Nassim Nicholas Taleb’s landmark Incerto series is an investigation of luck, uncertainty, probability, opacity, human error, risk, disorder, and decision-making in a world we don’t understand, in nonoverlapping and standalone books. All four volumes—Antifragile, The Black Swan, Fooled by Randomness, and the special expanded edition of The Bed of Procrustes, updated with more than 50 percent new material—are now together in one ebook bundle.
Nassim Nicholas Taleb spent 21 years as a risk taker (quantitative trader) before becoming a flaneur and researcher in philosophical, mathematical and (mostly) practical problems with probability.
Taleb is the author of a multivolume essay, the Incerto (The Black Swan, Fooled by Randomness, Antifragile, and Skin in the Game) an investigation of opacity, luck, uncertainty, probability, human error, risk, and decision making when we don’t understand the world, expressed in the form of a personal essay with autobiographical sections, stories, parables, and philosophical, historical, and scientic discussions in nonover lapping volumes that can be accessed in any order.
In addition to his trader life, Taleb has also written, as a backup of the Incerto, more than 50 scholarly papers in statistical physics, statistics, philosophy, ethics, economics, international affairs, and quantitative finance, all around the notion of risk and probability.
Taleb is currently Distinguished Professor of Risk Engineering at NYU's Tandon School of Engineering (only a quarter time position). His current focus is on the properties of systems that can handle disorder ("antifragile").
Taleb believes that prizes, honorary degrees, awards, and ceremonialism debase knowledge by turning it into a spectator sport.
2017 I have come to absorb Taleb's ideas, to the extent that some of my friends who haven't read him probably know the ideas quite well just by osmosis.
His effect on me includes the following:
1. I trust the time tested more than what obviously is true. 2. My default position is that experts are frauds. 3. Old institution can be trusted to do things right, but their beliefs can be arbitrarily ridiculous. 4. Systems need volatility. If you micromanage and remove every day stresses the system can become brittle and collapse into chaos the day you can no longer protect it. 5. We are herd animals and get infected into believing fashionable narratives about the world. We do not see the nonsense of today. To protect oneself one should try to isolate oneself from news papers and fashions. 6. Our society cares more about whether the stories people tell sound scientific, than whether their actions actually work. 7. It is dishonorable to support an idea in theory, if you do not also do so through your actions. 8. Our meritocracy has serious flaws. We look at the quantifiable, even if the numbers are meaningless. By default we trust those with education in a subject, and are fooled into believing that educating people generates skill, when it actually causes theory induced hubris.
My own ideas build upon those of Taleb. They could be listed as this:: 0. Most of the world is to complex to understand. We are better of looking at what survives the competition. Evolutionary processes automatically find good solutions, without a need for us to understand why stuff works. 1. Anything that has survived long in competition should be reckoned as fit. 2. Anything new or strange is most likely to fail competing with the old. 3. There is a chance that the strange and untested will win. 4. It is only by generating lots of competition and strangeness that gets to compete with the established that we can trust the establishment. 5. The world should maximize strangeness. Communist Russia was a terrible idea, Communist Cuba was a good one (communism was strange and most likely to fail, to big a risk to test it in a big country). 6. A libertarian society with low entry barriers for competition is most likely the right one; as these allow for competition and fast testing of strange ideas in all parts of society. 7. But strange alternatives should also be tested. Sweden's socialism probably is bad for us Swedes, but our radicalism is a worth while experiment for the world. 8. As an individual you are best of conforming to tradition. E.g. the fact that monogamous marriage has spread to almost the entire world and survived for millennia, means it makes sense even if we think it is stupid. Taking a random drug is most likely to hurt you. 9. Society benefits from the strangeness of its individuals. E.g. anyone who tries a new kind of poly-amorous relationship has a small chance of finding a formula that works for the masses. Other examples: Athletes taking drugs is a service to mankind, there is a small chance that they will come across something with minuscule side effects and large benefits. Doping should be allowed in all sports, provided that scientists got to document what you took and the health effects.
Ideas bout what appeals to me so much in the Incerto I have reread all of the Incerto at least four times. I and Taleb have similar tastes and personalities, so reading his books is like reading letters from a more experienced and wiser version of myself. Some readers think Taleb should be more concise, that his books only require a fifth of the pages he uses, for me the irrelevant excursions are as valuable as the rest.
