52 in 52 Book Summaries

Book Summary: The Black Swan by Nassim Nicholas Taleb | Forces of Habit

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

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The Essence

Using his experience as a day-trader and qualitative analyst, Nassim Taleb urges us to stop using the observable past as an indicator of the future. Humanity as a species have used data about the past to justify the narratives of the up and coming; this is inherently flawed and seeded in our predisposition for the sensational. Taleb pinpoints a variety of cases, showing that nothing we know or understand about the world at that time of a rare occurrence could have indicated nor predicted such an event; these are the Black Swans. By observing the nature of highly unpredictable events, we can come to appreciate a newfound caution in our application of systems and models of the world used to predict the future.

The Black Swan Summary Journal Entry:

This is my book summary of The Black Swan by Nassim Nicholas Taleb. My notes are a reflection of the journal write up above. Written informally, the notes contain a mesh of quotes and my own thoughts on the book. The Journal write up also includes important messages and crucial passages from the book.

  • “Humans are great at self-delusion.”
  •  A Black Swan is:
    1. An outlier; Rarity.
    2. Carries an extreme impact.
    3. Retrospective Predictability.
  • “Making a naïve observation of the past as something definitive or representative of the future is the one and only cause of our inability to understand the Black Swan.”
  • We tend to learn the precise, not the general. This stems from our excessive focus on what we know for ‘certain’. Yet nothing is truly ever known for certain.
  • Platonicity: “The desire to cut reality into crisp shapes.” Our tendency to mistake the map for the territory. We tend to focus more on what is clearly defined and allow it to blend into on conceptions for various generalizations. For example, how we use utopias, nationalities, and even abstract notions of shapes to dictate how we then come to conclusions about reality.
  • Triplet of Opacity: The human mind has become diluted by three notions. Due to how humanity has operated with history our judgment is clouded by:
    A) the illusion of understanding
    the world is far too complex for anyone to understand what is actually going on. We have ignored this. We think we know what is going on when in reality we cannot ever understand what is happening.
    B) the retrospective distortion
    Our propensity to use hindsight bias to explain phenomena. We believe things can be accessed "as if they were in a rearview mirror."
    C) the overvaluation of factual information and the handicap of authoritative and learned people
    Using Platonicity. Our categories for generalizing are shrewd, and inept at predicting future outcomes. The learned people use the categories they create to justify actions to the public, as though through the models they are granted foresight.
  • We as humans are categorizing machines. It becomes pathological however if the categories created are thought of as being absolute—as we tend to make them. By accepting a category as law, it removes the cynicism surrounding it. And without space left open for new interpretations, we strip the category of its true complexity.
  • “Uncertainty is our discipline, and that understanding how to act under conditions of incomplete information is the highest and most urgent human pursuit” -Karl Popper
  • “In a primitive environment, the relevant is the sensational.” Yet, in our current environment, “the relevant is often boring, nonsensational.”
  • Platonic Fold: The place where the platonic representation enters into contact with the reality and you can see the side effects of the models. It’s the place where you notice your models aren’t making total sense.
  • We Don’t Learn that We Don’t Learn.
  • Mediocristan: Dominated by the mediocre with few extreme successes or failures. No single observation can meaningfully affect the aggregate. “when your sample is large no single instance will significantly change to aggregate or total.”
    The bell curve is grounded in Mediocristan. Examples include physical matters like height and weight.
  • Extremistan: Where the total can be conceivably impacted by a single observation. “Inequalities are such that one single observation can disproportionately impact the aggregate, or the total.”
    Almost all social matters reside in Extremistan. Examples include social matters like wealth and academic publication.
  • Bleed>Blow up: When we “bleed” we lose over time, for a long time, gradually taking little loses that yield a disproportionately large gain due to the risk tolerance on the investment.
  • When working with uncertainty. Experimentation will yield sounder results then storytelling.
  • No matter how brilliant the model, abstract statistical information has little weight to us relieve to an anecdote.
  • Ludic Fallacy: The manifestation of the Platonic fallacy within the study of uncertainty. When we attempt an analysis of chance based on the narrow world of games and dice, we are committing the ludic fallacy. Platonic randomness has an additional layer of uncertainty concerning the rules of the game in real life. Said differently, the attributes of the uncertainty we face in real life have little connection to the sterilized ones we encounter in exams and gameslike the methods we are taught in the classroom.
  • Those who study vigorously in school have a tendency to become fools to the ludic fallacy.
  • Domain Specificity: The reaction, mode of thinking, or intuition, depends on the context in which the matter is presented, what evolutionary psychologist call the “domain” of the object or the event. We process information using not only logicif any logic at allbut the environmental framework that surrounds colors the information. So how we approach a problem in one domain may not mirror another.

Taleb is prolific. And with so much material, his terms can easily be misconstrued. Check out this brief video of Nassim Nicholas Taleb explaining what a Black Swan is. I also encourage you to check out his other publications for further clarification regarding his ideological footing in all matters concerning uncertainty. 

Reading Recommendations

If you liked what you saw. Here are 3 titles that I recommend based on what discussed in The Black Swan.

1. Superforecasting: The Art and Science of Prediction by Philip E. Tetlock, & Dan Gardner

2. Antifragile: Things That Gain from Disorder by Nassim Nicholas Taleb

3. Irrational Exuberance by Robert Shiller

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