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Editorial Reviews
A black swan is a highly improbable event with three principal characteristics: It is unpredictable; it carries a massive impact; and, after the fact, we concoct an explanation that makes it appear less random, and more predictable, than it was. The astonishing success of Google was a black swan; so was 9/11. For Nassim Nicholas Taleb, black swans underlie almost everything about our world, from the rise of religions to events in our own personal lives.
Why do we not acknowledge the phenomenon of black swans until after they occur? Part of the answer, according to Taleb, is that humans are hardwired to learn specifics when they should be focused on generalities. We concentrate on things we already know and time and time again fail to take into consideration what we don’t know. We are, therefore, unable to truly estimate opportunities, too vulnerable to the impulse to simplify, narrate, and categorize, and not open enough to rewarding those who can imagine the “impossible.”
For years, Taleb has studied how we fool ourselves into thinking we know more than we actually do. We restrict our thinking to the irrelevant and inconsequential, while large events continue to surprise us and shape our world. Now, in this revelatory book, Taleb explains everything we know about what we don’t know. He offers surprisingly simple tricks for dealing with black swans and benefiting from them.
Elegant, startling, and universal in its applications The Black Swan will change the way you look at the world. Taleb is a vastly entertaining writer, with wit, irreverence, and unusual stories to tell. He has a polymathic command of subjects ranging from cognitive science to business to probability theory. The Black Swan is a landmark book–itself a black swan.
*2nd Edition, With a new essay: "On Robustness and Fragility"
From the Hardcover edition.
Why do we not acknowledge the phenomenon of black swans until after they occur? Part of the answer, according to Taleb, is that humans are hardwired to learn specifics when they should be focused on generalities. We concentrate on things we already know and time and time again fail to take into consideration what we don’t know. We are, therefore, unable to truly estimate opportunities, too vulnerable to the impulse to simplify, narrate, and categorize, and not open enough to rewarding those who can imagine the “impossible.”
For years, Taleb has studied how we fool ourselves into thinking we know more than we actually do. We restrict our thinking to the irrelevant and inconsequential, while large events continue to surprise us and shape our world. Now, in this revelatory book, Taleb explains everything we know about what we don’t know. He offers surprisingly simple tricks for dealing with black swans and benefiting from them.
Elegant, startling, and universal in its applications The Black Swan will change the way you look at the world. Taleb is a vastly entertaining writer, with wit, irreverence, and unusual stories to tell. He has a polymathic command of subjects ranging from cognitive science to business to probability theory. The Black Swan is a landmark book–itself a black swan.
*2nd Edition, With a new essay: "On Robustness and Fragility"
From the Hardcover edition.
Related Reviews
Lost in Extremistan with nothing but a Bell Curve
Chapters 15 - 17 are excellent. The remainder is OK.
Starting with the good (chapters 15 - 17), within chapter 15 Taleb explains where the Bell curve works and where it does not. The Bell curve captures well variables that don't deviate much from the mean. Otherwise, it does not work. Taleb suggests we often fool ourselves in believing that correlation, regression coefficients, or standard deviation convey much information. This is because those coefficients are unstable (and can flip sign when possible) depending on the time selected. This is because the underlying variables are often not stationary enough for these coefficients to be stable.
Chapter 16 is excellent as an introduction to Mandelbrot's fractal geometry as an alternative to Gaussian based investment theory. He supports well that these mathematical tools do capture randomness (of non-stationary variables) far better than the Normal distribution. However, he admits that Mandelbrotian models are not predictive. When looking at the same data set, he and numerous colleagues each came up with different underlying parameters to build fractal-like models. And a small difference in such parameters makes a huge difference in outcome. That's why you will not hear much of fractal geometry within the quantitative financial community. Nevertheless, this is a fascinating subject that deserves further exploration. For this purpose, I recommend Mandelbrot's The Misbehavior of Markets
Within Chapter 17, Taleb further elaborates on the flaws of the Normal distribution. He underlines that half of the return of the stock market over the past 50 years was associated with just 10 days with the greatest daily change. This is an example where stock returns have outliers of such magnitude that using the Normal distribution is not appropriate. Taleb describes the run-ins he experienced with the living legends of modern finance including Myron Scholes and Robert Merton due to his rejection of the Normal distribution assumption that underlies all their models.
The remainder of the book is not nearly as good. Hundreds of pages can be summed up in just stating that we can't predict rare events. Taleb goes way overboard in attributing everything to luck. He thinks MicroSoft beat out Apple just due to luck. Taleb does not consider that MicroSoft open system allowed it to mushroom while Apple locked itself into a proprietary corner. Also, according to Taleb both the rise and fall of Rome were due entirely to luck. But, Rome was best at developing military strategy and transportation networks. However, it eventually suffered from imperial overstretch. Explanations are not always narrative fallacies as Taleb believes. They often beat out ignorance.
When it comes to advice, Taleb's recommendation is interesting. It consists in an asset allocation of 85% risk free investments (T-bill) and the 15% remainder into buying way out of the money Calls and Puts. By doing so, he positions his portfolio to capture the occasional mispriced Black Swans.
This book is somewhat uneven in quality and is not nearly as good as his first book: Fooled by Randomness Revision (Not Available in US): The Hidden Role of Chance in the Markets and Life that has become a classic on Wall Street. Otherwise, it still is an interesting reading.
If you find the subject of this book intriguing, let me suggest a few other books that are more rewarding. Scott Plous'sThe Psychology of Judgment and Decision Making explores the flaws in human judgments far more thoroughly and clearly than Taleb in `The Black Swan.' Perry Mehrling's Fischer Black and the Revolutionary Idea of Finance is also an excellent book. Ideally, that may be who Taleb would have liked to become. Fischer Black was brilliant and as skeptical as Taleb regarding much of the body of economics and finance. Yet, he left a great legacy of elegant models that people still use extensively including the famous Black-Scholes option model. Yes those models were often based on Taleb's dreaded Normal distribution. But, with minor modifications those models have remained valuable. Another recommendation is William Poundstone's Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street that describes the career of a bright MIT mathematician, Ed Thorp. The latter showed how to successfully deal with uncertainty in gambling and investing. Even Taleb recognized Thorp's unique expertise within `Black Swan.'
Chapter 16 is excellent as an introduction to Mandelbrot's fractal geometry as an alternative to Gaussian based investment theory. He supports well that these mathematical tools do capture randomness (of non-stationary variables) far better than the Normal distribution. However, he admits that Mandelbrotian models are not predictive. When looking at the same data set, he and numerous colleagues each came up with different underlying parameters to build fractal-like models. And a small difference in such parameters makes a huge difference in outcome. That's why you will not hear much of fractal geometry within the quantitative financial community. Nevertheless, this is a fascinating subject that deserves further exploration. For this purpose, I recommend Mandelbrot's The Misbehavior of Markets
Within Chapter 17, Taleb further elaborates on the flaws of the Normal distribution. He underlines that half of the return of the stock market over the past 50 years was associated with just 10 days with the greatest daily change. This is an example where stock returns have outliers of such magnitude that using the Normal distribution is not appropriate. Taleb describes the run-ins he experienced with the living legends of modern finance including Myron Scholes and Robert Merton due to his rejection of the Normal distribution assumption that underlies all their models.
The remainder of the book is not nearly as good. Hundreds of pages can be summed up in just stating that we can't predict rare events. Taleb goes way overboard in attributing everything to luck. He thinks MicroSoft beat out Apple just due to luck. Taleb does not consider that MicroSoft open system allowed it to mushroom while Apple locked itself into a proprietary corner. Also, according to Taleb both the rise and fall of Rome were due entirely to luck. But, Rome was best at developing military strategy and transportation networks. However, it eventually suffered from imperial overstretch. Explanations are not always narrative fallacies as Taleb believes. They often beat out ignorance.
When it comes to advice, Taleb's recommendation is interesting. It consists in an asset allocation of 85% risk free investments (T-bill) and the 15% remainder into buying way out of the money Calls and Puts. By doing so, he positions his portfolio to capture the occasional mispriced Black Swans.
This book is somewhat uneven in quality and is not nearly as good as his first book: Fooled by Randomness Revision (Not Available in US): The Hidden Role of Chance in the Markets and Life that has become a classic on Wall Street. Otherwise, it still is an interesting reading.
If you find the subject of this book intriguing, let me suggest a few other books that are more rewarding. Scott Plous'sThe Psychology of Judgment and Decision Making explores the flaws in human judgments far more thoroughly and clearly than Taleb in `The Black Swan.' Perry Mehrling's Fischer Black and the Revolutionary Idea of Finance is also an excellent book. Ideally, that may be who Taleb would have liked to become. Fischer Black was brilliant and as skeptical as Taleb regarding much of the body of economics and finance. Yet, he left a great legacy of elegant models that people still use extensively including the famous Black-Scholes option model. Yes those models were often based on Taleb's dreaded Normal distribution. But, with minor modifications those models have remained valuable. Another recommendation is William Poundstone's Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street that describes the career of a bright MIT mathematician, Ed Thorp. The latter showed how to successfully deal with uncertainty in gambling and investing. Even Taleb recognized Thorp's unique expertise within `Black Swan.'
Many important ideas, many flaws that detract from the message
This is an entertaining and enlightening book, and fairly easy to read. It has an important message regarding how the world works; that the world is governed not by the predictable and the average, but by the random, the unknownable, the unpredictable -- big events or discoveries or unusual people that have big consequences. Change comes not uniformly but in unpredictable spurts. These are the Black Swans of the title: completedly unexpected and rare events or novel ideas or technologies that have a huge impact on the world. Indeed, Taleb argues that history itself is primarly driven by these Black Swans.
It is convincing argument, entertainingly presented with plenty of sarcasm, and indeed, anger, by Taleb. For example he rails against the academic community, economists (including specific names), and Nobel Prize committee. Considerable numbers of his arguments "ring true" to me, that is my experience in life confirms that they are more accurate than the traditional approach. Like any important work, 90% of what is in the book is not original; that does not make it less important. Taleb's contribution is in integrating the material together, and showing how these different ideas are tied to the Black Swan.
The themes include: winner-take-all phenonomen, numerous effects of randomness on the world, the invalidity of the Gaussian Bell Curve to most things in world, concepts of scalablity, numerous instabilities in the world, especially the modern world where information travels so quickly, the fallacies about people's inability to predict the future. The importance of these ideas, Taleb's ability to weave them together into a single theory, and the ability of this theory to change the way you look at the world, means the book easily deserves my highest recommendation.
However, the book does have many flaws, unfortunately -- unfortunate because I believe they will take away from the credibility of the message, which is in important one. The are numerous minor flaws such as, for example, the inexplicable invention of a fictional author (disclosed a few pages later), when certainly there must have been some real example that would have worked better. Another example is repeated jabs about the French; these may be amusing but I just don't think they have a place in work like this. There are also diatribes against specific people, including famous economists, which, though amusing, and possibly justified, demonstrate a high level of anger by author and take away from his credibility. Often he also overreaches, for example in saying the usual combination of anti-abortion and pro-death penalty or the opposite combined views of pro-abortion and anti-death penatly cannot be explained logically, when in fact widely known theories such as George Lakoff's (in Moral Politics) have explained hows these groups of views are entirely consistent.
Another flaw is that Taleb seems to go a little toward the extreme of saying that we can predict almost nothing about the future, and though he does not say so explicitly, this seems to imply we have no moral responsibility to the future. This, combined with Taleb's advice to the reader about their behavior based on the "Black Swan" view of world just rubbed me the wrong way, for several reasons. One is that Taleb personally has very little in common with most people; never having as far as I know had a regular career (essentially what he calls non-scalable, e.g. dentist, engineer, baker) he nevertheless recommends that people choose these kinds of careers rather than a scalable career (e.g. financial trader, author, actor which are subject to a few lucky successful people and a lot of failures). This advise is odd first because Taleb is in a non-scalable profession (derivatives trader, then hedge fund manager) -- indeed it appears he is quite wealthy. Even more odd because he says all these types of non-scalable types of work are boring and evens makes sarcastic comments (the book is extremely sarcasm heavy) for example about dentists being able to do well by diligently drilling teeth for 30 years. The second things that bothered me is that Taleb seems be somewhat amoral to me; in this type of book where plenty of his own emotions come through, plenty of his personality, he has plenty of criticism of others for their wrong models and wrong view of the world, and how this has hurt the world, but there remains a lack of moral responsibility to his advice.
Perhaps the best comparison I could make are to other important works that do not suffer from these flaws, for example the Age of Fallibility by George Soros and Irrational Exuberance by Robert Shiller (1st and 2nd editions). But probably Black Swan will sell better than either of these because of it's "edginess," i.e. aggresiveness; I personally have a distaste for this approach.