As one of the 100 possible examples I will mention what Taleb writes about his education. He payed a minimum of effort to the curriculum, provided he would pass, while investing vast energy into following his intellectual whims, reading the books that tickled his fancy - and that he hence actually absorbed, thereby learning a lot more effectively than he could be being a good student. These things I can immediately apply to my own life, and are real gems, but then that is only because I desire the same things as Taleb. I can use him as a role model
Taleb versus rationalism My other intellectual role model is Eliezer Yudkowsky, who in many ways is diametrically opposed to Taleb. Where Taleb distrusts reason and takes every chance to scorn scientism (the naive use of science), Eliezer tries to reform science. Eliezer advocates a science based on Bayesian reasoning, and tries to make himself as rational as possible by becoming aware of and compensating for the mental biases that Taleb (if we exaggerate a bit) thinks make reason impossible.
These men are unified by their interest in the flaws in human reason, in history and morality, but their taste, style and attitude are opposites. Yudkowsky dreams about creating immortality, Taleb sees it as immoral, Yudkowsky thinks great progress is just around the corner, Taleb thinks great stagnation is around the corner and that society mostly develops by debunking fraudsters.
I find myself supporting both men. I am not in the middle, but I rather support both wholeheartedly on many in many of their beliefs, while thinking that one is just wrong at times. I am closer to Taleb in personality but when the two disagree I intellectually agree with Yudkowsky.
Maybe Taleb feels free to be extremely wrong on issues outside his control, such as immortality. After all Taleb says that (I paraphrase) "Changing a mans mind is the same as changing his tastes" and T fundamentally does not believe in rationality. Every so often he out of hand dismisses something without proper justification, and I guess this is just him being himself and floundering his tastes, not well thought out opinions.
The most vibrant presentation of sceptical empiricism since Dawkins stopped being beautiful.
Black Swan is a furious pompous attack on macroeconomics, journalism, and risk modelling via heuristics and biases; so it is an amazing introduction to modelling. But it's also an entire original worldview, applying to history, policy, science, and personal conduct. This is taken even further (too far?) in Antifragile, which is more or less a work of evolutionary epistemology, or evolutionary practical ethics. There's a lot of redundancy between them; Fooled by Randomness gives you the highest signal:rant ratio.
The first three books are largely critical, hacking away at theory-blindness, model error, and the many kinds of people he sees as possessing unearned status (economists, journalists, consultants, business-book writers): this is the upswing, a chaotic attempt to give general positive advice in a world that dooms general positive advice.
Every other page has something worth hearing, for its iconoclasm, or a Latin gobbet, or catty anecdote, if not something globally and evidently true. I think he is right about 30% of the time, which is among the highest credences I have for anyone. I only think I am 35% right, for instance. But a core point is that he thinks his approach should work even given our intractable ignorance.
The core point, repeated a hundred times for various domains: In real life, many systems deteriorate without an irregular supply of stressors (non-fatal negative events), and actually benefit from them by constructively overreacting. By robbing such 'antifragile' systems of stressors, modern approaches to managing them do damage in the guise of helping out.
Taleb was my introduction to the post-classical theory of reason, but the project overlaps a bit with the LessWrong school I now favour. Underneath (i.e. in the technical appendices), his approach is very similar but with more conservative goals. I think Taleb saved me years of synthesis and conceptual invention.
His conduct on Twitter (ridiculous chest-beating, insulting anyone who disagrees with him, including great scholars like Tetlock and Thaler) is embarrassing, but does not detract from the accomplishment.
In one sentence: Extraordinarily rude man marries classical ethics to modern mathematics and cognitive science.
To be read when: young; if you have a news habit; when despairing of university economics.
Summary: great ideas inside, but some parts can be (and should be) skipped.
The good: Taleb has some fantastic ideas, including, but not limited to: ergodicity (given enough time, if there's even a very slight chance that something happens, it will happen), the non-linear (ie disproportionally large) impact of rare events, evidence of absence vs absence of evidence, just to name a few. These will give the reader food for thought for a long time, and some of these ideas can be applied directly in daily life.
The bad: The author's supreme elitism underscores every (otherwise good) part of the book. The author has extreme disdain for people who have to work for a living, or otherwise have obligations that cannot be dropped at a moment's notice. The reader is frequently reminded that the author has "f*** you money", meaning that he has no "skin in the game" of empathising with other people (which arguably goes against his own principle of not accepting advice from people with no skin in your game). Ironically, these views had a nonlinear (negative) effect on my opinion about the author's book, which shows just how powerful the author's good ideas are.
Rumsfeld (you don't have to like him to appreciate the net quote) once said "...We also know there are known unknowns; that is to say, we know there are some things we do not know. But there are also unknown unknowns—the ones we don't know we don't know. And if one looks throughout the history of our country and other free countries, it is the latter category that tends to be the difficult ones."
