The Black Swan by Nassim Nicholas Taleb

When I started reading this book, I didn’t think I’d have to be smart to talk about it. Turns out, you kinda have to be smart to talk about this book — at least to do so without being called an idiot by its author, Nassim Nicholas Taleb (also known as NNT). But then, he’s likely to call you an idiot regardless. Before I even started reading the book, a twitter friend even mentioned it:

He’s calls lots of people morons, stupid, unintelligent, and the like throughout the book. I’m not one to say he’s wrong, and perhaps I should count it a blessing that I don’t have dealings with too many people of great power.

But honestly reading the book made me feel less stupid. Mostly because with my small exposure to statistics in business school, I felt like an underlying question I had was always ignored:

The models you’re teaching us assume that we understand the system in which we’re using it — what do we use if something happens from outside our assumptions?

I would be dismissed as if I was asking an illogical, purposeless question. My question would not at all help me compute the homework being assigned to me that night. But now I understand that’s a question almost all experts refuse to grant any consideration, and that made me enjoy the book throughly. In particular, I liked story in Chapter 9 where NNT explains how the probability found in casino game (dice/card/roulette) is not at all the randomness he works with. All those probabilities are understood, and in the context of a Casino are controlled to the house advantage (so long as the Whales are kept at bay from large bets at the right time using Maximum Bets) and by risk management to spoil cheaters. But the real Black Swans for the casino ended up being when a tiger attacked a main stage performer, when a contractor was hurt during new construction, and when a corporate drone completely forgot to file a very important document with the IRS. All of these are far less predictable, and far more hurtful to the casino’s business than a card-counter playing Black Jack. But how does one mitigate such things?

NNT describes his Black Swan problem — when events that are both improbable and unknown cause massive consequences — but also the important Turkey problem. If you are a turkey living with a farmer, and are fed well everyday for 999 days, what do you expect to happen on day 1000? The answer is obvious to one with the wisdom of the farmer, that not only will he not be fed, but he will meet his end. If not on day 1000, most certainly at another day in the future. And the exact day doesn’t really matter, nor change that certainty. But to the Turkey, day 1000 was a Black Swan. How could he have ever predicted something so beyond the realm of his knowledge?

Don’t be the turkey. Don’t be a sukka. (I love that NNT uses that term like my favorite blogger Mr. Money Mustache does.) Understand that randomness is bound to impact your life at grand scales.

What you won’t find in this book are the fantastical 10-simple-steps-you-can-take-right-now-to-win that so many other “thinking books” try to leave with the reader. No one has them, and Taleb at least has the guts to say he can’t predict the Black Swans any better than you or I could. The only difference is that he’s slightly less shocked when they come. In some aspects of life… that negative knowledge can be rather useful.

I recommend the book. I’m not smart enough to do it justice or talk about it. I’d like to think I’m smart enough to say I don’t know plenty of other things too.

The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb

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