Despite my criticisms, the main ideas of the book as so important as to merit reading and indeed great consideration.
It is convincing argument, entertainingly presented with plenty of sarcasm, and indeed, anger, by Taleb. For example he rails against the academic community, economists (including specific names), and Nobel Prize committee. Considerable numbers of his arguments "ring true" to me, that is my experience in life confirms that they are more accurate than the traditional approach. Like any important work, 90% of what is in the book is not original; that does not make it less important. Taleb's contribution is in integrating the material together, and showing how these different ideas are tied to the Black Swan.
The themes include: winner-take-all phenonomen, numerous effects of randomness on the world, the invalidity of the Gaussian Bell Curve to most things in world, concepts of scalablity, numerous instabilities in the world, especially the modern world where information travels so quickly, the fallacies about people's inability to predict the future. The importance of these ideas, Taleb's ability to weave them together into a single theory, and the ability of this theory to change the way you look at the world, means the book easily deserves my highest recommendation.
However, the book does have many flaws, unfortunately -- unfortunate because I believe they will take away from the credibility of the message, which is in important one. The are numerous minor flaws such as, for example, the inexplicable invention of a fictional author (disclosed a few pages later), when certainly there must have been some real example that would have worked better. Another example is repeated jabs about the French; these may be amusing but I just don't think they have a place in work like this. There are also diatribes against specific people, including famous economists, which, though amusing, and possibly justified, demonstrate a high level of anger by author and take away from his credibility. Often he also overreaches, for example in saying the usual combination of anti-abortion and pro-death penalty or the opposite combined views of pro-abortion and anti-death penatly cannot be explained logically, when in fact widely known theories such as George Lakoff's (in Moral Politics) have explained hows these groups of views are entirely consistent.
Another flaw is that Taleb seems to go a little toward the extreme of saying that we can predict almost nothing about the future, and though he does not say so explicitly, this seems to imply we have no moral responsibility to the future. This, combined with Taleb's advice to the reader about their behavior based on the "Black Swan" view of world just rubbed me the wrong way, for several reasons. One is that Taleb personally has very little in common with most people; never having as far as I know had a regular career (essentially what he calls non-scalable, e.g. dentist, engineer, baker) he nevertheless recommends that people choose these kinds of careers rather than a scalable career (e.g. financial trader, author, actor which are subject to a few lucky successful people and a lot of failures). This advise is odd first because Taleb is in a non-scalable profession (derivatives trader, then hedge fund manager) -- indeed it appears he is quite wealthy. Even more odd because he says all these types of non-scalable types of work are boring and evens makes sarcastic comments (the book is extremely sarcasm heavy) for example about dentists being able to do well by diligently drilling teeth for 30 years. The second things that bothered me is that Taleb seems be somewhat amoral to me; in this type of book where plenty of his own emotions come through, plenty of his personality, he has plenty of criticism of others for their wrong models and wrong view of the world, and how this has hurt the world, but there remains a lack of moral responsibility to his advice.
Perhaps the best comparison I could make are to other important works that do not suffer from these flaws, for example the Age of Fallibility by George Soros and Irrational Exuberance by Robert Shiller (1st and 2nd editions). But probably Black Swan will sell better than either of these because of it's "edginess," i.e. aggresiveness; I personally have a distaste for this approach.
Despite my criticisms, the main ideas of the book as so important as to merit reading and indeed great consideration.
A disappointing follow-up to "Fooled by Randomness"
I'm a mathematician and former trader, and I've always enjoyed Taleb's work, from his technical tome on derivatives, "Dynamic Hedging," to the brilliant "Fooled by Randomness." These books provided a healthy dose of empirical skepticism about a field that sometimes gets carried away with its own "precise" models -- as well as some insightful commentary on why people are bad at recognizing randomness and making predictions, and how we should be wary of charlatans (and fools) trying to sell us false certainty, especially about financial markets. Unfortunately, "The Black Swan" doesn't say much that "Fooled by Randomness" didn't already say (and say better), and I was disappointed by most of the new material.
First, Taleb's ideas on uncertainty have gone a bit over the edge. Before, he denounced the poor use of over-simplified models (i.e. the bell curve) to model uncertainty; he now seems to have given up on models altogether (save for a brief and justified nod to Benoit Mandelbrot). Rather than just attack bad science, and encourage better science in its place, he seems to view the entire scientific enterprise as hopeless -- adopting the somewhat anti-intellectual attitude that we should stop trying to "understand" markets at all, and be more like Fat Tony, the trader from Brooklyn. His portrayal of mathematical finance types is a complete caricature, which is amusing because, whether he likes it or not, he's one of them! (Taleb has taught in the mathematical finance program at NYU's prestigious Courant Institute.) The idea that mainstream academics are too myopic to see beyond their bell-curve models is laughable, and in many cases, decades out of date -- even undergrads learn about the flaws in the Black-Scholes model, and the problem of "fat tails."
While "Fooled by Randomness" suggests (wisely) that we pay attention to the magnitude of events and not just their probabilities, in "The Black Swan" he throws out probability altogether. This results in some bizarre advice, such as that people should structure their lives (and financial portfolios) to capture "positive black swans," i.e. huge but unlikely turns of good fortune, because "unlikely" is a meaningless probabilistic notion. For example, he suggests that people should put 90% of their assets in extremely safe instruments (like T-bills), while gambling the remaining 10% on risky ventures and hoping to hit it big. He claims that this limits one's downside while waiting for a big windfall ... but what happens when the "risky" 10% gets wiped out in a year or two? Do you then start investing your remaining assets (possibly losing more), or do you just stick with low-yield T-bills for the rest of your life? Taleb seemingly hasn't thought it out that far. By the "positive black swan" logic, thousands of unemployed "actors," waiting for that big break that never comes, have the right idea -- not to mention people who waste their money on lottery tickets (hey, the downside is only a buck, but the upside is millions!). This seems to be a complete reversal from "Fooled by Randomness," which had a brighter view of skilled ("Mediocristan") pursuits like dentistry, where one avoids living at the behest of good or bad fortune altogether.
Finally, Taleb has always exuded snobbery in his writing -- in the past it has almost been charming -- but this time it quickly wears out its welcome. He never fails to remind the reader that he sees himself as an erudite "gentleman trader," a rogue philosopher among philistines and eggheads. Yawn.
I still give this book 3 stars, because it does have some decent content, but read "Fooled by Randomness" instead. If you've already read that book, there's no need to buy this one -- but if you're in the mood to read about the problems of uncertainty and prediction in the markets, check out "When Genius Failed" by Lowenstein, "A Random Walk Down Wall Street" by Malkiel, or (for the eggheads) "Fractals and Scaling in Finance" by Mandelbrot.
First, Taleb's ideas on uncertainty have gone a bit over the edge. Before, he denounced the poor use of over-simplified models (i.e. the bell curve) to model uncertainty; he now seems to have given up on models altogether (save for a brief and justified nod to Benoit Mandelbrot). Rather than just attack bad science, and encourage better science in its place, he seems to view the entire scientific enterprise as hopeless -- adopting the somewhat anti-intellectual attitude that we should stop trying to "understand" markets at all, and be more like Fat Tony, the trader from Brooklyn. His portrayal of mathematical finance types is a complete caricature, which is amusing because, whether he likes it or not, he's one of them! (Taleb has taught in the mathematical finance program at NYU's prestigious Courant Institute.) The idea that mainstream academics are too myopic to see beyond their bell-curve models is laughable, and in many cases, decades out of date -- even undergrads learn about the flaws in the Black-Scholes model, and the problem of "fat tails."
While "Fooled by Randomness" suggests (wisely) that we pay attention to the magnitude of events and not just their probabilities, in "The Black Swan" he throws out probability altogether. This results in some bizarre advice, such as that people should structure their lives (and financial portfolios) to capture "positive black swans," i.e. huge but unlikely turns of good fortune, because "unlikely" is a meaningless probabilistic notion. For example, he suggests that people should put 90% of their assets in extremely safe instruments (like T-bills), while gambling the remaining 10% on risky ventures and hoping to hit it big. He claims that this limits one's downside while waiting for a big windfall ... but what happens when the "risky" 10% gets wiped out in a year or two? Do you then start investing your remaining assets (possibly losing more), or do you just stick with low-yield T-bills for the rest of your life? Taleb seemingly hasn't thought it out that far. By the "positive black swan" logic, thousands of unemployed "actors," waiting for that big break that never comes, have the right idea -- not to mention people who waste their money on lottery tickets (hey, the downside is only a buck, but the upside is millions!). This seems to be a complete reversal from "Fooled by Randomness," which had a brighter view of skilled ("Mediocristan") pursuits like dentistry, where one avoids living at the behest of good or bad fortune altogether.
Finally, Taleb has always exuded snobbery in his writing -- in the past it has almost been charming -- but this time it quickly wears out its welcome. He never fails to remind the reader that he sees himself as an erudite "gentleman trader," a rogue philosopher among philistines and eggheads. Yawn.
I still give this book 3 stars, because it does have some decent content, but read "Fooled by Randomness" instead. If you've already read that book, there's no need to buy this one -- but if you're in the mood to read about the problems of uncertainty and prediction in the markets, check out "When Genius Failed" by Lowenstein, "A Random Walk Down Wall Street" by Malkiel, or (for the eggheads) "Fractals and Scaling in Finance" by Mandelbrot.
A bad book for all the wrong reasons.
I really wish this were a good book, because the basic idea behind it is original, important and clever. That makes Taleb's careless handling of his topic all the more disturbing.
The rock-solid foundation of this book is Taleb's insight that the most important events in history, and presumably to come in the future, are essentially unpredictable; they can't be forecast using the information we have prior to their occurrence. That's a huge point and Taleb goes on to offer some compelling evidence that it is indeed true. He uses the analogy of a Turkey deciding that humans must have his best interests at heart because they show up every day of his life to feed him a good meal, he projects that - based on all of his evidence - this will continue. This works great until a couple of days before Thanksgiving. Suddenly his predictions have failed him catastrophically.
Great idea, and - I believe - true. But Taleb undercuts his own thought baby with shoddy writing, poor research and personal opinion masquerading as evidence.
The writing: A well-written book allows a reader to flow naturally from one paragraph to the next and from one idea to the next, even when the subject matter is complex. Taleb's writing is tough to follow and slow to get through. Beyond that, you really struggle to comprehend what he is trying to get across to you for huge portions of this book.
The research: When Taleb used examples to back his ideas that came from fields with which I was unfamiliar, I felt pretty good about them. However, whenever he used examples from areas where I have deeper knowledge, I noticed that his knowledge was lacking badly (being a trader comes to mind). This started to make me question all of his supporting evidence.
The opinion: Taleb leans heavily on the idea that most of what happens in the world is luck, even when we try desperately to ascribe some sort of tangible cause to it. At one point he uses the example of Mac operating software being far superior to that of Windows, but Windows being dominant in the market. He chalks it up entirely to luck! I'm sure he'd say I'm falling prey to a logical fallacy, but Apple and Steve Jobs had a huge head start on Microsoft, but refused to let anyone else run their operating system - so to run it, you had to buy a Mac. Microsoft let anyone run their operating system and consequently took the dominant share of the market.
This book is really a shame. The idea is just too good to be used this poorly. It made me sad to read this thing. Taleb the thinker deserved a far better writer than Taleb the author. What a waste.
You might still try reading this to understand Taleb's idea, because it's a huge insight, but watch all of his other content because it's riddled with holes.
The rock-solid foundation of this book is Taleb's insight that the most important events in history, and presumably to come in the future, are essentially unpredictable; they can't be forecast using the information we have prior to their occurrence. That's a huge point and Taleb goes on to offer some compelling evidence that it is indeed true. He uses the analogy of a Turkey deciding that humans must have his best interests at heart because they show up every day of his life to feed him a good meal, he projects that - based on all of his evidence - this will continue. This works great until a couple of days before Thanksgiving. Suddenly his predictions have failed him catastrophically.
Great idea, and - I believe - true. But Taleb undercuts his own thought baby with shoddy writing, poor research and personal opinion masquerading as evidence.
The writing: A well-written book allows a reader to flow naturally from one paragraph to the next and from one idea to the next, even when the subject matter is complex. Taleb's writing is tough to follow and slow to get through. Beyond that, you really struggle to comprehend what he is trying to get across to you for huge portions of this book.
The research: When Taleb used examples to back his ideas that came from fields with which I was unfamiliar, I felt pretty good about them. However, whenever he used examples from areas where I have deeper knowledge, I noticed that his knowledge was lacking badly (being a trader comes to mind). This started to make me question all of his supporting evidence.
