Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets

by Nassim Nicholas Taleb

You can more safely use the data to reject than to confirm hypotheses. Why? Consider the following statements: Statement A: No swan is black, because I looked at four thousand swans and found none. Statement B: Not all swans are white. I cannot logically make statement A, no matter how many successive white swans I may have observed in my life and may observe in the future (except, of course, if I am given the privilege of observing with certainty all available swans). It is, however, possible to make Statement B merely by finding one single counterexample. Indeed, Statement A was disproved by the discovery of Australia, as it led to the sighting of the Cygnus atratus, a swan variety that was jet black! The reader will see a hint of Popper’s ideas, as there is a strong asymmetry between the two statements; and, furthermore, such asymmetry lies in the foundations of knowledge. It is also at the core of my operation as a decision maker under uncertainty.