistan.’

Mediocristan VS Extremistan:

To elaborate on how the impact of something is so drastically different from person to person, and to categorize what counts as a black swan for different people, Taleb explains the worlds of Mediocristan and Extremistan.

In Mediocristan, you will face the ‘tyranny of the collective, routine, the obvious, the predicted.’ This will include height, weight, calories as well as the income of people belonging to small professions or owning small businesses, mortality rates, etc.

One event cannot make a big and widespread impact. It takes continuity to see the impact. To create an impact worthy of noticing, the collective effect of time and effort is needed.

In Extremistan, comes wealth, income, sales, recognition, fame, deaths by war, deaths by natural disasters, economic data, demographic data, stock market, size of companies, inflammation rate, etc.

Here, you will see ‘the tyranny of the singular, the accidental, the unseen, the unpredicted.’ One moment, one incident, a black swan can have an enormous impact here.

The Big Problem

The big problem then is the relation between low predictability and large impact. Together, they make the black swans more puzzling. And, the bigger problem is that as individuals and society, we refuse to admit the existence of the black swans.

We believe that we and our ‘tools’ are equipped to assess the situations, read the past and make predictions. However, the history of the world has shown otherwise. In fact, what most people commoditize as uncertain and unpredictable is neither concrete nor a category of knowledge. It is to Taleb, it is the lack and limitation of knowledge.

Near Black Swans:

The negative impact of something can be reduced when you are prepared. Some events can be predicted. For this, you need the tools of understanding and perception. These tools can help you lessen the impact of a black swan, and it will then be called ‘Near Black Swans.’

How to develop those tools? How to be prepared? How to get a better understanding of the black swan? Read The Black Swan by Nassim Taleb!

Reviewed by;

Tonny Rutakirwa,

Chairman,

Tonniez Group Holdings,

Serving since 28th December 2008.

Entrepreneur

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