Nassim Taleb's Incerto is one of those tools that help us deal with this predicament, especially in a world filled with naive "experts" and decision-makers who put people in danger because of their blindness or bravado.
An absolute must read. This is not optional reading, I repeat for emphasis, this is not optional! I have read each individual volume in the Incerto a minimum of 3 or 4 times by now and it's most important volume, Antifragile 6 or 7 times by now.
If you want me to describe what this set of books is about, I cannot do that within the space of a brief book review because they touch on so many different topics. Incerto is Latin for uncertainty, and that is the most common theme throughout all five of the books in the Incerto, I'll just leave it there for now and you'll have to discover the rest on your own.
#Book Review: Incerto Series, by Nassim Nicklaus Taleb
Fooled by Randomness, 2001 The Black Swan, 2007 The Bed of Procrustes, 2010 Antifragile, 2012 Skin In The Game, 2018
Like most people, I first read "Black Swan" by Nassim Nicholas Taleb during the 2008 financial crisis. Intrigued by his unique way of thinking, I looked up his previously published book "Fooled by Randomness.” Since then, Taleb has become one of my favorite authors that I will read his next book as soon as it comes out: "Antifragile" in 2012, and "Skin In The Game" in 2018. I have been thinking about writing a review of his books for at least two years, but they are not the easiest books to summarize and simplest ideas to crystalize. Fortunately during the pandemic, I had the chance to re-read all five books, now finally felt ready to write this review.
Taleb called his five-book series "Incerto," in which he investigates luck, uncertainty, probability, opacity, human error, risk, disorder, and decision-making in a world we don't understand. He offers advices on avoiding common misconceptions and mistakes, and points out ways to take advantage and even thrive in this uncertain and ever-changing world.
Although I enjoyed much of Taleb's insights, but not sure I like the way he carries himself. Arrogant, angry, petty, self-promoting, he has committed all the offenses that he has accused other people. If you happen to disagree with him, you must be either a hypocritical academic, empty suit, or just plain stupid. I understand that some of the anger may come from the personal attacks he has received, but also think much of his wounds may have been self-inflicted.
Now with that out of the way, we then try to separate the ideas from the man. Although Taleb said good books can't be summarized, there are many overlaps between his five books. So instead of reviewing each book individually, I will try to emphasize the major points from all the books. The title of each following section reflects the underlying ideas, not necessarily corresponding to the book titles. I will try my best to reflect the author's thinking, but will also add some thoughts on my own.
1 The Black Swan: The world is uncertain, and history often jumps
The world is full of uncertainties, period. Some come from the fact we still don't understand the underlying process, like why it rains in ancient times. Others come from the nonlinearity of the process, like light rain only leaves a few puddles, heavy rain may cause a flood. But a large part of the comes from the intrinsic uncertain (aka stochastic) of the process, like tornadoes and hurricanes. With human activities, most of these uncertainties come from the complex interactions and feedbacks between independent participants, like in politics and economics, but particularly prominent in the financial markets.
Among the uncertainties, there are large jumps in both the natural and human processes. Taleb coined the term "Black Swans," which
1. Are highly improbable before the event. 2. Have an enormous impact. 3. Only explainable after the fact.
In the natural world, most progress came from "Black Swan" events. Millions of years ago, a meteoroid hit the earth and wiped out the dinosaurs, thus paving the way for the dominance of mammals, and the emergence of intelligent human beings. Taleb argues most human progress is also coming from these "Black Swan" type jumps, like disease, famine, revolution, and war. Although understandably some may argue otherwise, I mostly agree with him: history did not move forward smoothly, it often jumped. A deterministic view of history has to be tempered with the understanding of the chaotic nature historical events.
2 The Bell Curve: Our perception of the world is naive and flawed
Humans are terrified at things we can't comprehend, so we tend to imagine mystical power behind certain natural or human events. Myths, superstition, religion, in human history we have invented all sorts of ways to appease the gods and sway the outcome of the events in our way.
At the beginning of the modern era, the development of science gradually changed our understanding and perception of the natural world. Through Newton, Darwin, Faraday, Einstein, Watson, we began to developed a more rational view of the world. We started to harness molecular even nuclear energy to power the modern world. We have developed new technologies to tame the natural uncertainties, from hydraulic dams to steam engines to light bulbs to vaccines. We have achieved unprecedented growth and prosperity, and there were never so many humans on earth living ever longer and enjoying so much abundance. This progress seems to be ever accelerating and never-ending, and our record has been truly astonishing.