The opinion: Taleb leans heavily on the idea that most of what happens in the world is luck, even when we try desperately to ascribe some sort of tangible cause to it. At one point he uses the example of Mac operating software being far superior to that of Windows, but Windows being dominant in the market. He chalks it up entirely to luck! I'm sure he'd say I'm falling prey to a logical fallacy, but Apple and Steve Jobs had a huge head start on Microsoft, but refused to let anyone else run their operating system - so to run it, you had to buy a Mac. Microsoft let anyone run their operating system and consequently took the dominant share of the market.
This book is really a shame. The idea is just too good to be used this poorly. It made me sad to read this thing. Taleb the thinker deserved a far better writer than Taleb the author. What a waste.
You might still try reading this to understand Taleb's idea, because it's a huge insight, but watch all of his other content because it's riddled with holes.
good ideas but unfair criticism too
As a mathematical statistician I am a little taken aback by Taleb's lack of scholarship in understanding and appreciating what professional statisticians do. He puts down economists, Nobel laureates, philosopher and statisticians among others. There is a degree of unseemly arrogance on his part and I am sure that some of the other 300 or so reviews on amazon take him to task on that.
It is a shame too because for many of us, it spoils the really good main point of the book which is that Black Swans exist, make predictions difficult if not impossible but can be handle in the stock trading business at least by using his barbell approach.
I found the first 1/3 rd of the book very philosophical extremely redundant yet provocative. The rest of the book was much more interesting to me particular the last few chapter which had the most technical discussion and many points to agree with and also to quibble with.
A Black Swan is an extreme event that is very rare but so significant that it creates instability in averages and can ruin predictions and be either castastrophic (the negative Black Swan) or bring great fortune (the positive Black Swan). These Black Swans are real and Taleb cites many examples. Taleb is also right with his point that some economists are blind to the Black Swan or at least the unpredictability of them. I have often seen major declines in the stock market explained after the fact with seemingly logical but very suspicious and dubious rationalizations. Taleb deserves credit for recognizing this and realizing that in the world he calls extremistan where the Black Swans exist they must be accounted for but no should attempt the futile business of predicting them!
He also recognizes that there is another world where the Gaussian distribution and other light-tailed parametric distributions prevail and he calls this the world of mediocrastan. Here, the usual parametric statistics is useful but in Taleb's view it is not very common in practice to be in a mediocrastan world. This is the world of parametric statistics and is the place where most elementary courses in statistics reside. But here is also where I think Taleb makes a big mistake. He assume that this is the world where all statisticians and econometricians live and play and so these teachings are irrelevant to the practical world. Well, in many of the areas he discusses the parametric statistical models do not work. But probabilist, statisticians and econometricians have realized this for at least the past 60 years. In the 1930s and 1940s the field of nonparametric statistics developed through the work of Pitman, Mann and Whitney and Wilcoxon to name a few. Also the theory of extreme value distributions goes back to Fisher and Tippett in 1929 and was rigorously developed by Gnedenko in the 1940s. Nonparametric statistics deals with general distributions that do not have a simple parametric form and includes the heavy-tailed distributions that Taleb cares about. Also the asymptotic theory of extreme values that Fisher and Tippett, Gumbel and Gnedenko discovered showed that the extreme events had systematic behavior based on the three extreme-value types of distributions. So the extremes can be treated using asymptotic statistical theory just as well as the averages can be characterized asymptotically through the central limit theorem and the stable laws (in the case of a heavy-tailed population distribution). So in some ways Taleb is off and out of gas because he doesn't address or perhaps is even ignorant of this theory.
In the area of finance as well as in other areas, time series models have been useful in developing forecasts. In the world of mediocrastan the Box-Jenkins ARIMA models are very useful for problems in forecast and stochastic control. This was well established with the very popular book by Box and Jenkins that was first published in 1970. However financial data often falls into the world of extremistan and the stationary distributions when they exist are non-Gaussian and heavy-tailed. It is in this context that ARIMA models fail but the statisticians and econometricians have developed other models including the GARCH models which handle this type of data and allow for better predictions. Taleb mentions the GARCH models but only to make fun of them in a very superficial way that does not discuss any of the mathematics associated with these models. Again, I am not sure if Taleb is ignorant about this body of literature or just dismisses it because he see other models that cannot be used to predict as more appropriate.
Taleb is enamored with Mandelbrot and his theory of fractal geometry and the apparent natural properties of fractals. Well at least fractals look like coastlines on the world globe as well as other common items in our natural environment. But is this enough to say that fractals are the only models relevant to extremistan? I am not yet convinced.
This August I went to the Joint Statistical Meetings in Denver. There was a session on the Black Swan and to his credit Taleb was brave enough to accept the invitation of the statistical community to come to discuss the issues in his book. Unfortunately, I was not able to attend that session. But it got mew curious enough to want to read the book and see what Taleb's premise was all about. I do not yet know much about what came out of that session. I hope that at least Mr. Taleb came out of it with a better appreciation of the intelligence of statisticians and the more sophisticated models that he appears to be ignorant of based on the lack of discussion of them in his book.
Another branch of nonparametric statistics developed in the 1970s that is now called resampling methods. One of the more successful of these methods is the bootstrap. I have done some research into bootstrap methods as well as having authored a text on the topic. I believe that the bootstrap approach to time series analysis is another way that these time series with non-Gaussian innovation distributions or the stationary distributions of the time series model can be handled. I am not yet convinced that in the world of extremistan the hope of some form of forecasting must be abandoned as is Taleb's thesis.
It is a shame too because for many of us, it spoils the really good main point of the book which is that Black Swans exist, make predictions difficult if not impossible but can be handle in the stock trading business at least by using his barbell approach.
I found the first 1/3 rd of the book very philosophical extremely redundant yet provocative. The rest of the book was much more interesting to me particular the last few chapter which had the most technical discussion and many points to agree with and also to quibble with.
A Black Swan is an extreme event that is very rare but so significant that it creates instability in averages and can ruin predictions and be either castastrophic (the negative Black Swan) or bring great fortune (the positive Black Swan). These Black Swans are real and Taleb cites many examples. Taleb is also right with his point that some economists are blind to the Black Swan or at least the unpredictability of them. I have often seen major declines in the stock market explained after the fact with seemingly logical but very suspicious and dubious rationalizations. Taleb deserves credit for recognizing this and realizing that in the world he calls extremistan where the Black Swans exist they must be accounted for but no should attempt the futile business of predicting them!
He also recognizes that there is another world where the Gaussian distribution and other light-tailed parametric distributions prevail and he calls this the world of mediocrastan. Here, the usual parametric statistics is useful but in Taleb's view it is not very common in practice to be in a mediocrastan world. This is the world of parametric statistics and is the place where most elementary courses in statistics reside. But here is also where I think Taleb makes a big mistake. He assume that this is the world where all statisticians and econometricians live and play and so these teachings are irrelevant to the practical world. Well, in many of the areas he discusses the parametric statistical models do not work. But probabilist, statisticians and econometricians have realized this for at least the past 60 years. In the 1930s and 1940s the field of nonparametric statistics developed through the work of Pitman, Mann and Whitney and Wilcoxon to name a few. Also the theory of extreme value distributions goes back to Fisher and Tippett in 1929 and was rigorously developed by Gnedenko in the 1940s. Nonparametric statistics deals with general distributions that do not have a simple parametric form and includes the heavy-tailed distributions that Taleb cares about. Also the asymptotic theory of extreme values that Fisher and Tippett, Gumbel and Gnedenko discovered showed that the extreme events had systematic behavior based on the three extreme-value types of distributions. So the extremes can be treated using asymptotic statistical theory just as well as the averages can be characterized asymptotically through the central limit theorem and the stable laws (in the case of a heavy-tailed population distribution). So in some ways Taleb is off and out of gas because he doesn't address or perhaps is even ignorant of this theory.
In the area of finance as well as in other areas, time series models have been useful in developing forecasts. In the world of mediocrastan the Box-Jenkins ARIMA models are very useful for problems in forecast and stochastic control. This was well established with the very popular book by Box and Jenkins that was first published in 1970. However financial data often falls into the world of extremistan and the stationary distributions when they exist are non-Gaussian and heavy-tailed. It is in this context that ARIMA models fail but the statisticians and econometricians have developed other models including the GARCH models which handle this type of data and allow for better predictions. Taleb mentions the GARCH models but only to make fun of them in a very superficial way that does not discuss any of the mathematics associated with these models. Again, I am not sure if Taleb is ignorant about this body of literature or just dismisses it because he see other models that cannot be used to predict as more appropriate.
Taleb is enamored with Mandelbrot and his theory of fractal geometry and the apparent natural properties of fractals. Well at least fractals look like coastlines on the world globe as well as other common items in our natural environment. But is this enough to say that fractals are the only models relevant to extremistan? I am not yet convinced.
This August I went to the Joint Statistical Meetings in Denver. There was a session on the Black Swan and to his credit Taleb was brave enough to accept the invitation of the statistical community to come to discuss the issues in his book. Unfortunately, I was not able to attend that session. But it got mew curious enough to want to read the book and see what Taleb's premise was all about. I do not yet know much about what came out of that session. I hope that at least Mr. Taleb came out of it with a better appreciation of the intelligence of statisticians and the more sophisticated models that he appears to be ignorant of based on the lack of discussion of them in his book.
Another branch of nonparametric statistics developed in the 1970s that is now called resampling methods. One of the more successful of these methods is the bootstrap. I have done some research into bootstrap methods as well as having authored a text on the topic. I believe that the bootstrap approach to time series analysis is another way that these time series with non-Gaussian innovation distributions or the stationary distributions of the time series model can be handled. I am not yet convinced that in the world of extremistan the hope of some form of forecasting must be abandoned as is Taleb's thesis.
After reading "Fooled By Randomness", I eagerly looked forward to reading Taleb's latest book, only to be disappointed. He mentions both in the prologue and acknowledgments, "the book just wrote itself", and it shows. He could have fitted most of the 300 pages into 50 and gotten his points across. In any event, this book does not add anything more to "Fooled By Randomness" (194 pages) and is often rambling and incoherent. Perhaps if one read The Black Swan first, it may have been interesting but not if you read Taleb's previous excellent book.
I am a mathematical statistician and I have read the book in question. Although I agree with the book's conclusion, I can only say that the information in the book can be written in about two pages. It does not require a book to say it.
Oh dear. If you've read Taleb's previous book, Fooled By Randomness, don't bother with The Black Swan. Fooled By Randomness was deservedly successful, filled with contrarian thinking that makes sense, delivered in an original and engaging style. But success went to Taleb's head. In The Black Swan, Taleb seems more interested in talking about himself. He doesn't do his reputation any favors by doing so. He describes what he seems to think of as charming quirkiness, nearly giving an octogenarian Nobel Prize laureate a heart attack by heckling him at a lecture. Taleb loves to take blowhards down a notch or two. But when someone challenges his ideas, it's because they haven't read his book, or they didn't understand his brilliance.
The Black Swan jumps around, switching from a tale of a non-existent Russian author to Taleb's experiences in Lebanon to the mathematics of probability. The language is repetitive, using "black swan" and "extremistan" long after their cuteness has worn off.
Read Fooled By Randomness or Devil Take the Hindmost or Fortune's Formula. Read Harry Potter. Anything but The Black Swan.
The Black Swan jumps around, switching from a tale of a non-existent Russian author to Taleb's experiences in Lebanon to the mathematics of probability. The language is repetitive, using "black swan" and "extremistan" long after their cuteness has worn off.
Read Fooled By Randomness or Devil Take the Hindmost or Fortune's Formula. Read Harry Potter. Anything but The Black Swan.
I loved Fooled by Randomness. I recommended it to friends, colleagues and candidates. Beside thought-provoking comments on chance and financial markets, Taleb's previous book was a cheerful but cruel variation on the theme of the confusion between success and luck, a subject which has been discussed to death in literature, and which comes down to the question which has probably agitated people ever since ambitious young men walked the streets of Sumer and Akkad, and possibly earlier, being: "Why Am I Not More Successful ?".
In Black Swan, Nassim Taleb abandons social critique to focus on philosophy, which unfortunately was the weakest part in Fooled by Randomness. We get several hundred pages of anecdotes and curiosities about Taleb's life, statistics, finance, and more about Taleb, all in a pretentious tone, which I found repetitive and boring (but which some apparently find entertaining). In my view, his main weakness is his poor sense of History - which could come in handy in the study of dynamic phenomena over long periods. While plodding through Taleb's ramblings, I had the impression that what's really missing is having an historical (rather than statistical or mathematical) perspective on events. As for the "Black Swan" concept, it is theoretically worthless: since any event can be explained ex-post, a "Black Swan" is merely a pretentious term for "unforeseen event with major consequences". Incidentally, I find it paradoxical that someone who endeavours to write on uncertainty should be so certain of himself.
