The Black Swan: The Impact of the Highly Improbable (Incerto, #2)

by Nassim Nicholas Taleb

So you can see here that the Black Swan is a sucker’s problem. In other words, it occurs relative to your expectation.

In general, positive Black Swans take time to show their effect while negative ones happen very quickly—it is much easier and much faster to destroy than to build.

Now, there are other themes arising from our blindness to the Black Swan: We focus on preselected segments of the seen and generalize from it to the unseen: the error of confirmation. We fool ourselves with stories that cater to our Platonic thirst for distinct patterns: the narrative fallacy. We behave as if the Black Swan does not exist: human nature is not programmed for Black Swans. What we see is not necessarily all that is there. History hides Black Swans from us and gives us a mistaken idea about the odds of these events: this is the distortion of silent evidence. We “tunnel”: that is, we focus on a few well-defined sources of uncertainty, on too specific a list of Black Swans (at the expense of the others that do not easily come to mind). I will discuss each of the points in the next five chapters. Then, in the conclusion of Part One, I will show how, in effect, they are the same topic.

Unless we concentrate very hard, we are likely to unwittingly simplify the problem because our minds routinely do so without our knowing it.

By a mental mechanism I call naïve empiricism, we have a natural tendency to look for instances that confirm our story and our vision of the world—these

naïve empiricism.

Seeing white swans does not confirm the nonexistence of black swans.

“We” are the empirical decision makers who hold that uncertainty is our discipline, and that understanding how to act under conditions of incomplete information is the highest and most urgent human pursuit.

Karl Raimund Popper

“falsification” (to falsify is to prove wrong) meant to distinguish between science and nonscience,

But it remains the case that you know what is wrong with a lot more confidence than you know what is right. All pieces of information are not equal in importance.

Scientists believe that it is the search for their own weaknesses that makes them good chess players, not the practice of chess that turns them into skeptics. Similarly, the speculator George Soros,

from experience and empirical observations, it was shown from studies of infant behavior that we come equipped with mental machinery that causes us to selectively generalize from experiences

(i.e., to selectively acquire inductive learning in some domains but remain skeptical in others).

that I (almost) planned to write,” he said. “You are a lucky man; you presented in such a comprehensive way the effect of chance on society and the overestimation of cause and effect. You show how stupid we are to systematically try to explain skills.”

The narrative fallacy addresses our limited ability to look at sequences of facts without weaving an explanation into them, or, equivalently, forcing a logical link, an arrow of relationship, upon them.

that, counter to what everyone believes, not theorizing is an act—that theorizing can correspond to the absence of willed activity, the “default” option. It takes considerable effort to see facts (and remember them) while withholding judgment and resisting explanations.

Even from an anatomical perspective, it is impossible for our brain to see anything in raw form without some interpretation.

Since such gambling is associated with their seeing what they believe to be clear patterns in random numbers,

this illustrates the relation between knowledge and randomness.

The more random information is, the greater the dimensionality, and thus the more difficult to summarize. The more you summarize, the more order you put in, the less randomness. Hence the same condition that makes us simplify pushes us to think that the world is less random than it actually is.

And the Black Swan is what we leave out of simplification.

Our tendency to perceive—to impose—narrativity and causality are symptoms of the same disease—dimension reduction.

we will tend to more easily remember those facts from our past that fit a narrative, while we tend to neglect others that do not appear to play a causal role in that narrative.

So we pull memories along causative lines, revising them involuntarily and unconsciously. We continuously renarrate past events in the light of what appears to make what we think of as logical sense after these events occur.

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

Such insight should warn us that mere absence of nonsense may not be sufficient to make something true.

A more appropriate solution is to make the event appear more unavoidable. 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.

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

Note that in the absence of any other information about a person you encounter, you tend to fall back on her nationality and background as a salient attribute (as the Italian scholar did with me).

National traits” might be great for movies, they might help a lot with war, but they are Platonic notions that carry no empirical validity—yet,

Empirically, sex, social class, and profession seem to be better predictors of someone’s behavior than nationality

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.

There are fact-checkers, not intellect-checkers. Alas.

Adding the because makes these matters far more plausible, and far more likely.

Cancer from smoking seems more likely than cancer without a cause attached to it—an unspecified cause means no cause at all.

Just imagine that, as shown by Paul Slovic and his collaborators, people are more likely to pay for terrorism insurance than for plain insurance (which covers, among other things, terrorism).

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.

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

stability and absence of crises encourage risk taking, complacency, and lowered awareness of the possibility of problems.

the death of a relative in a motorcycle accident is far more likely to influence your attitude toward motorcycles than volumes of statistical analyses.

Note that I ride my red Vespa around town, since no one in my immediate environment has recently suffered an accident—although I am aware of this problem in logic, I am incapable of acting

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.

heuristics and biases approach (heuristics corresponds to the study of shortcuts, biases stand for mistakes).

Much of the trouble with human nature resides in our inability to use much of System 2, or to use it in a prolonged way without having to take a long beach vacation. In addition, we often just forget to use

the cortical part, which we are supposed to use for thinking, and which distinguishes us from other animals, and the fast-reacting limbic brain, which is the center of emotions, and which we share with other mammals.

The way to avoid the ills of the narrative fallacy is to favor experimentation over

storytelling, experience over history, and

clinical knowledge over...

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.