The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb Summary and Reviews
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Book Reviews of The Black Swan: The Impact of the Highly Improbable
Book Review: The Highly Unlikely Is Likely
Summary: 5 Stars
"The Black Swan" has a highly-developed and stunning imagery within its title. The symbolism of the expected white swan and the shock of the unexpected black swan is the summary of the book (which at 400 pages could have used an excellent editor to trim 50-75 pages). Mr. Taleb takes aim at those (especially in the financial markets) who predicts the likely outcome and how, we in society, rarely examine the unpredicted. He argues that knowing the future is unknowable. He has covered this topic before in his 2001 best-seller, "Fooled by Randomness." Overall an interesting book. Book Review: Blather
Summary: 1 Stars
The Black Swan argues that standard statistics is a fraud because it is backward looking (I too prefer statistics on future data!). All models or theories are simplifications of a more complex reality, parochial and incomplete; they don't work in all circumstances, and are irrelevant at certain levels of aggregation or for certain applications. That doesn't mean they are fraudulent. Taleb makes perfection the enemy of the good, and winds himself into knots of contradictions, such as calling himself an empiricist yet relying mainly on anecdotes.
He states he teaches how to take advantage of uncertainty, but skewering traditional forecasting tools leads him merely to nihilism, or simply overestimating the probability of improbable events. How would one draw the line on which unseen data should be ignored (it's an infinite set, after all)? He argues we reward those who imagine the impossible, but what does that mean in practice, that we encourage people to enumerate everything possible no matter how improbable? Such risk reports are all too common because they reflect a lot of work, but without some sort of prioritization they are useless. One can remember Richard Clarke's vague warnings about Al Qaeda (and cyberterrorism, and ...) prior to 9/11, or the hundreds of `mission critical risk' overrides on the Challenger space shuttle before it blew up, as examples of beautiful hindsight but useless foresight.
I could imagine him teaching a statistics class to freshman and instead of starting with the arithmetic mean and standard deviation ask 'what was the probability of an airplane taking down the World Trade Center on September 10, 2001?', and waxing poetic about how `we just don't know!" Students might think such talk is much cooler than boring formulas, but such confused thinking leads nowhere in particular and can be indulged indefinitely without producing anything useful, as Taleb demonstrates over 400 pages.
Book Review: Lost in Extremistan with nothing but a Bell Curve
Summary: 5 Stars
If, as Socrates would have it, the only true knowledge is knowledge of one's own ignorance, then Nassim Nicholas Taleb is the world's greatest living teacher. In The Black Swan, Taleb's second book for laypeople, he gives a full treatment to concepts briefly explored in his first book "Fooled by Randomness." The Black Swan is basically a sequel to that book, but much more focused, detailed and scholarly. This is a book of serious philosophy that reads like a stand-up comedy routine. (Think Larry David...)
The Black Swan is probably the strongest statement of enlightened empiricism since Ernst Mach refused to acknowledge the existence of the atom. Of course, in theory, everyone today is supposed to be an empiricist - all right-thinking intellectuals claim to base their views solely on positive scientific observation. But very few sincerely confront the implications of rigorous empiricism. Specifically, few confront "the problem of induction," illustrated here by the story of the black swan.
Briefly: observing an event once does not predict it will occur again in the future. This remains true regardless of the number of observations one adds to the pile. Or, as Taleb, recapitulating David Hume, has it: the observation of even a million white swans does not justify the statement "all swans are white." There is no way to know that somewhere out there a black swan is not hiding, disproving the rule and nullifying our "knowledge" of swans. The problem of induction tells us that we cannot really learn from our experiences. It makes knowledge very problematic, if not impossible. And yet, humans do behave -almost without exception- as though they believe that experience teaches us lessons. This is forgivable; there is no better path to knowledge. But before proceeding, one must account for the limits that the problem of induction places on our claims to knowledge. And humans seem, at every turn, to lack this critical self-awareness.
In one of the many humorous anecdotes that seem to comprise this entire book, Taleb recounts how he learned his extreme skepticism from his first boss, a French gentleman trader who insisted that he should not worry about the fluctuating values of economic indicators. (Indeed, Taleb proudly declares that, to this day, he remains blissfully ignorant of supposedly crucial "indicators" like housing starts and consumer spending. This is a shocking statement from a guy whose day job is managing a hedge fund.) Even if these "common knowledge" indicators are predictive of anything (dubious - see above), they are useless to you because everyone else is already accounting for them. They are "white swans," or common sense. Regardless of their magnitude, white swans are basically irrelevant to the trader - they have already been impounded into the market. In this environment, one can only profitably concern oneself with those bets which others are systematically ignoring - bets on those highly unlikely, but highly consequential events that utterly defy the conventional wisdom. What Taleb ought to worry about, the Frenchman warned, was not the prospect of a quarter-percent rise in interest rates, but a plane hitting the World Trade Center!
Yep, the precise facts of 9-11 were actually presaged by this French gentlemen, as a rogue wave that just might be lurking over the horizon. And, to the contemporary American mind, this is THE quintessential Black Swan. Of course, the Frenchman's insight was just a coincidence - the thing with Black Swans is that they cannot be foreseen.
Taleb explains that conventional social scientists use induction to collect data, which is then plotted on the good old Gaussian bellcurve. With characteristic silliness, Taleb dubs the land of the bellcurve "Mediocristan" - and informs us that it is the natural habitat of the white swan. He contrasts Mediocristan with "Extremistan" - where chaos reigns, the wholly unexpected happens, power laws and fractal geometry apply and the bellcurve does not. Taleb's fictional/metaphorical 'stans' share something with the 'stans' of the real world: very ill-defined borders. Indeed, one can never tell whether one is in the relatively safe territory of Mediocristan or if one has wandered into the lawless tribal regions of Extremistan. The bellcurve can only help you in Mediocristan, but you have no way of knowing whether you have strayed into Extremistan - beyond the bellcurve's jurisdiction. This means that bellcurves are of no reliable use, anywhere. The full implications of this take a while to sink in, and are sure to cause huge controversy. In July, Taleb will debate Charles Murray (author of -what else?- the Bell Curve). I'll let you know who wins.
Taleb frames his whole argument much more entertainingly than I could here, and he bolsters it with an astonishing command of both cutting-edge social science and the entire history of philosophy. This is an astonishing work of serious philosophy, and it reads like pulp fiction. Readers who enjoyed FBR will find here the same dry wit, the same literary erudition, and deep sense of the absurd that made that book so much fun. But this is better, by an order of magnitude - easily the best book I have read in 5 years. I smell a timely pop-science bestseller here to rival Gladwell or Surowiecki, but this is also a classic that will be read for decades to come.
Book Review: Fun to read. Making the mind working
Summary: 5 Stars
First of all I had fun reading it. I was many times in a non-reading mood, and some of the drafts came to me. I print them out in order to read another time, and suddenly I was finding myself after reading a few pages. Joyful style but with content. Very interesting content. The stuff that make you thinking, thinking, and thinking again.
The principles of the book are quite simple.
The unknown is more frequent than we tend to think.
The effect of unexpected things is rather huge. Much more than we dare to fantasize.
"we know" is in many cases a big illusion. The human mind tends to think it knows, but does not always have solid ground for this dellusion of "I know".
As in the good old medieval days, "experts" are many times empty heads with empty (and expensive) suits. The "truth" behind science, is limited to some areas, and in many areas having a degree and posing scienist, is truth irelevant.
"Narrative falacy" talks about our tendency to build stories around facts. In love it may serve a purpose, but when starting to beleive the stories and accomodating facts to the stories, things become stupid.
Much more is there for the taking.