And don't try Taleb's approach to risk management, which is essentially forgetting about unfavourable events since they are not predictable. I seem to understand that the author takes a dim view of planning, but he should think again. Planning is what people do when they have to prepare for an uncertain future (like the military does, for example). One of the keys to good planning is general knowledge: reading the newspapers for example, something Taleb takes a misplaced pride in not doing.
In Black Swan, Nassim Taleb abandons social critique to focus on philosophy, which unfortunately was the weakest part in Fooled by Randomness. We get several hundred pages of anecdotes and curiosities about Taleb's life, statistics, finance, and more about Taleb, all in a pretentious tone, which I found repetitive and boring (but which some apparently find entertaining). In my view, his main weakness is his poor sense of History - which could come in handy in the study of dynamic phenomena over long periods. While plodding through Taleb's ramblings, I had the impression that what's really missing is having an historical (rather than statistical or mathematical) perspective on events. As for the "Black Swan" concept, it is theoretically worthless: since any event can be explained ex-post, a "Black Swan" is merely a pretentious term for "unforeseen event with major consequences". Incidentally, I find it paradoxical that someone who endeavours to write on uncertainty should be so certain of himself.
And don't try Taleb's approach to risk management, which is essentially forgetting about unfavourable events since they are not predictable. I seem to understand that the author takes a dim view of planning, but he should think again. Planning is what people do when they have to prepare for an uncertain future (like the military does, for example). One of the keys to good planning is general knowledge: reading the newspapers for example, something Taleb takes a misplaced pride in not doing.
To get to the substance of "The Black Swan," you must first get beyond the author's overweening self-regard. But when you have done that--if indeed you can--you find there is very little substance after all. Much of the book is little more than the author's confession of worldliness and refinement. We are guided to understand that he is at once immersed in man's strife-torn existence ("This is not an autobiography, so I will skip the scenes of war") and steeped in les belles lettres ("My point, I repeat, is not that Balzac is untalented, but that he is less uniquely talented than we think"). What arguments he makes regarding "black swans"--rare events with outsized impact--are mostly arguments of assertion rather than demonstration, and what insights he provides into the nature of these events are far from profound. In most cases they are but a short distance removed from common sense.
Nonetheless, some readers may enjoy the spectacle of a grown man displaying the sort of braggadocio not normally seen in males above age fourteen. It is lowbrow entertainment to watch the pompous make asses of themselves, but it is still entertainment. And pomposity is in every chapter of the book. Do you have any idea how many world cities Nassim Nicholas Taleb sips coffee in? No? Voila, he will tell you! New York, Beirut, Lugano, Rome, Paris, Athens, Venice, Sydney, and many more! "I was transiting through the Frankfurt airport on my way from Oslo to Zurich. I had time to kill and it was a great opportunity for me to buy dark European chocolate...."
Or, do you know how many languages Nassim Nicholas Taleb speaks? No? Voici, he will tell you this too! French, Arabic, English.... Alas, his Italian is weak, so he augments it with hand gestures. And Latin: "I am carrying Seneca on all my travels, in the original, as I relearned Latin--reading him in English did not feel right. It would be equivalent to reading Yeats in Swahili." The author's only nod to modesty here is that he did not then claim to have actually read Yeats in Swahili.
Taleb's erudition in language is at the heart of one of the most egotistically comical paragraphs of the book. During a meeting with his close friend, Benoit Mandelbrot, Taleb recounts that,
"Mandelbrot mentioned one of his friends, the aristocratic mathematician Marcel-Paul Schutzenberger [who] insisted on the clear cut distinction in the French language between `hasard' and `fortuit.' We went to the Petit Robert dictionary. `Fortuit' seems to correspond to my epistemic opacity, `l'imprevu et non quantifiable'; `hasard' to the more ludic type of uncertainty that was proposed by the Chevalier de Mere in the early gambling literature. Remarkably, the Arabs may have introduced another word ...."
If you had a Petit Robert yourself, you might be tempted to look up "poseur."
Oh, yes, the substance. These "black swans" are statistical outliers, and thus invite a discussion of statistical modeling and its application to the real world. This the author provides, sort of, in chapters 15-17. Here he proposes to be technical ("The nontechnical reader can skip this chapter...," he helpfully cautions), maybe even mathematical. But beyond the not very surprising demonstration that the tail of a bell curve becomes miniscule more quickly than that of a power-law curve of modest degree, there is little in here that passes for analysis. There is a discursion into the fractal geometry of Mandelbrot, however, and a none-too-clear assertion that power-law distributions are scalable (true) and therefore "Mandelbrotian" (I suppose so). All this might make sense on some level, but it is not a demonstration of the superiority of power laws or the inferiority of the bell curve. It seems rather to be a flattering tribute to his friend Mandlebrot.
In chapter 17 the knives come out. Here Taleb takes on "Locke's Madmen," those benighted economists who at some point foolishly used the bell curve in their modeling and analysis. These include Paul Samuelson. Of him and three other notables Taleb says, "All four were Nobeled. All four were in a delusional state under the effect of mathematics...." I'm quite certain that Taleb knows more about economics than I do. I am even more certain that Samuelson does. To me this is an intra-disciplinary feud, which, at bottom, seems to be the reason for the book. It is the rant of an iconoclast against orthodoxy.
The book is not without value. There are very sensible observations on the inability of most gamblers to realistically imagine the odds against them, for example, the unintended consequences of government regulation, and the wisdom of not permitting economic entities to become "too big to fail." There are practical illustrations of statistics that do not fit the bell curve: distribution of income, for example. There are also a number of bons mots scattered throughout the book: calling egalitarianism "the glorification of mediocrity," and observing that "Forecasting by bureaucrats tends to be used for anxiety relief rather than for adequate policy making." But it is doubtful that the discovery of these baubles, whatever their value as wisdom or amusement, is worth wading through the rest of Mediocristan.
Nonetheless, some readers may enjoy the spectacle of a grown man displaying the sort of braggadocio not normally seen in males above age fourteen. It is lowbrow entertainment to watch the pompous make asses of themselves, but it is still entertainment. And pomposity is in every chapter of the book. Do you have any idea how many world cities Nassim Nicholas Taleb sips coffee in? No? Voila, he will tell you! New York, Beirut, Lugano, Rome, Paris, Athens, Venice, Sydney, and many more! "I was transiting through the Frankfurt airport on my way from Oslo to Zurich. I had time to kill and it was a great opportunity for me to buy dark European chocolate...."
Or, do you know how many languages Nassim Nicholas Taleb speaks? No? Voici, he will tell you this too! French, Arabic, English.... Alas, his Italian is weak, so he augments it with hand gestures. And Latin: "I am carrying Seneca on all my travels, in the original, as I relearned Latin--reading him in English did not feel right. It would be equivalent to reading Yeats in Swahili." The author's only nod to modesty here is that he did not then claim to have actually read Yeats in Swahili.
Taleb's erudition in language is at the heart of one of the most egotistically comical paragraphs of the book. During a meeting with his close friend, Benoit Mandelbrot, Taleb recounts that,
"Mandelbrot mentioned one of his friends, the aristocratic mathematician Marcel-Paul Schutzenberger [who] insisted on the clear cut distinction in the French language between `hasard' and `fortuit.' We went to the Petit Robert dictionary. `Fortuit' seems to correspond to my epistemic opacity, `l'imprevu et non quantifiable'; `hasard' to the more ludic type of uncertainty that was proposed by the Chevalier de Mere in the early gambling literature. Remarkably, the Arabs may have introduced another word ...."
If you had a Petit Robert yourself, you might be tempted to look up "poseur."
Oh, yes, the substance. These "black swans" are statistical outliers, and thus invite a discussion of statistical modeling and its application to the real world. This the author provides, sort of, in chapters 15-17. Here he proposes to be technical ("The nontechnical reader can skip this chapter...," he helpfully cautions), maybe even mathematical. But beyond the not very surprising demonstration that the tail of a bell curve becomes miniscule more quickly than that of a power-law curve of modest degree, there is little in here that passes for analysis. There is a discursion into the fractal geometry of Mandelbrot, however, and a none-too-clear assertion that power-law distributions are scalable (true) and therefore "Mandelbrotian" (I suppose so). All this might make sense on some level, but it is not a demonstration of the superiority of power laws or the inferiority of the bell curve. It seems rather to be a flattering tribute to his friend Mandlebrot.
In chapter 17 the knives come out. Here Taleb takes on "Locke's Madmen," those benighted economists who at some point foolishly used the bell curve in their modeling and analysis. These include Paul Samuelson. Of him and three other notables Taleb says, "All four were Nobeled. All four were in a delusional state under the effect of mathematics...." I'm quite certain that Taleb knows more about economics than I do. I am even more certain that Samuelson does. To me this is an intra-disciplinary feud, which, at bottom, seems to be the reason for the book. It is the rant of an iconoclast against orthodoxy.
The book is not without value. There are very sensible observations on the inability of most gamblers to realistically imagine the odds against them, for example, the unintended consequences of government regulation, and the wisdom of not permitting economic entities to become "too big to fail." There are practical illustrations of statistics that do not fit the bell curve: distribution of income, for example. There are also a number of bons mots scattered throughout the book: calling egalitarianism "the glorification of mediocrity," and observing that "Forecasting by bureaucrats tends to be used for anxiety relief rather than for adequate policy making." But it is doubtful that the discovery of these baubles, whatever their value as wisdom or amusement, is worth wading through the rest of Mediocristan.
Some Great Points and Some Mistaken Conclusions Amidst This Sea of Emotional Blathering
Taleb brings up many great points:
(i) The world's growing nature to produce larger 'black swans',
(ii) Implications of a world with increasingly scalable functions,
(iii) 2 clearly different types of randomness.
But he give you a headache trying to read his book because:
(i) His sarcasm irresponsibly muddles his stance on issues and reduces his credibility (e.g. he states that scalable careers are a bad idea, but he has achieved success with at least 2 different scalable careers);
(ii) He arrogantly gives his opinions on many major issues with any clear supporting points;
(iii) His anecdotes would be much better replaced with real stories. Real stories provide real evidence; anybody can make up a story to suit their points.
(iv) He spends much more time attacking ideas than embracing them. We have too many critics today who are happy to yell out 'THAT'S WRONG!' but lack that ambition and the backbone to determine and pronounce true solutions to things that they believe are wrong.
(v) His ideas that 'we can't forecast' and 'we can't model situations' is just wrong and irresponsible. If that were the case, we would all go back to being hunter-gatherers; "screw investing in a farm!, you CANT BE SURE that a drought won't occur!". Well droughts DO occur, and a farmer could go bankrupt, but overall society has blossomed for making investments (like a crop) based on forecasted results and the fact that droughts can occur doesn't mean that forecasting how many potatoes you can grow assuming no droughts isn't a worthwhile exercise; it just mean that you have to take proper consideration for the caveats any given forecast/model/plan.
While he brings up some great points, he, in my opinion, comes to some wrong conclusions based on these due to his cynicism and blinding anger (about issues such as his previous home in Lebanon). I am very sympathetic to the issues he has/is going through, but I urge readers to consider that they are reading conclusions of a very unpeaceful mind.
My biggest problem with Taleb's book is that it suggests that one shouldn't make a sizable investment in any one item, but in my opinion, life is often all about investing in 1 relationship, 1 purpose, 1 dream, etc. You have to throw caution to the wind sometimes and just live your life. You spend too much time overthinking everything and you'll end up miserable.
(i) The world's growing nature to produce larger 'black swans',
(ii) Implications of a world with increasingly scalable functions,
(iii) 2 clearly different types of randomness.
But he give you a headache trying to read his book because:
(i) His sarcasm irresponsibly muddles his stance on issues and reduces his credibility (e.g. he states that scalable careers are a bad idea, but he has achieved success with at least 2 different scalable careers);
(ii) He arrogantly gives his opinions on many major issues with any clear supporting points;
(iii) His anecdotes would be much better replaced with real stories. Real stories provide real evidence; anybody can make up a story to suit their points.
(iv) He spends much more time attacking ideas than embracing them. We have too many critics today who are happy to yell out 'THAT'S WRONG!' but lack that ambition and the backbone to determine and pronounce true solutions to things that they believe are wrong.
(v) His ideas that 'we can't forecast' and 'we can't model situations' is just wrong and irresponsible. If that were the case, we would all go back to being hunter-gatherers; "screw investing in a farm!, you CANT BE SURE that a drought won't occur!". Well droughts DO occur, and a farmer could go bankrupt, but overall society has blossomed for making investments (like a crop) based on forecasted results and the fact that droughts can occur doesn't mean that forecasting how many potatoes you can grow assuming no droughts isn't a worthwhile exercise; it just mean that you have to take proper consideration for the caveats any given forecast/model/plan.
