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

by Nassim Nicholas Taleb

My prepared statement was this: “The casino is the only human venture I know where the probabilities are known, Gaussian (i.e., bell-curve), and almost computable.” You cannot expect the casino to pay out a million times your bet, or to change the rules abruptly on you during the game—there are never days in which “36 black” is designed to pop up 95 percent of the time.* In real life you do not know the odds; you need to discover them, and the sources of uncertainty are not defined. Economists, who do not consider what was discovered by noneconomists worthwhile, draw an artificial distinction between Knightian risks (which you can compute) and Knightian uncertainty (which you cannot compute), after one Frank Knight, who rediscovered the notion of unknown uncertainty and did a lot of thinking but perhaps never took risks, or perhaps lived in the vicinity of a casino. Had he taken economic or financial risks he would have realized that these “computable” risks are largely absent from real life! They are laboratory contraptions! Yet