Incerto 4-Book Bundle: Fooled by Randomness, The Black Swan, The Bed of Procrustes, Antifragile

by Nassim Nicholas Taleb

Black Swans hijack our brains, making us feel we “sort of” or “almost” predicted them, because they are retrospectively explainable.

One single observation can invalidate a general statement derived from millennia of confirmatory sightings of millions of white swans.

What we call here a Black Swan (and capitalize it) is an event with the following three attributes.

First, it is an outlier, as it lies outside the

realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact (unlike the bird). Third, in spite of its outlier status, human nature makes us concoct explanations for its...

I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not pr...

the effect of these Black Swans has been increasing. It started accelerating during the industrial revolution, as the world started getting more complicated, while ordinary events, the ones we study and discuss and try to predict from reading the newspapers, have become increasingly inconsequential.

Fads, epidemics, fashion, ideas, the emergence of art genres and schools. All follow these Black Swan dynamics. Literally, just about everything of significance around you might qualify.

This combination of low predictability and large impact makes the Black Swan a great puzzle; but that is not yet the core concern of this book.

Go ask your portfolio manager for his definition of “risk,” and odds are that he will supply you with a measure that excludes the possibility of the Black Swan—hence

The central idea of this book concerns our blindness with respect to randomness, particularly the large deviations:

Look into your own personal life, to your choice of profession, say, or meeting your mate, your exile from your country of origin, the betrayals you faced, your sudden enrichment or impoverishment. How often did these things occur according to plan?

What You Do Not Know

Black Swan logic makes what you don’t know far more relevant tha...

Isn’t it strange to see an event happening precisely because it was not supposed to happen?

The next killing in the restaurant industry needs to be an idea that is not easily conceived of by the current population of restaurateurs.

The same applies to the shoe and the book businesses—or any kind of entrepreneurship.

The payoff of a human venture is, in general, inversely proportional to what it is expected to

Experts and “Empty Suits”

The inability to predict outliers implies the inability to predict the course of history, given the share of these events in the dynamics of events.

We produce thirty-year projections of social security deficits and oil prices without realizing that we cannot even predict these for next summer—our

What is surprising is not the magnitude of our forecast errors, but our absence of awareness of it.

Based on their empirical record, they do not know more about their subject matter than the general population, but they are much better at narrating—or, worse, at smoking you with

complicated mathematical models.

Black Swans being unpredictable, we need to adjust to their existence (rather than naï...

We will see that, contrary to social-science wisdom, almost no discovery, no technologies of note, came from design and planning—they were just Black Swans.

the reason free markets work is because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or “incentives” for skill.

Learning to Learn

Another related human impediment comes from excessive focus on what we do know: we tend to learn the precise, not the general.

The story of the Maginot Line shows how we are conditioned to be specific.

The French had been excellent students of history; they just learned with too much precision.

We scorn the abstract; we scorn it with passion.

It is necessary here, as it is my agenda in the rest of this book, both to stand conventional wisdom on its head and to show how inapplicable it is to our modern, complex, and increasingly recursive environment.*

my counterfactual, introspective, and hard-thinking ancestor would have been eaten by a lion while his nonthinking but faster-reacting cousin would have run for cover. Consider that thinking is time-consuming and generally a great waste of energy, that our predecessors spent more than a hundred million years as nonthinking mammals

A NEW KIND OF INGRATITUDE

But there are even more mistreated heroes—the very sad category of those who we do not know were heroes, who saved our lives, who helped us avoid disasters. They left no traces and did not even know that they were making a contribution.

The person who imposed locks on cockpit doors gets no statues in public squares, not so much as a quick mention of his contribution in his obituary. “Joe Smith, who helped avoid the disaster of 9/11, died of complications of liver disease.”

And yet, recognition can be quite a pump. Believe me, even those who genuinely claim that they do not believe in recognition, and that they separate labor from the fruits of labor, actually get a serotonin kick from it.

Who gets rewarded, the central banker who avoids a recession or the one who comes to “correct” his predecessors’ faults and happens to be there during some economic recovery?

everybody knows that you need more prevention than treatment, but few reward acts of prevention.

LIFE IS VERY UNUSUAL

the rare event equals uncertainty. This may seem like a strong statement—that we need to principally study the rare and extreme events in order to figure out common ones—but

There are two possible ways to approach phenomena. The first is to rule out the extraordinary and focus on the “normal.”

The second approach is to consider that in order to understand a phenomenon, one needs first to consider the extremes—particularly if, like the Black Swan, th...

If you want to get an idea of a friend’s temperament, ethics, and personal elegance, you need to look at him under the tests of severe circumstances, not under the regular rosy glow of daily life.

If you want to know a friend's character, you need to look at them under tests of severe circumstances.

Indeed the normal is often irrelevant.

Normal is often irrelevant.

Why? Because the bell curve ignores large deviations, cannot handle them, yet makes us confident that we have tamed uncertainty.

Bell curve cannot handle large deviations

PLATO AND THE NERD

it is not a concrete and precise category of knowledge, a nerdified field, but its opposite;

uncertainty is the lack of knowledge. It is the contrary of knowledge. Avoid using terms of knowledge to describe it.

Models and constructions, these intellectual maps of reality, are not always wrong; they are wrong only in some specific applications. The difficulty is that a) you do not know beforehand (only after the fact) where the map will be wrong,

Models of construction or maps of reality are not always wrong. You don't know beforehand where the map will be wrong. This can lead to severe circumstances. They are like medicines with severe side effects.