While he brings up some great points, he, in my opinion, comes to some wrong conclusions based on these due to his cynicism and blinding anger (about issues such as his previous home in Lebanon). I am very sympathetic to the issues he has/is going through, but I urge readers to consider that they are reading conclusions of a very unpeaceful mind.
My biggest problem with Taleb's book is that it suggests that one shouldn't make a sizable investment in any one item, but in my opinion, life is often all about investing in 1 relationship, 1 purpose, 1 dream, etc. You have to throw caution to the wind sometimes and just live your life. You spend too much time overthinking everything and you'll end up miserable.
A 100 page book, with 200 extra pages
An interesting but somewhat obvious thesis: highly improbable events with a large impact play a large role in the world; because of this the future is impossible to predict (the 1987 stock market crash, the fall of the USSR, the rise of the internet, etc). NNT (as he refers to himself) provides a lot of interesting examples and shows clearly how 'risk management' is generally a fraud.
He attacks economics and economists for their heavy reliance on mathematical techniques that bear little resemblance to reality. He nicely shows the ridiculous assumptions made by economists, giving an example of a Nobel laureate whose model didn't match the facts. But since the model used elegant mathematics, he received the Nobel.
However, too often he says it's relatively straightforward to prove blah blah blah, but then doesn't. We're supposed to take it on faith that he's got some proof for his claim. Also, he annoyingly talks about how much smarter he is than everyone else, disparaging everyone he can think of. NNT's ego gets in the way of much of the book. This windbag could have written a 100 page book just as effectively, but clearly likes to hear himself write being so impressed with himself.
He attacks economics and economists for their heavy reliance on mathematical techniques that bear little resemblance to reality. He nicely shows the ridiculous assumptions made by economists, giving an example of a Nobel laureate whose model didn't match the facts. But since the model used elegant mathematics, he received the Nobel.
However, too often he says it's relatively straightforward to prove blah blah blah, but then doesn't. We're supposed to take it on faith that he's got some proof for his claim. Also, he annoyingly talks about how much smarter he is than everyone else, disparaging everyone he can think of. NNT's ego gets in the way of much of the book. This windbag could have written a 100 page book just as effectively, but clearly likes to hear himself write being so impressed with himself.
The author expressed his strong negative options on statistics, econometrics, some finance professors, some Nobel Prize winners, etc. The whole point is that traditional stat, econ, finance techniques are mostly around the first moment (mean) but the distributions in finance tend to be non-normal and it's the risk that we should pay more attention to. That's a point few people would disagree with. What the author may not have known is that there are stat techniques out there that handle all the issues mentioned - while it's true that there's a lot of room for improvement, it's misleading to say that this is an area ignored by the academics and practitioners. While fractals are recommended, it is not clear how they can be directly applied to the area of investment finance.
There is a 2007 issue in American Statistican dedicated to the debate with the author and is highly recommended.
There is a 2007 issue in American Statistican dedicated to the debate with the author and is highly recommended.
An idea for an article, not a book
There is a lot to be said about the impact of highly improbable events. Unfortunately, there isn't enought to be said in order to fill a book.
After Fooled By Randomness I was looking forward to The Black Swan. But it's clear by page 50 that Taleb is padding his prose in order to produce something book-length. That's sad because it eventually waters down a fine idea worthy of discussion.
The Black Swan is yet another example of good article length concepts that a publisher thinks will make a good book. However, the author doesn't have a heck of a lot more to say than what could be easily fit inside the pages of Esquire or Vanity Fair.
.
After Fooled By Randomness I was looking forward to The Black Swan. But it's clear by page 50 that Taleb is padding his prose in order to produce something book-length. That's sad because it eventually waters down a fine idea worthy of discussion.
The Black Swan is yet another example of good article length concepts that a publisher thinks will make a good book. However, the author doesn't have a heck of a lot more to say than what could be easily fit inside the pages of Esquire or Vanity Fair.
.
I agree with other reviews that this is a poor follow on to "Fooled by Randomness." I've found myself skipping sections and not missing anything.
Mostly this book is soaked with the author's extreme arrogance. And it is nothing more than listening to a babbling know-it-all. The type of guy that you get stuck talking to at a party until you start praying for a fire alarm.
As a scientist, I don't agree with the notion that an outlier event disproves a hypothesis or central tendency statistics. It merely proves that outliers exist and mathematical models are attempts to predict and are often flawed. Duh, we already knew that.
Further, the whole notion that no one could have predicted the internet or Google is absurd. We've seen them grow--and participated in that growth. How is that improbable and unpredictable?
The book is mildly engaging at times, and apparently I'm one of the few that disliked it. Maybe my PhD made me too dumb to understand.
Mostly this book is soaked with the author's extreme arrogance. And it is nothing more than listening to a babbling know-it-all. The type of guy that you get stuck talking to at a party until you start praying for a fire alarm.
As a scientist, I don't agree with the notion that an outlier event disproves a hypothesis or central tendency statistics. It merely proves that outliers exist and mathematical models are attempts to predict and are often flawed. Duh, we already knew that.
Further, the whole notion that no one could have predicted the internet or Google is absurd. We've seen them grow--and participated in that growth. How is that improbable and unpredictable?
The book is mildly engaging at times, and apparently I'm one of the few that disliked it. Maybe my PhD made me too dumb to understand.
Pompous Overbearing New York Author Writes Self-Centered Book; Film at 11
It takes Nassim Nicholas Taleb almost 300 pages to say the following: "$@&% happens. And if you use the classical bell curve to predict when $@&% will happen anywhere outside of a casino, extreme $@&% will happen more than you would expect and you could be hurt by it".
That's it. Read the book if you must, but I'm saving you the cost, and pain of having to find this out yourself. The rest of "Black Swan" is just pointless pontificating by an ego with a 2 book contract whose ideas ran out 3/4 of the way through his previous book.
How I got here:
Reading John Robb's excellent "Brave New War" left me with a real desire to research the references he used in its creation. Taleb's "Fooled By Randomness" and "Black Swan" articles were among the references listed. I read "FBR" first and found it very enjoyable, informative read. He introduced the black swan concept in that book, and it was self-explanatory within the context. I picked up "Black Swan" to complete the set of Robb's references.
The review:
"Black Swan" is labor to get through. I had to force myself to finish it, where "Fooled By Randomness" breezed by. Not that it is difficult or too abstract. It's just tedious. Poorly paced, loaded with filler and pointless autobiographical notes, scattered historical references without much relevance to the topic at hand.
There were exactly 2 real-world relevant points in "Black Swan". The first is that in order to protect against financial black swans, individual investors should allocate funds according to their desired risk level, with a majority in safe havens like T-bills, with a small stake in high-risk, high-yield areas. For all of his years in the finance community, Taleb spouts wisdom you can read on a brochure for Fidelity Investments.
His second piece of advice was in a foot note, that as of 2006, he thought Freddie Mac was going to fail. Again, I'm just a nobody, but I saw this in 2003.
Really, the rest of the book is an ego stroke where Taleb uses the book as a sort of "magic mirror" to ask the audience to tell him "is he not the fairest of all?".
Historical figures and movements like Sixtus Empiricus and his Pyrrhonian skepticism, Henri Poincare and Bertrand Russell are mentioned but how they are integrated into the concept of extraordinary events happening in life beyond an "it's better to reserve judgment because you just... can't... tell.. what... could ... happen". Why bring these people in? Were they the only skeptics who advocated such thoughts? Or were they chosen to emphasize a fault in the author? (Ah ha! See my "Sins of the author point #3)
The author's sins:
But really, what put me over the top was his sloppy egotism. After the success of "FBR", Taleb must've thought he could stretch the black swan concept into an entire book. But once he got into the actual job of writing, he found he had to pad the text with many of the sure signs of reading an egomaniac's work:
1. The author refers to himself in the third person. Several times, Taleb asks himself questions "If you ask me, 'NNT, what should I do?' Well, the answer is clear ..."
2.The author uses archaic terms to describe his ancestry, to enhance his social standing. Despite clearly stating growing up amid the Lebanese Civil War, Taleb insists on calling himself of "Levant origin". While this is technically true, it's an obscure term in modern language used mostly in archaeology and history to describe the region during the Crusades. It's similar to the way that modern Iranian expatriates insist they are Persian, and not Iranian, thus creating a more romantic and mysterious character. Taleb intentionally uses "Levant" to conjure up a time when the eastern Mediterranean was populated by "gentlemen of leisure" with a high social standing, and not "Lebananese" with all of the current western-associated imagery that goes with it. I see it as a pathology of self-loathing to not admit the country you came from. I don't walk around saying I'm Prussian because I find it more romantic than saying I had German grandparents.
3. The author paints himself fighting a lonely fight against "the man/the system/the machine". What a load. Countless examples in "Black Swan" of Taleb being a rebel for the sake of being a rebel grow so tiring and again, pointless. "I never wear neck ties at my job." "I don't read the newspaper." Super Taleb. Fight the power. What about black swans again? Even his historical references are chosen to be figures who were seen as rebels in their time, because they advocated a viewpoint contrary to at-the-time popular dogma. His choice may also be almost deliberately obscure, to invoke a "I know someone you don't" childishness.
4. The author goes to lengths to paint himself as a man of the people. His assertions about of his choice of friends and who he spends his time with (and thus, implicitly assures the reader that this person is therefore more worthy of success) are "Brooklyn types" rather than stuffed-shirt Ph.Ds who Taleb imagines deserving nothing better than "a rat stuffed down their collar". This seems more Homer Simpson than "Wall Street wizard". Within the context, I understand his 2-D caricatures, but where he goes at great lengths to invoke complexity into everyday life, to paint personalities with such flat, stereotypical attributes is almost insulting. It's hack writing at best.
5. But still the author is a stuffed shirt who knows much cooler people than you do, dear reader. Guess who hung out with Umberto Eco? Benoit Mandelbrot? Various Nobel laureates? Not you. Taleb. Uh huh. Taleb, can we force you to take your arm and stop patting yourself on the back and use it to write something worthwhile? Pretty please? With some Brooklyn sugar on it?
There are more, to be sure, but let's just leave this review at "Read 'Fooled By Randomness', skip 'Black Swan'"
That's it. Read the book if you must, but I'm saving you the cost, and pain of having to find this out yourself. The rest of "Black Swan" is just pointless pontificating by an ego with a 2 book contract whose ideas ran out 3/4 of the way through his previous book.
How I got here:
Reading John Robb's excellent "Brave New War" left me with a real desire to research the references he used in its creation. Taleb's "Fooled By Randomness" and "Black Swan" articles were among the references listed. I read "FBR" first and found it very enjoyable, informative read. He introduced the black swan concept in that book, and it was self-explanatory within the context. I picked up "Black Swan" to complete the set of Robb's references.
The review:
"Black Swan" is labor to get through. I had to force myself to finish it, where "Fooled By Randomness" breezed by. Not that it is difficult or too abstract. It's just tedious. Poorly paced, loaded with filler and pointless autobiographical notes, scattered historical references without much relevance to the topic at hand.
There were exactly 2 real-world relevant points in "Black Swan". The first is that in order to protect against financial black swans, individual investors should allocate funds according to their desired risk level, with a majority in safe havens like T-bills, with a small stake in high-risk, high-yield areas. For all of his years in the finance community, Taleb spouts wisdom you can read on a brochure for Fidelity Investments.
His second piece of advice was in a foot note, that as of 2006, he thought Freddie Mac was going to fail. Again, I'm just a nobody, but I saw this in 2003.
Really, the rest of the book is an ego stroke where Taleb uses the book as a sort of "magic mirror" to ask the audience to tell him "is he not the fairest of all?".
Historical figures and movements like Sixtus Empiricus and his Pyrrhonian skepticism, Henri Poincare and Bertrand Russell are mentioned but how they are integrated into the concept of extraordinary events happening in life beyond an "it's better to reserve judgment because you just... can't... tell.. what... could ... happen". Why bring these people in? Were they the only skeptics who advocated such thoughts? Or were they chosen to emphasize a fault in the author? (Ah ha! See my "Sins of the author point #3)
The author's sins:
But really, what put me over the top was his sloppy egotism. After the success of "FBR", Taleb must've thought he could stretch the black swan concept into an entire book. But once he got into the actual job of writing, he found he had to pad the text with many of the sure signs of reading an egomaniac's work:
1. The author refers to himself in the third person. Several times, Taleb asks himself questions "If you ask me, 'NNT, what should I do?' Well, the answer is clear ..."