In the meantime, we also tried to apply the physical models of the natural world to human societies; modern political, economic, and financial theories are direct results. We have developed all sorts of social theories and economic theories, like Marxism, Socialism, Keynesian Economics, and the latest Modern Monetary Theory. Some have promoted social progress, like social democracies, but most brought unimaginable horrors, like Nazisim and Socialism. Our record on social engineering is truly disastrous, but politicians and activists of each generation still working hard at it nevertheless.
We often misunderstood the extend our perception of the world is just that, perception, not reality, and can't tell the difference. Here Taleb's rage against bell-curve is well justified and poignant. Most college graduates with liberal arts degrees can’t understand the underlying assumptions but mistook the simplified models as the real world. We often use the bell curve as the way the world should operate and left all deviations as "outliers" or "Black Swans." But in reality, these outliers are parts or maybe the essential parts of the process. As they say, "There are known knowns, there are known unknowns, but it is the unknown unknowns that are going to kill you."
3 The Expert Class: Ex-Post explanation is easy, Ex-Ante Prediction is hard, confusion about the two often harmful
Our innate desire to come up with narratives for the past events do not necessarily give us the knowledge to predict the future. Yet a particular class of people, like journalists, academics, consultants, bureaucrats, has taken the opportunities to becomes the "Experts." They utilize their superior book knowledge to explain the past more authoritatively and claim to foretell the future. Taleb has reserved his harshest criticisms against this so-called "Expert Class", actually named names like Robert Rubin, Thomas Friedman, Robert Merton, and many others. Understandably this is also the more controversial part of his writing.
One of the critical aspects of the scientific method is that a theory can't just explain the past but have to predict the future. Einstein's Theory of General Relativity predicted that gravity could bend light, which puzzled most physicists. Eventually the prediction was proven by astronomical observations, which resulted in the wide recognization of the theory, even when most people can barely comprehend the idea. But more commonly in social sciences, we have more theories that explain the past than to predict the future. In the natural world we could quickly test and discredit these theories, but in the social and economic world it is all but impossible
In quantitative modeling, one of the cardinal sins is "overfitting." Given a set of financial data, one can easily fit a complex model to explain the data. The more complex the model, the better the fit. However complex models are more likely to fit onto the noise in the data, resulted in poor ability to predict the future, let alone making any real money in the market. However, for most social and economic theories, there are no reliable ways to separate correlations from causation and check their forecasts against reality. The proponents of these models usually brushed aside these "inconvenient truths" sometimes out of ignorance, but often out of selfish interests, and defend their belligerence in the name of “Science," as Taleb calls it “Scientism.”
Thus these bad social and economic theories do not perish in realty but often adopted by particular political interests to advance their objectives, causing untold miseries to millions of people. It is safe to say that most human disasters in modern history are in the name of these social and economic theories, and the "Expert Class" often the ones who sold their souls to the devil. In recent decades with the advance of technology, the “Expert Class” managed to grows their power and control, and we are destined to see more “expert-made” disasters to come.
4 Against the Gods: Our desire to minimize uncertainty often lead to worse disasters
To minimize the uncertainties of weather, we build dams to control floods and manage irrigation, thus the beginning of agriculture and civilization. Most of the time, these risk minimizing efforts bring many benefits, until an unexpected heavy rain burst the dam and cause much more extensive damage.
We have extended our risk mitigation from the natural to the economic world, developed commodities contracts, financial instruments, insurance products, and deposit insurance. Again most of the time, these worked well and people can enjoy the benefits of a modern financial system. However, we can only spread the risk but can't eliminate them, and the relationship we relied upon for these "hedges" often fail at the worst time possible, resulting in more concentrated risk and severe loss. The 2008 Global Financial Crisis was a prime example.
The lesson learned here is not to avoid building the dam or having the modern financial instruments, but to understand the underlying assumptions and complexities and have a realistic protection against the potential losses. But that involved in deeper understanding than most people in the financial industry willing, and most are happy to go along to pass the buck. So it seems the next financial crises is inevitable.
5 Antifragile: how to benefit from uncertainty and stress
The uncertainty and stress are not all bad, and some systems need them to maintain their health and even thrive. Most common is our skeletal system; it requires constant impact and shock to maintain its strength and even become stronger, as Taleb coined the term "Antifragile." Most of the natural system that survived through time is Antifragile, since a small chance of failure will turn to certainty given enough time.
