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Summary:
Bestselling author Nassim Nicholas Taleb continues his exploration of randomness in his fascinating new book, The Black Swan, in which he examines the influence of highly improbable and unpredictable events that have massive impact. Engaging and enlightening, The Black Swan is a book that may change the way you think about the world, a book that Chris Anderson calls, "a delightful romp through history, economics, and the frailties of human nature." See Anderson's entire guest review below.
Guest Reviewer: Chris Anderson
Chris Anderson is editor-in-chief of Wired magazine and the author of The Long Tail: Why the Future of Business Is Selling Less of More.
Four hundred years ago, Francis Bacon warned that our minds are wired to deceive us. "Beware the fallacies into which undisciplined thinkers most easily fall--they are the real distorting prisms of human nature." Chief among them: "Assuming more order than exists in chaotic nature." Now consider the typical stock market report: "Today investors bid shares down out of concern over Iranian oil production." Sigh. We're still doing it.
Our brains are wired for narrative, not statistical uncertainty. And so we tell ourselves simple stories to explain complex thing we don't--and, most importantly, can't--know. The truth is that we have no idea why stock markets go up or down on any given day, and whatever reason we give is sure to be grossly simplified, if not flat out wrong.
Nassim Nicholas Taleb first made this argument in Fooled by Randomness, an engaging look at the history and reasons for our predilection for self-deception when it comes to statistics. Now, in The Black Swan: the Impact of the Highly Improbable, he focuses on that most dismal of sciences, predicting the future. Forecasting is not just at the heart of Wall Street, but it’s something each of us does every time we make an insurance payment or strap on a seat belt.
The problem, Nassim explains, is that we place too much weight on the odds that past events will repeat (diligently trying to follow the path of the "millionaire next door," when unrepeatable chance is a better explanation). Instead, the really important events are rare and unpredictable. He calls them Black Swans, which is a reference to a 17th century philosophical thought experiment. In Europe all anyone had ever seen were white swans; indeed, "all swans are white" had long been used as the standard example of a scientific truth. So what was the chance of seeing a black one? Impossible to calculate, or at least they were until 1697, when explorers found Cygnus atratus in Australia.
Nassim argues that most of the really big events in our world are rare and unpredictable, and thus trying to extract generalizable stories to explain them may be emotionally satisfying, but it's practically useless. September 11th is one such example, and stock market crashes are another. Or, as he puts it, "History does not crawl, it jumps." Our assumptions grow out of the bell-curve predictability of what he calls "Mediocristan," while our world is really shaped by the wild powerlaw swings of "Extremistan."
In full disclosure, I'm a long admirer of Taleb's work and a few of my comments on drafts found their way into the book. I, too, look at the world through the powerlaw lens, and I too find that it reveals how many of our assumptions are wrong. But Taleb takes this to a new level with a delightful romp through history, economics, and the frailties of human nature. --Chris Anderson
Customer Reviews:
Average Customer Rating:
Good...but not as good as Fooled by Randomness
Customer Rating:
The ideas presented in this book are essentially the same as those presented in Taleb's first book, Fooled by Randomness, just from a slightly different vantage point. That said, I found Black Swan to be good but you could get the picture reading only Fooled by Randomness, which I thought was the better of the two, if so inclined.
Pros: - This book will make you keenly aware of the existence of black swans (both good and bad) in almost every facet of life -- actually maybe this is a con because it might keep you up at night. - Taleb offers tools such as fractil geometry as a replacement for Gaussian distributions (however, still not predictive). - This text and concepts covered are engaging and thought provoking.
Cons: - I do agree with other reviews that the book was repetitive. Even more so after having read Fooled by Randomness. It is my suspicion that this book probably achieved so much success riding on the coat-tails of Fooled by Randomness.
Other thoughts: - Some may find Taleb's irreverance and style abrasive, but I actually kind of like it.
Thought Provoking Book
Customer Rating:
I bought this book because I am an active investor and I had a little knowledge of Nassim Taleb. This is not an investment "stragegy" type book. It will definitely challenge the way you look at the risk and rewards/penalities of most aspects in your life.
While I loved the book, some of the chapters (Taleb warns the reader as well)are a little boring to read. Some of the discussion about philoshers from the 1500's and 1600's is beyond my level of interest. That said, they are still relevenant to the book.
Taleb does a great job illustrating the fallacies and the dangers of "bell curve" thinkers.
From investors standpoint I like this book a lot. As mentioned before there are no specific strategies, but the book will help you in your mental approach towards investing and understanding risk.
In My Top 10 Books
Customer Rating:
Though this book is not an easy read, it nonetheless must be read. The author explains that history is not as predictable as we think it is and it does not move linear but in fits and starts from startling events. The title is used as a metaphor. Everyone thought that all swans were white until the black swan was discovered. His most dramatic visual is a simple example of a two dimensional graph showing on the y axis satisfaction from a turkey's perspective and time on the X axis. It shows the y axis growing with time until - bang the Wednesday before Thanksgiving. Taleb than asks the rhetorical question, "do you want to be a turkey". Risk is not an exact science, the author was a quant trader, and came to study why all of the risk formulas sometimes don't work and in some cases are disastrous - everything from the Stock Market Crash in 1987 to 9/11 - are examples when the "black" swan appears. This book was written before the Great Recession. After reading this book the reader can see that the "black swan" was an unraveling of a "white swan" - property values, though prone to local bubbles, would not go down for an entire country - in other words the "white swan" was a macro-economic model and when it burst everything changed. The rest of the book is very instructive in thinking about risk and again not being a turkey. Don't read it to your own detriment.
Ego trip
Customer Rating:
The book is largely a rant against use of the Gaussian distribution. But Taleb doesn't tell just what is being plotted against what in the cases where, he says, the Gaussian is no good. He also says that Mandelbrot's work with fractals is applicable to economics and finance, but doesn't say just how. He comes across as egotistical and defensive about his ego. He drops an awful lot of names along the way.
Black Swan=Black Hole
Customer Rating:
This book consists of so much repetition and Name Dropping that it quickly becones boring.
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