2.The author uses archaic terms to describe his ancestry, to enhance his social standing. Despite clearly stating growing up amid the Lebanese Civil War, Taleb insists on calling himself of "Levant origin". While this is technically true, it's an obscure term in modern language used mostly in archaeology and history to describe the region during the Crusades. It's similar to the way that modern Iranian expatriates insist they are Persian, and not Iranian, thus creating a more romantic and mysterious character. Taleb intentionally uses "Levant" to conjure up a time when the eastern Mediterranean was populated by "gentlemen of leisure" with a high social standing, and not "Lebananese" with all of the current western-associated imagery that goes with it. I see it as a pathology of self-loathing to not admit the country you came from. I don't walk around saying I'm Prussian because I find it more romantic than saying I had German grandparents.
3. The author paints himself fighting a lonely fight against "the man/the system/the machine". What a load. Countless examples in "Black Swan" of Taleb being a rebel for the sake of being a rebel grow so tiring and again, pointless. "I never wear neck ties at my job." "I don't read the newspaper." Super Taleb. Fight the power. What about black swans again? Even his historical references are chosen to be figures who were seen as rebels in their time, because they advocated a viewpoint contrary to at-the-time popular dogma. His choice may also be almost deliberately obscure, to invoke a "I know someone you don't" childishness.
4. The author goes to lengths to paint himself as a man of the people. His assertions about of his choice of friends and who he spends his time with (and thus, implicitly assures the reader that this person is therefore more worthy of success) are "Brooklyn types" rather than stuffed-shirt Ph.Ds who Taleb imagines deserving nothing better than "a rat stuffed down their collar". This seems more Homer Simpson than "Wall Street wizard". Within the context, I understand his 2-D caricatures, but where he goes at great lengths to invoke complexity into everyday life, to paint personalities with such flat, stereotypical attributes is almost insulting. It's hack writing at best.
5. But still the author is a stuffed shirt who knows much cooler people than you do, dear reader. Guess who hung out with Umberto Eco? Benoit Mandelbrot? Various Nobel laureates? Not you. Taleb. Uh huh. Taleb, can we force you to take your arm and stop patting yourself on the back and use it to write something worthwhile? Pretty please? With some Brooklyn sugar on it?
There are more, to be sure, but let's just leave this review at "Read 'Fooled By Randomness', skip 'Black Swan'"
Thomas Kuhn in the History of Scientific Revolutions described the effects of anomalies in systems, regardless of whether one "sees" them or not. Sometimes one simply needs a new lens or filter to view a variable always there. Newtonian physics, which breaks down as an explanation of relativistic phenomena, becomes a functional part of Einsteinian physics when new variables (such as space-time) are revealed by logic and experimentation. In Frameworks: Conflicts in Balance, I described how Kuhn's observations apply not only to scientific frameworks, but to any framework, whether physical and metaphysical. Relevance becomes a mechanism (i.e. a lens or filter) of the human brain. Evolution itself depends on the application of some variables (such as genes) that turn on and turn off under appropriate circumstances.
Every framework contains a cluster of variables, rules, anomalies, zones of freedom and limits. In other words, Black Swans are simple anomalies, and a mere part of a larger framework dynamic. This observation began not with Taleb, but with the Greeks. Curiously, Taleb never even refers to Kuhn, or to those before him who observed many other characteristics related to change.
So I found Taleb's self-aggrandizing tome excessive in a number of ways. Each page was a celebration of ... Taleb, of how he was smarter than everyone in the universe, how everyone who failed to appreciate him was an idiot. While the idea of the Black Swan is a good one, it's not new. The unnecessary and hyperbolic jargon he applies (such as Extremistan) simply serves to confuse even sympathetic readers. As I recall from my college days, when you can't explain something simply, you dazzle them with BS. The book needs a filter --- there's too much Taleb and too few swimming birds.
I had great expectations for the book. But I just couldn't get past the ego. Frameworks: Conflict in Balance
Every framework contains a cluster of variables, rules, anomalies, zones of freedom and limits. In other words, Black Swans are simple anomalies, and a mere part of a larger framework dynamic. This observation began not with Taleb, but with the Greeks. Curiously, Taleb never even refers to Kuhn, or to those before him who observed many other characteristics related to change.
So I found Taleb's self-aggrandizing tome excessive in a number of ways. Each page was a celebration of ... Taleb, of how he was smarter than everyone in the universe, how everyone who failed to appreciate him was an idiot. While the idea of the Black Swan is a good one, it's not new. The unnecessary and hyperbolic jargon he applies (such as Extremistan) simply serves to confuse even sympathetic readers. As I recall from my college days, when you can't explain something simply, you dazzle them with BS. The book needs a filter --- there's too much Taleb and too few swimming birds.
I had great expectations for the book. But I just couldn't get past the ego. Frameworks: Conflict in Balance
Bombastic and entertaining, but not as devastating, original or clever as the author thinks it is
Nassim Nicholas Taleb is, in equal parts, enthralling and utterly infuriating. He has written a book so sure of its own certitude, that has one effective lesson: there can be no certitude. Taleb makes the enormous mistake of believing (and saying) that he's solved the eternal verities - that after millennia of philosophical, ethical, political, economic and social debate: thrust and counter-thrust - that mathematics and physics can save the day.
While there is certainly value in this book - if you can bear the cloying self-regard with which it is expounded, it's a pretty ripsnorting read - Taleb is also very, very inconsistent (or confused) about some very, very fundamental things which he doesn't seem to have read or thought nearly hard enough about. Early doors he praises the virtue of having unread volumes on the shelves of ones library: I was continually struck that it was a pity Taleb hadn't dipped into one or two of them along the way.
Firstly, he calls himself a philosopher and an intellectual, but writes off people who "took too many philosophy classes" or "read too much Wittgenstein", and who may therefore be under the impression that language problems are important, when infact such intellectual niceties have "no serious implications".
This, naturally, makes him look a bit of a Philistine, which would be okay, were it not to bear directly on the content of his book. The principle problem which Taleb sets out to solve is that of the misleading narrative discipline. Better familiarity with Wittgenstein might have helped him here. The Continental view is that we *cannot* make sense of with the world but through one or more narratives. Our daily labour is to untangle and jury rig all our working narratives so they can steer us in a broadly satisfactory path through the data. "The Truth" doesn't exist independently of our relationship to the physical universe, but rather is a function of our narratives. Narratives can't get in the way of truths; narratives are containers in which truths are packed and brought to market. Taleb might not like Platonicity, but it is the human (Humean?) dilemma that we're stuck with it.
This might seem a petty, arcane, weekend-ish sort of objection, but I don't think it is. In overlooking this, Taleb fails to recognise that beloved physics and mathematics, by which he would sweep aside the dismal gaussian-inflected social sciences, are simply narratives themselves, with no epistemic priority over the social sciences (the priority that he cites is - must be - a narrative!). Indeed, he calls himself an "sceptical empiricist", but conveniently overlooks that the social scientists tend to be far more enthusiastic collectors of empirical evidence than physicists (a point made eloquently by in a recent book by Nancy Cartwright).
Taleb's narrative is a rather quaint (and I would say uninformed) form of essentialism: He is a thorough-going reductivist who says things like "one may have a million ways to explain things, but the true explanation is unique, whether or not it is in our grasp" and seems to take it as read that all true learning, reduces to and can be extrapolated from a few essential, internally consistent logical truths.
Pragmatists like Thomas Kuhn and Richard Rorty(doubtless volumes on his Eco-esque Anti-library: his reading in the philosophy of science seems to have stopped at Karl Popper) had a radically different (and to my mind more compelling) view about essentialism, but would agree about the pitfalls of what he calls "Platonicity", but would mark them down as facts of life. Taleb, curiously, isn't entirely antagonistic to Platonicity, and is happy enough to fall into it when it suits him (reductivism/essentialism about science is hard core Platonicity, in this humble reviewer's opinion).
Taleb is also a contradictory on the value of the narrative. For example, he rails at length about Platonocity - to mistake the map for the territory - by dint of which we privilege "crisp constructs" over "less elegant objects with messier and less tractable structures": this is the sort of data compression that encourages the observation of "fraudulent" gaussian distributions - yet uses the opposite argument when warning against overly-detailed empirical "knowledge": "listening to the news on the radio is far worse for you than reading a weekly magazine, because the longer interval allows the information to be filtered a bit". That is to say, I suppose, that sometimes allowing a little bit of narrative weeding helps the Platonic garden grow.
Such inconsistencies make Taleb seem like a buffoon (but not quite so much as his own needlessly self-aggrandizing tone does!), and his repeated harping about the injustices of the Nobel prize process suggest a bruised ego somewhere on the way.
The fundamental point is that it's in the very nature of *any* intellectual or scientific enquiry to impose some order and organisation - a narrative - on otherwise unstructured data - we have to, to separate the significant from the irrelevant. The dilemma of induction is precisely that, ahead of time, it is impossible to know what will be significant, so the exercise of making that call, QED without evidence, is inherently fraught. Taleb would benefit immensely from reading Thomas Kuhn's wonderful and classic book The Structure of Scientific Revolutions. Without that insight, Taleb's much vaunted "sceptical empiricism" amounts to not much more than saying "expect to be surprised".
It might, as he points out, seem rational to calculate the forecast proitability of a casino on the odds available through time at the tables, but that is to ignore the risk of something unexpected happening such as a bomb going off in the lobby. But the nature of unexpected things is that you can't anticipate them. That's what it means to be unexpected.
That's ultimately the conclusion of this unnecessarily long book: "Stuff happens". The interesting material is mostly covered in existing books written by more talented and less egotistical authors (I would highly recommend Philip Ball's Critical Mass: How One Thing Leads to Another) and the implication of the power law on the behaviour of markets is the subject of Benoit Mandelbrot's very good The (Mis) Behaviour of Markets: A Fractal View of Risk, Ruin And Reward.
The Black Swan certainly rollocks along, but its author isn't talented, rigorous or informed enough to rate this book as a serious entry.
Olly Buxton
While there is certainly value in this book - if you can bear the cloying self-regard with which it is expounded, it's a pretty ripsnorting read - Taleb is also very, very inconsistent (or confused) about some very, very fundamental things which he doesn't seem to have read or thought nearly hard enough about. Early doors he praises the virtue of having unread volumes on the shelves of ones library: I was continually struck that it was a pity Taleb hadn't dipped into one or two of them along the way.
Firstly, he calls himself a philosopher and an intellectual, but writes off people who "took too many philosophy classes" or "read too much Wittgenstein", and who may therefore be under the impression that language problems are important, when infact such intellectual niceties have "no serious implications".
This, naturally, makes him look a bit of a Philistine, which would be okay, were it not to bear directly on the content of his book. The principle problem which Taleb sets out to solve is that of the misleading narrative discipline. Better familiarity with Wittgenstein might have helped him here. The Continental view is that we *cannot* make sense of with the world but through one or more narratives. Our daily labour is to untangle and jury rig all our working narratives so they can steer us in a broadly satisfactory path through the data. "The Truth" doesn't exist independently of our relationship to the physical universe, but rather is a function of our narratives. Narratives can't get in the way of truths; narratives are containers in which truths are packed and brought to market. Taleb might not like Platonicity, but it is the human (Humean?) dilemma that we're stuck with it.
This might seem a petty, arcane, weekend-ish sort of objection, but I don't think it is. In overlooking this, Taleb fails to recognise that beloved physics and mathematics, by which he would sweep aside the dismal gaussian-inflected social sciences, are simply narratives themselves, with no epistemic priority over the social sciences (the priority that he cites is - must be - a narrative!). Indeed, he calls himself an "sceptical empiricist", but conveniently overlooks that the social scientists tend to be far more enthusiastic collectors of empirical evidence than physicists (a point made eloquently by in a recent book by Nancy Cartwright).
Taleb's narrative is a rather quaint (and I would say uninformed) form of essentialism: He is a thorough-going reductivist who says things like "one may have a million ways to explain things, but the true explanation is unique, whether or not it is in our grasp" and seems to take it as read that all true learning, reduces to and can be extrapolated from a few essential, internally consistent logical truths.
Pragmatists like Thomas Kuhn and Richard Rorty(doubtless volumes on his Eco-esque Anti-library: his reading in the philosophy of science seems to have stopped at Karl Popper) had a radically different (and to my mind more compelling) view about essentialism, but would agree about the pitfalls of what he calls "Platonicity", but would mark them down as facts of life. Taleb, curiously, isn't entirely antagonistic to Platonicity, and is happy enough to fall into it when it suits him (reductivism/essentialism about science is hard core Platonicity, in this humble reviewer's opinion).