A critical feature of most Antifragile systems is that the individual components of the systems are fragile. The external shocks cause some parts to die out but other parts to flourish, thus making the whole system stronger. A free-market economy is Antifragile: individual entrepreneurs and their employees are fragile and often fail at an alarming rate, but the whole economy benefits from their dynamism and creativity. One counter-example is Japan, whose government won't let failed companies go bankrupt after the economic bubbles of 1980, resulted in the economic stagnation for the next 30 years.
Contrary to most environmentalist beliefs, the ecosystem is Antiffragle: nature tends to evolve and adapt regardless of changes, either natural or human activities. There are many other examples, one may come up with some general rules, have to leave for other future thinkers.
6 Skin In The Game: rebalance the benefit and cost of uncertainties
In ancient society, there were specific types of “Skin In The Game”. Here Taleb gives the example of the Hamarabi Code: builders will suffer death if their house fell down and killed the owner. Also during battles Kings and nobles are supposed to be on the front line, to signal their skin in the game and suffer the consequence of the defeat.
In modern society, the “Expert Class”somehow managed to avoid the negative consequence of their own mistakes. Engineers don't get punished if their machines fail, and managers don't get fired if their business went bankrupt. But most importantly, the economists and government bureaucrats who direct the economy but largely insulated from the failure of their policies. This can be seen from Marxism/Communism/Socialism failures of the past, to mask/lockdown orders of today. Thus modern society is riddled with these type of top down hypocrisy, resulted in a more profound sense of risk and failure, and general helplessness among the public.
The key is to reintroduce the skin in the game for the people and companies at the top. In Europe, the economic and political elites worked together to keep the rich and powerful stay on the top for centuries, leaving the rest of society stagnating. In the United States, free-market competition was the norm. Once-powerful companies in the SP500 index remain in the index for a much shorter period than in the past, giving room for new disruptors to raise. A chaotic yet vibrant financial market makes sure bad companies can't coast very long, and bad managers will suffer personally.
Of course, in academia, journalism, consulting, and government, “Skin In The Game” is absent by design to isolate “experts” from the consequence of their failures. So we need to be extra careful when taking their advice; it is probably far safer just to ignore them.
Applications in Finance
In finance, uncertainty is the name of the game. Even the simplest lending involves the uncertainty of default, let alone more risky ventures such as underwriting, trading, and derivatives. In 1970, the modern financial theories were created after physical science, and people finally started to think we can tame the uncertainty and risk. Unfortunately, financial models are not the reality in the markets; the extreme events and nonlinearities are not just "outliers" or "Black Swans" but very much part of the market. And the #1 rule of the game of finance was, is, and will be to survive, then prosper.
Unfortunately, modern financial theory can not eliminate the uncertainty but just move it around, sometimes into a much more concentrated and toxic form. However, most people dealing with these financial risks are not aware of the underlying assumptions and complexities, nor do they have the intellectual curiosity or ability to care, let alone to do anything about it. The subprime debt crisis in 2008 is the prime example, but we are sure it is not going to be the last one.
We are all humans with bounded rationality, self-interests, and will; thus bubbles and crashes are all but inevitable. But with modern information technology and ubiquitous trading apps, the market is getting even more active and volatile and evolving at a much greater speed. To survive and even prosper in this ever uncertain world, one would benefit significantly from Taleb's insights. These books are not perfect, sometimes rambling, often harsh, but if one can glean something from Taleb's insight, maybe even make a few bucks in the market, or avoid the next market crashes, it would be very much worth well.
That's a heavy book in every possible way. I had a hard time deciding what to feel about it as I was torn between the ideas illustrated vs the way it is written. I felt some observations I had were finally justified (with mathematical models even) but I hated the writing. The blocks were messed up alternating between personal stories, scientific evidence, evidence and theories/research from other authors. I just felt it could have been in better order and explained with so much less text. In the end I decided to rate this book based on the developed theory, as the author is actually not a writer. Why would anyone read this bundle? I would say go for it if you ever felt sometimes observations of incidents don't add up linearly and are tenacious enough to read through the explanation of why that happens :)
The pearls of wisdom and information are tucked away in this book. The metaphors and allegory are excellent at conveying the ideas and contest, the problem is they are buried and the book is tedious to read. There is a lot of rambling and what could have been succinctly covered in a few pages devolves into chapter.
Buying the bundle does not make it any easier. I am completely underwhelmed and most certainly have buyers remorse.
The only real good book is the original - The Black Swan.
NNT is quite good, yet I don't think he is right. On the internet, and everywhere else, you don't want to keep listening to his idiopathic reasoning against justified arguments coming from people he thrash over with his "stats". He won't make you think. He won't make you grow. He just puts you in a cardboard box that's labelled "Anti-fragile"