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

by Nassim Nicholas Taleb

While we believe that the memory is fixed, constant, and connected, all this is very far from truth. What makes sense according to information obtained subsequently will be remembered more vividly. We invent some of our memories—a sore point in courts of law since it has been shown that plenty of people have invented child-abuse stories by dint of listening to theories.

The Madman’s Narrative

Consider that two people can hold incompatible beliefs based on the exact same data.

One may have a million ways to explain things, but the true explanation is unique, whether or not it is within our reach.

In a famous argument, the logician W. V. Quine showed that there exist families of logically consistent interpretations and theories that can match a given series of facts. Such insight should warn us that mere absence of nonsense may not be sufficient to make something true.

This does not mean that we cannot talk about causes; there are ways to escape the narrative fallacy. How? By making conjectures and running experiments, or as we will see in Part Two (alas), by making testable predictions.*

Narrative and Therapy

If narrativity causes us to see past events as more predictable, more expected, and less random than they actually were, then we should be able to make it work for us as therapy against some of the stings of randomness.

If you are a professional, you can feel that you “made a mistake,” or, worse, that “mistakes were made,” when you failed to do the equivalent of buying the winning lottery ticket for your investors, and feel the need to apologize for your “reckless” investment strategy (that is, what seems reckless in retrospect).

Hey, it was bound to take place and it seems futile to agonize over it. How can you do so? Well, with a narrative.

If you work in a randomness-laden profession, as we see, you are likely to suffer burnout effects from that constant second-guessing of your past actions in terms of what played out subsequently. Keeping a diary is the least you can do in these circumstances.

TO BE WRONG WITH INFINITE PRECISION

It happens all the time: a cause is proposed to make you swallow the news and make matters more concrete.

The media, however, go to great lengths to make the process “thorough” with their armies of fact-checkers. It is as if they wanted to be wrong with infinite precision

The problem of overcausation does not lie with the journalist, but with the public. Nobody would pay one dollar to buy a series of abstract statistics reminiscent of a boring college lecture. We want to be told stories, and there is nothing wrong with that—except that we should check more thoroughly whether the story provides consequential distortions of reality. Could it be that fiction reveals truth while nonfiction is

a harbor for the liar? Could it be that fables and stories are closer to the truth than is the thoroughly fact-checked ABC News?

Instead, they almost invariably make it look far more complicated than it is.

You will be told that “you overanalyze,” or that “you are too complicated.” All you will be saying is that you don’t know!

Dispassionate Science

THE SENSATIONAL AND THE BLACK SWAN

Narrative, as well as its associated mechanism of salience of the sensational fact, can mess up our projection of the odds.

An earthquake in California, however, is a readily imaginable cause, which greatly increases the mental availability—hence the assessed probability—of the flood scenario.

Now, if instead I asked you how many cases of lung cancer are likely to take place because of smoking, odds are that you would give me a much higher number

which is a pure mistake of logic, since the first, being broader, can accommodate more causes,

The Black Swans we imagine, discuss, and worry about do not resemble those likely to be Black Swans. We worry about the wrong “improbable” events, as we will see next.

Black Swan Blindness

The answer is that there are two varieties of rare events: a) the narrated Black Swans, those that are present in the current discourse and that you are likely to hear about on television, and b) those nobody talks about, since they escape models—those that you would feel ashamed discussing in public because they do not seem plausible.

that people overreact to low-probability outcomes when you discuss the event with them, when you make them aware of it.

Elders are repositories of complicated inductive learning that includes information about rare events. Elders can scare us with stories—which is why we become overexcited when we think of a specific Black Swan.

The economist Hyman Minsky sees the cycles of risk taking in the economy as following a pattern: stability and absence of crises encourage risk

taking, complacency, and lowered awareness of the possibility of problems.

The Pull of the Sensational

Indeed, our consciousness may be linked to our ability to concoct some form of story about ourselves. It is just that narrative can be lethal when used in the wrong places.

THE SHORTCUTS

These researchers have mapped our activities into (roughly) a dual mode of thinking, which they separate as “System 1” and “System 2,” or the experiential and the cogitative. The distinction is straightforward.

parallel-processed, and can lend itself to errors. It is what we call “intuition,” and performs these quick acts of prowess that became popular under the name blink,

System 1 is highly emotional, precisely because it is quick. It produces shortcuts, called “heuristics,” that allow us to function rapidly and effectively.

System 2, the cogitative one, is what we normally call thinking.

It makes fewer mistakes than the experiential system, and, since you know how you derived your result, you can retrace your steps and correct them in an adaptive manner.

Emotions are assumed to be the weapon System 1 uses to direct us and force us to act quickly.

Indeed, neurobiologists who

have studied the emotional system show how it often reacts to the presence of danger long before we are consciously aware of it—we experience fear and start reacting a few milliseco...

How to Avert the Narrative Fallacy

I’ll conclude by saying that our misunderstanding of the Black Swan can be largely attributed to our using System 1, i.e., narratives, and the sensational—as well as the emotional—which imposes on us a wrong map of the likelihood of events.

Let me bring Mediocristan into this. In Mediocristan, narratives seem to work—the past is likely to yield to our inquisition. But not in Extremistan, where you do not have repetition, and where you need to remain suspicious of the sneaky past and avoid the easy and obvious narrative.

The way to avoid the ills of the narrative fallacy is to favor experimentation over storytelling, experience over history, and clinical

knowledge over theories.

Being empirical does not mean running a laboratory in one’s basement: it is just a mind-set that favors a certain class of knowledge over others.

Another approach is to predict and keep a tally of the predictions.

So far we have discussed two internal mechanisms behind our blindness to Black Swans, the confirmation bias and the narrative fallacy.