Taleb is also a contradictory on the value of the narrative. For example, he rails at length about Platonocity - to mistake the map for the territory - by dint of which we privilege "crisp constructs" over "less elegant objects with messier and less tractable structures": this is the sort of data compression that encourages the observation of "fraudulent" gaussian distributions - yet uses the opposite argument when warning against overly-detailed empirical "knowledge": "listening to the news on the radio is far worse for you than reading a weekly magazine, because the longer interval allows the information to be filtered a bit". That is to say, I suppose, that sometimes allowing a little bit of narrative weeding helps the Platonic garden grow.
Such inconsistencies make Taleb seem like a buffoon (but not quite so much as his own needlessly self-aggrandizing tone does!), and his repeated harping about the injustices of the Nobel prize process suggest a bruised ego somewhere on the way.
The fundamental point is that it's in the very nature of *any* intellectual or scientific enquiry to impose some order and organisation - a narrative - on otherwise unstructured data - we have to, to separate the significant from the irrelevant. The dilemma of induction is precisely that, ahead of time, it is impossible to know what will be significant, so the exercise of making that call, QED without evidence, is inherently fraught. Taleb would benefit immensely from reading Thomas Kuhn's wonderful and classic book The Structure of Scientific Revolutions. Without that insight, Taleb's much vaunted "sceptical empiricism" amounts to not much more than saying "expect to be surprised".
It might, as he points out, seem rational to calculate the forecast proitability of a casino on the odds available through time at the tables, but that is to ignore the risk of something unexpected happening such as a bomb going off in the lobby. But the nature of unexpected things is that you can't anticipate them. That's what it means to be unexpected.
That's ultimately the conclusion of this unnecessarily long book: "Stuff happens". The interesting material is mostly covered in existing books written by more talented and less egotistical authors (I would highly recommend Philip Ball's Critical Mass: How One Thing Leads to Another) and the implication of the power law on the behaviour of markets is the subject of Benoit Mandelbrot's very good The (Mis) Behaviour of Markets: A Fractal View of Risk, Ruin And Reward.
The Black Swan certainly rollocks along, but its author isn't talented, rigorous or informed enough to rate this book as a serious entry.
Olly Buxton
First the negative points : loose structure, mixed styles (feels like a scientific/philosophical/narative essay à la Kundera), and very condescending and pretentious. This is pretty much a "look how brilliant I am" kind of book with lots of name dropping and personal anecdotes, but it is nonetheless fun to read if you want to think a little while you're flying to the beach. However, Taleb's lack of focus will eventually get to you, and you'll be back in a few hours after a good nap.
You'll find some interesting points on complexity economics and some wordly wisdom too. But if these two subjects are of any interest to you, I would rather suggest Eric D. Beinhocker's "The Origin of Wealth" (very rich, well structured and arrogance-free), and Charlie Munger's "Poor Charlie's Almanak" (not arrogance-free, but in a way that is actually funny and with a very convincing scorecard to back it up).
You'll find some interesting points on complexity economics and some wordly wisdom too. But if these two subjects are of any interest to you, I would rather suggest Eric D. Beinhocker's "The Origin of Wealth" (very rich, well structured and arrogance-free), and Charlie Munger's "Poor Charlie's Almanak" (not arrogance-free, but in a way that is actually funny and with a very convincing scorecard to back it up).
Taleb is insufferable. His writing meanders around in a sort of self-absorbed epiphany, from his life story, about which he appears to have almost no self-awareness, by way of his intolerant ravings at various Nobel laureates for their blindness to their own fallibilities, a trait he shares in spades, to at last some extremely thought provoking notions on the uncertainty of things. If you can wade through all the former, you may well be rewarded by the latter. But it is a tough slog. His earlier "Fooled by Randomness" was a much better book. His ideas were less developed but at least he seems to have had an editor who insisted he write for the reader.
Arrogant, Irritating & Thought-Provoking in Equal Measure
It's quite an experience to finish reading _The Black Swan_ during the week in which one of America's most storied investment banks implodes and the wheels appear to have largely come off for the entire banking and (purportedly) hedging industry. I've also just read an article in the FT (from 17/03/08) in which Greenspan attempts to shift the entire blame for the meltdown on to poor risk models. No kidding?
So on one level, current events seem to be bearing out the core argument of _The Black Swan_: that years of 'careful' investing (Bear Sterns made its first lost since its founding this past quarter) can be obliterated by a single unforeseen event (sub-prime mortgages collapsing and taking the credit markets with them as everyone shuts down lending).
So, the relevance of this book goes a long way towards redeeming its arrogant style and irritating structure. I suppose that arrogance is fairly standard in the financial sector (and see where that got the banks!), but I tend to prefer a *little* humility in my books, especially when they talk about the underlying uncertainty in markets and in life. I also felt that at times the book resembled a kitchen sink of ideas -- it jumps between power laws and firm reputation without so much as a 'by your leave' -- and that a good editor could have forced _The Black Swan_ into something a bit more rounded and (at times) coherent. I would advise, for instance, reading _Six Degrees_ before reading _The Black Swan_ so as to be able to make more sense of the random pages that cover networks and network theory.
In spite of my issues with the *format* of _The Black Swan_, I still found the *content* to be extremely valuable for someone with a modest background in statistics and a level of conceptual comfort somewhere between 'cocktail party' and 'cocktail party with financial types'. So with several paperback versions now in print and daily evidence from the financial and real estate markets of the critical effect of "it'll never happen here" scenarios on the real world I'd strongly recommend a trip down to the local bookshop to pick up a copy.
So on one level, current events seem to be bearing out the core argument of _The Black Swan_: that years of 'careful' investing (Bear Sterns made its first lost since its founding this past quarter) can be obliterated by a single unforeseen event (sub-prime mortgages collapsing and taking the credit markets with them as everyone shuts down lending).
So, the relevance of this book goes a long way towards redeeming its arrogant style and irritating structure. I suppose that arrogance is fairly standard in the financial sector (and see where that got the banks!), but I tend to prefer a *little* humility in my books, especially when they talk about the underlying uncertainty in markets and in life. I also felt that at times the book resembled a kitchen sink of ideas -- it jumps between power laws and firm reputation without so much as a 'by your leave' -- and that a good editor could have forced _The Black Swan_ into something a bit more rounded and (at times) coherent. I would advise, for instance, reading _Six Degrees_ before reading _The Black Swan_ so as to be able to make more sense of the random pages that cover networks and network theory.
In spite of my issues with the *format* of _The Black Swan_, I still found the *content* to be extremely valuable for someone with a modest background in statistics and a level of conceptual comfort somewhere between 'cocktail party' and 'cocktail party with financial types'. So with several paperback versions now in print and daily evidence from the financial and real estate markets of the critical effect of "it'll never happen here" scenarios on the real world I'd strongly recommend a trip down to the local bookshop to pick up a copy.
I found the book highly polemical and the authors style annoying. His bile seems to be primarily directed at academic economists, and secondarily at corporate risk management. I don't think the general public is taking academic economics too seriously, and most undergrad b school majors or econ majors couldn't understand it, even if they wanted to.
Asymetrical distributions with thicker tails have been used more or less forever by statisticians and anyone seriously dealing with risk.
If everyone strictly believed in EMT, who would get involved in hedge funds or private equity? After LTCM blew up, a vivid counter example was on Page 1 of every newspaper in the country.
As far as corporate risk management is concerned, there are a lot of black swans that are irrelevent since they wouldn't include actionable information, even if the probabilities were quantifiable. For example, an astroid hits the earth or world war III. We are all dead. Even much less extreme events are essentially unmanagable at a corporate level. The example of the casino risk managers seem like a caricature of enterprise risk management (although it may be true), but doesn't represent current best practice.
There are some real problems regarding risk management in the financial area, and although Taleb mentions them in passing, they deserve more thoughtful and lengthy treatment. These are more in the grey swan category, and you don't need Karl Popper to understand what's going on. I think a grounding in the history of speculative excesses could provide some perspective on the current situation. One timely example being financial engineeering whose main purpose is to reduce transparency -- see the WSJ on CDO's in conjunction with the Bear Sterns blip.
If Taleb would get an editor, or better yet, a ghost writer, this could have been a valuable book.
Asymetrical distributions with thicker tails have been used more or less forever by statisticians and anyone seriously dealing with risk.
If everyone strictly believed in EMT, who would get involved in hedge funds or private equity? After LTCM blew up, a vivid counter example was on Page 1 of every newspaper in the country.
As far as corporate risk management is concerned, there are a lot of black swans that are irrelevent since they wouldn't include actionable information, even if the probabilities were quantifiable. For example, an astroid hits the earth or world war III. We are all dead. Even much less extreme events are essentially unmanagable at a corporate level. The example of the casino risk managers seem like a caricature of enterprise risk management (although it may be true), but doesn't represent current best practice.
There are some real problems regarding risk management in the financial area, and although Taleb mentions them in passing, they deserve more thoughtful and lengthy treatment. These are more in the grey swan category, and you don't need Karl Popper to understand what's going on. I think a grounding in the history of speculative excesses could provide some perspective on the current situation. One timely example being financial engineeering whose main purpose is to reduce transparency -- see the WSJ on CDO's in conjunction with the Bear Sterns blip.
If Taleb would get an editor, or better yet, a ghost writer, this could have been a valuable book.
Taleb's concept is certainly not his: "absence of evidence is not evidence of absence" is as old as the Greek philosophers. And is something anyone who studies science should already know. It's one of the classic "logical fallacies".
That natural systems very often do NOT follow Gaussian distribution is something anyone who has taken intro stats should know.
That non-linear systems are common; that positive feedback loops exist in nature; these things we know.
Serious students of economics, physics, chemistry, climate, or biology may sometimes view the world through bell-curve tinted glasses. So remind us. But don't insult our intelligence by combining lack of originality with insufferable arrogance.
That natural systems very often do NOT follow Gaussian distribution is something anyone who has taken intro stats should know.
That non-linear systems are common; that positive feedback loops exist in nature; these things we know.
Serious students of economics, physics, chemistry, climate, or biology may sometimes view the world through bell-curve tinted glasses. So remind us. But don't insult our intelligence by combining lack of originality with insufferable arrogance.
Foggy premise presented by an arrogant author
Really can't understand all the great reviews of this book. The author THINKS he's witty, when he's really just showing off his arrogance. Trust me, he's no Larry David....as one other reviewer seemed to think.
But the real letdown of this book is his foggy writing, which is almost always a sign of foggy thinking. And to MAKE UP one of his prime examples (the author with the unpronounceable Slavic name) and then to continue to bring up other examples using "her" is simply lazy research and writing. If his premise is so true, surely he can find real life examples to share with us. He probably intimidated his editor so much that this really annoying writing style was not challenged by the publisher. A layperson can find many better books written on the subject of randomness.
But the real letdown of this book is his foggy writing, which is almost always a sign of foggy thinking. And to MAKE UP one of his prime examples (the author with the unpronounceable Slavic name) and then to continue to bring up other examples using "her" is simply lazy research and writing. If his premise is so true, surely he can find real life examples to share with us. He probably intimidated his editor so much that this really annoying writing style was not challenged by the publisher. A layperson can find many better books written on the subject of randomness.
Interesting but close to unreadable
The fundamental premise of the book is that it is the unknown or highly improbable events that have the biigest impact. There are myriad examples of how business, society and individuals closely monitor the known risks yet do not position to limit the downside of negative black swans or expose themselves to positive black swans.
The concepts in the book are good. For example the fallacy of trying to apply rational predictive tools, like normal distribution curves, to social science being one of the best ones. It is interesting with the current subprime mortgage issues causing roller coaster fluctuations on the market over the last couple of weeks: it reinforces that market experts have little idea about what is really going on.
I also like the concept that history is always written with 20/20 hindsight. NNT looks at diaries at the time immediately prior to WW1 which don't predict the turmoil, but to historians after the event it was all as plain as day as to what was happening.
The big problem i have with the book is that it is written in such a pompous and arrogant style. NNT isn't really trying to engage the reader, it seems he is trying to show the world what a superior individual he is to the rest of us. According to him he is a great mathematician, philosopher, writer, trader, statistician amongst the many other talents which he probably didn't have time to mention. This book could have been really good but unfortunately the author forgets that his readers are more important than him and while he leaves you slightly intrigued I found myself more frustrated and disengaged.
The concepts in the book are good. For example the fallacy of trying to apply rational predictive tools, like normal distribution curves, to social science being one of the best ones. It is interesting with the current subprime mortgage issues causing roller coaster fluctuations on the market over the last couple of weeks: it reinforces that market experts have little idea about what is really going on.
I also like the concept that history is always written with 20/20 hindsight. NNT looks at diaries at the time immediately prior to WW1 which don't predict the turmoil, but to historians after the event it was all as plain as day as to what was happening.
