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Book Review : The Black Swan by Nicholas Taleb

In his book The Black Swan, the author, Nicholas Taleb, talks about how random events may come as a surprise to many of us. He begins by mentioning that  human beings have a gift for transforming stimuli coming from their environment into meaningful information. Much of this has resulted in building the scientific method, mythologies about how our world was created, stories of heroes facing difficult times, historical analysis where one event occurs because of another, and more generally speaking, any attempt to put meaning in a chaotic world.

Defining Black Swans

Now, what are Black Swans? On a very basic level, in the 18th century in London, most people believed that all swans were white because all one could find in the United Kingdom were white swans. So, people say with certainty that all swans must be white. And then one day, someone discovered one swan that was black. This came as a surprise as it had never been seen before but also as it contradicted the more abstract idea, derived from experienced that all swans must be white.

Examples of Black Swan Events

Other examples of Black Swans include physicist Copernicus discovering that it’s not the sun that revolves around the earth; but rather it’s the planet Earth that’s revolving around the sun. This carries profound implications in terms of our understanding of the universe but also the place of man and the cosmic universe and even our relationship to God – the Catholic Church was a strong believer an earth-centered universe. Other Black Swans events include the financial crash of 1929. Pres. Herbert Hoover is famous for saying that prosperity was just around the corner. This turned out to be incorrect but Pres. Hoover had no prior experience of anything like a global financial crash and therefore based on his experience his prediction that the crash would resolve itself seemed logical. The author also talks about another Black Swan event. Assume that you are bidding on a horse race and you decide to back of a horse called rocket. Certainly, it makes sense: the horse got a great track record. But on D-Day, instead of racing, the horses just stays put and loses the race. This is another Black Swan event as nothing in the past could have helped us anticipate the horse’s very strange reaction on the day of the race. 

Black Swan events are developments that no one had foreseen

So what are Black Swan events? They are an event that seems strikingly different from whatever we have seen in the past and occur despite our best efforts in anticipating how the future plays out. They are a random event that typically makes no apparent sense and carries profound implications for our personal lives but also our relationship to others and to God and the meaning of life and how the world works. 

Why we are inept at predicting the future

According to the author, human beings rush to anticipate on predicting the future but they’re actually quite poor at it for at least several reasons: 

first of all, human beings are prone to what’s called the “narrative fallacy.” In other words, we like to explain our life experience on the basis of a story with a beginning, a middle and an end. And in doing so we choose particularly particular events that seem all related to one another thanks to some kind of cause and effect relationship. And in doing so we also disregard any event which doesn’t fit into our global narrative. We fail for example to include random events or anything that may have occurred for no apparent reason. And based on our understanding of the past we try to figure out what the future might hold while still failing to take into account the eventual occurrence of random events. 

Second of all, we are prone to “confirmation bias.” The idea is that we have developed our own thinking on some matter and instead of looking for reasons why we may be wrong we look for additional information that confirms that we are correct. For example, someone who believes in climate change will be interested in finding additional information that does indeed confirm the idea that climate is in fact changing but less inclined and looking for contradictory information.   

Finally, we are victims of what the author calls the “ludic fallacy.” Based on game theory, we believe that the future may play out according to a number of different scenarios each of which have a different probability of occurring. And so we assign probabilities at different scenarios despite our notorious incompetence in assessing probabilities. To support his claim, the author mentions two different kinds of information. Some information is scalable information in that it contains no lower or upper limit. Other sorts of information are non-scalable information because they do contain a lower and upper limit. Think of a person’s body weight which could never be lower than 10 pounds and never be hired in 10,000 pounds. The author talks about understanding income distribution in the United Kingdom. He mentions that we would solve this matter by looking at the United Kingdom gross domestic product and divide this amount by the number of residents to get an idea of average income per citizens. Such a calculation, however, does not provide how income is distributed as some Englishmen may be very wealthy while others are extraordinarily poor.  

Now, how should we develops our skills in assessing probability?

The author suggests that we focus our time and effort in measuring, not what we do know but rather we don’t know. He believes that taking an inventory of what we don’t know will help us better assess risk. He mentions, for example that if we are always aware that they may be unforeseeable risks in pursuing any opportunity, despite how promising that opportunity may seem, then, we would probably be less inclined to invest heavily in it. 

Clearly, the ideas mentioned in the Black Swan really resonate with the Benveniste Test. 

In Short 

In his book The Black Swan, the author shows that human beings have a gift for transforming stimuli coming from our environment into meaningful information. We then make predictions as to how the future may unfold. But we are terrible. We are unable to account for random events, also referred to as Black Swan events that completely undermine our understanding of the world, of ourselves, and our relationships. Human beings tend to be victims of at least three fallacies:  


To improve our understanding of probabilities and to be less prone to random events that may end up ruining us financially, the author suggests that we be more aware of what we don’t know. Rather than focus our time and parading what we do know, the author suggests it would be more inclined to look at what we ignore and act accordingly. As a result, when informed that random and unpredictable events may occur at any time, most of us would act in a more prudent fashion thereby minimizing our exposure to risks and Black Swan events. 

What I find interesting in this book is how the author stresses that we ought to focus our time and energy in assessing what we don’t know. This is close to what I’m trying to develop with the Benveniste Test. With this test, I can in fact show what someone does know and doesn’t know. Also, what I find interesting in the book is that is actually based on empirical thinking. Scottish philosopher David Hume talked a lot about how we’re not able to derive knowledge based on repeated observations much like we’re not able to conclude that all swans are white just because we have only seen white swans so far. So in a sense, this book shows that developing a scientific method is a great way to mitigate risk and it makes a lot of Karl Popper seem even more relevant. 

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