The big problem i have with the book is that it is written in such a pompous and arrogant style. NNT isn't really trying to engage the reader, it seems he is trying to show the world what a superior individual he is to the rest of us. According to him he is a great mathematician, philosopher, writer, trader, statistician amongst the many other talents which he probably didn't have time to mention. This book could have been really good but unfortunately the author forgets that his readers are more important than him and while he leaves you slightly intrigued I found myself more frustrated and disengaged.
Important and Useful Insight Obscured by Delivery
Taleb has an important but rather simple message to deliver. It can be summed up in three words: Rare events happen. That was the point of Fooled by Randomness (which is a better book), and it is the point here.
Once this main point is made (and it is irrefutable), there are any number of embellishments, examples, and explanations that can help the reader round out his or her understanding of the concept. This would be a 5-star book if the author had written it to help the reader understand the basic concept and its implications.
Instead, the book reads like an ego trip. His delivery is maddening. He seems to be filled with anger. The book viciously attacks many well-meaning, competent people in academia, finance, science, and other fields for no apparent reason, other than that they don't see (or agree with) his point.
For that reason, I found the book hard to read. Some reviewers have called it funny; I found no humor in it. Instead, what I found is an author who clearly thinks he is smarter than everyone else and allows that to get in the way of clarity. He seems to take joy in belittling those who "outrage" him by their stupidity. (Really, what kind of person gets "filled with rage" over others being unable to see an academic point?)
Another quality that makes this book hard to read is the deliberately opaque way that Taleb chooses to make many of his points. If there is a straightforward way or an obscure way to make a point, he consistently selects the obscure way...using unfamiliar references, saying "secundo" instead of "second," inventing a non-existent author to make a point about book sales rather than choosing a real-life example, and so on. Taleb seems to think such writing is "erudition" (a quality he clearly admires). I believe that it puts an unfortunate academic-style veil over the book.
I've learned from both of Taleb's books--Fooled by Randomness and this one. I've learned not only the main point--that rare events happen, and they happen more often than we usually expect--but I've also learned something about how not to write. Writing I most admire is deliberately written to be understood, not to get in the way of understanding.
Once this main point is made (and it is irrefutable), there are any number of embellishments, examples, and explanations that can help the reader round out his or her understanding of the concept. This would be a 5-star book if the author had written it to help the reader understand the basic concept and its implications.
Instead, the book reads like an ego trip. His delivery is maddening. He seems to be filled with anger. The book viciously attacks many well-meaning, competent people in academia, finance, science, and other fields for no apparent reason, other than that they don't see (or agree with) his point.
For that reason, I found the book hard to read. Some reviewers have called it funny; I found no humor in it. Instead, what I found is an author who clearly thinks he is smarter than everyone else and allows that to get in the way of clarity. He seems to take joy in belittling those who "outrage" him by their stupidity. (Really, what kind of person gets "filled with rage" over others being unable to see an academic point?)
Another quality that makes this book hard to read is the deliberately opaque way that Taleb chooses to make many of his points. If there is a straightforward way or an obscure way to make a point, he consistently selects the obscure way...using unfamiliar references, saying "secundo" instead of "second," inventing a non-existent author to make a point about book sales rather than choosing a real-life example, and so on. Taleb seems to think such writing is "erudition" (a quality he clearly admires). I believe that it puts an unfortunate academic-style veil over the book.
I've learned from both of Taleb's books--Fooled by Randomness and this one. I've learned not only the main point--that rare events happen, and they happen more often than we usually expect--but I've also learned something about how not to write. Writing I most admire is deliberately written to be understood, not to get in the way of understanding.
The concept is useful but delivered in a very wordy and condescending manner. It felt like I was back in college sitting through a rambling lecture by an absent-minded, self-absorbed professor (terrible flash backs!). The whole book could have been 100 pages without losing impact or meaning.
Most investors understand and accept the persistence of fat-tailed return distribution. Not so difficult. So why does he go on as if most people don't get the concept...
Anyways, I am curious as to how he invests for himself given what he preaches. How good is his track record, or is he all talk... In his next edition, he should add just one more page in this painfully drawn out book and publish his personal track record...the way Warren Buffett and Joel Greenblatt do.
Most investors understand and accept the persistence of fat-tailed return distribution. Not so difficult. So why does he go on as if most people don't get the concept...
Anyways, I am curious as to how he invests for himself given what he preaches. How good is his track record, or is he all talk... In his next edition, he should add just one more page in this painfully drawn out book and publish his personal track record...the way Warren Buffett and Joel Greenblatt do.
I'll start out with a brief summary. The basic premise of the book is enlightening: the things that most effect your life and history are things that are highly impactful but highly improbable. This is called a "Black Swan". The impact of the Web, 9/11, Katrina, the financial crisis, etc. are all events unforeseen, unplanned for, but had an enormous impact.
For most of the book, he resigns himself and all of us to accepting that we can't much plan for the future so don't try. That's the part I'm not too fond of even if he has a point. We can do some scenario planning as a society, as economists, etc. and understand that there are limitations. I think we can also plan for _resilency_ in the case of negative Black Swans, which I think is too often overlooked. In the second edition of the book, he has a postscript essay which, however, does offer some good suggestions.
Lots of good ideas in the book. What makes it an unpleasant read is his ranting. In the process of his exposition, he really disses economists (of which he is one) as being pretty much useless people. There are a lot of people and a lot of professions he believes are useless. Fine. But saying it once is enough.
Worth a read.
For most of the book, he resigns himself and all of us to accepting that we can't much plan for the future so don't try. That's the part I'm not too fond of even if he has a point. We can do some scenario planning as a society, as economists, etc. and understand that there are limitations. I think we can also plan for _resilency_ in the case of negative Black Swans, which I think is too often overlooked. In the second edition of the book, he has a postscript essay which, however, does offer some good suggestions.
Lots of good ideas in the book. What makes it an unpleasant read is his ranting. In the process of his exposition, he really disses economists (of which he is one) as being pretty much useless people. There are a lot of people and a lot of professions he believes are useless. Fine. But saying it once is enough.
Worth a read.
A flawed book with great ideas and some nice writing
NNT (as he calls himself) has some fascinating points and some interesting turns of phrase, though he does rather go on and on and on.... Leaving aside the long-winded somewhat self-absorbed writing style, NNT makes some interesting points that he illustrates well. He discusses the problems with the fact that humans seek validation for what they think (rather than challenging themselves) and why we cannot predict well in many circumstances. He spends a lot of time discussing the problems inherent with the use of a bell curve to predict things where the impact of extreme events really matter. Finally he spends (too little) time on what to do about all this. I took a few key points away from the book:
- It is better, perhaps, to try and be generally right rather than precisely wrong
- Beware of looking for more rules than really exist
- Watch out for a tendency to prepare for "last war"
- Rare and consequential events can be much more important than the "normal" stuff in the bell curve
- Some things (that he calls "mediocristan") are such that the most typical is average and single instances don't impact the total much
- Others (he calls these "extremistan") are more winner-takes-all kinds of environments where extreme events matter most
- He makes the point that a thousand days cannot prove you right but one can prove you wrong
There's more but it's a very long book and I am not going to attempt to summarize the nuggets spread throughout it here. Be prepared for a slog if you want to get everything you can out of the book - it goes on and on. 3 stars to average out 1 star for length and incoherence in places and 5 stars for some great content.
- It is better, perhaps, to try and be generally right rather than precisely wrong
- Beware of looking for more rules than really exist
- Watch out for a tendency to prepare for "last war"
- Rare and consequential events can be much more important than the "normal" stuff in the bell curve
- Some things (that he calls "mediocristan") are such that the most typical is average and single instances don't impact the total much
- Others (he calls these "extremistan") are more winner-takes-all kinds of environments where extreme events matter most
- He makes the point that a thousand days cannot prove you right but one can prove you wrong
There's more but it's a very long book and I am not going to attempt to summarize the nuggets spread throughout it here. Be prepared for a slog if you want to get everything you can out of the book - it goes on and on. 3 stars to average out 1 star for length and incoherence in places and 5 stars for some great content.
You have to work to separate the wheat from the chaff
There's no doubt that Nassim Taleb is a brilliant man. And, there's no doubt that he is frustrated by having to work among people who don't get it. What is there to get? Simply that the quest for certainty -- through mathematics, science or other logic disciplines -- may end up being the very thing which obfuscates the truth; that we end up not being able to see the forest for the trees. I think what he is saying is that there can never be certainty; that there will always be Black Swans...random events.
The reason why I say "I think" that is what he is saying is because there is so much stuff here -- a lot of which is totally irrelevant. He talks about his home town, seemingly just to wax nostaligic, though he may use the vignette to talk -- belaboredly -- about a point. Among the other stuff he presents is: an unusally high regard for the French language; too much - again irrelevant - reference to and back-story about thought leaders, and; palpable disdain for some colleagues in the quantitative field. If you can get through all of that and hold on to the nuggets, though, you will see some fresh thinking. Just his distinction between 2 different systems of thought is worth the work required. There are other presentations which may shift the way you think about things, too. In the end, it's worth reading, but you will have to focus on what's important because he doesn't.
The reason why I say "I think" that is what he is saying is because there is so much stuff here -- a lot of which is totally irrelevant. He talks about his home town, seemingly just to wax nostaligic, though he may use the vignette to talk -- belaboredly -- about a point. Among the other stuff he presents is: an unusally high regard for the French language; too much - again irrelevant - reference to and back-story about thought leaders, and; palpable disdain for some colleagues in the quantitative field. If you can get through all of that and hold on to the nuggets, though, you will see some fresh thinking. Just his distinction between 2 different systems of thought is worth the work required. There are other presentations which may shift the way you think about things, too. In the end, it's worth reading, but you will have to focus on what's important because he doesn't.
Poorly organized, badly written, sprawling and not particularly enlightening
I picked up this book thinking that the premise was interesting.
Sadly this book is horrific.
The author is encumbered with an unchecked ego and his sense of superiority drips disdain on his readers and the rest of the world.
He decries editors, yet could have used a good one.
The book is rambling, poorly organized and his points aren't that interesting. One of his main arguments uses the story of an author whose unconventional book becomes a best seller only to have the sequel flop. This is complete fiction though--there is little to no real science in this book, just the ramblings of an egomaniac. His main points are neither new nor particularly exciting. This book seems just to have been written to show off how smart he thinks he is.
Overall it would be mildly interesting if he didn't write so poorly, but alas there is little to be gained from this book other than frustration and the loss of a few hours of your life.
Sadly this book is horrific.
The author is encumbered with an unchecked ego and his sense of superiority drips disdain on his readers and the rest of the world.
He decries editors, yet could have used a good one.
The book is rambling, poorly organized and his points aren't that interesting. One of his main arguments uses the story of an author whose unconventional book becomes a best seller only to have the sequel flop. This is complete fiction though--there is little to no real science in this book, just the ramblings of an egomaniac. His main points are neither new nor particularly exciting. This book seems just to have been written to show off how smart he thinks he is.
Overall it would be mildly interesting if he didn't write so poorly, but alas there is little to be gained from this book other than frustration and the loss of a few hours of your life.
This was very disappointing book
"The Black Swan" was very disappointing for several reasons. It needed someone to edit it, it was too long and rambling. Taleb goes on and on and on. Please, give us a break. Early on I decided that I didn't like the book, but I finished it. Taleb comes across as a pompous, arrogant know it all. I could sum up "The Black Swan" this way; it is better to be lucky than good! A much better book on risk is "Against The Gods,The Remarkable Story of Risk".
Interesting, but too long-winded
There are some great ideas in this book, but in my mind, there's too much fluff as well. Some of the personal anecdotes are amusing, but there are entirely too many - and too many created characters who don't serve any real purpose.
I feel like the message is dumbed down too much. Clearly the author has a great deal of disdain for the way many people view the world, but too much of that contempt keeps getting in the way of the story. I started to get the feeling that the author felt his readers needed to be beat over the head with his points. The points can be interesting, but just explain them to me, don't give me a bunch of 2-dimensional characters to show a simple example.
Further, I want more depth, and more insight. The ideas are there, but they could have been explained in 10 pages. Use the rest of the book to explain the implications, and how we can use this knowledge in real life. There were too many diatribes against Nobel winners and foolish economists, and too few insights, such as putting a lot of money in Bonds and a little in highly risky stocks.
Some good ideas overall, but it could have been so much better.
I feel like the message is dumbed down too much. Clearly the author has a great deal of disdain for the way many people view the world, but too much of that contempt keeps getting in the way of the story. I started to get the feeling that the author felt his readers needed to be beat over the head with his points. The points can be interesting, but just explain them to me, don't give me a bunch of 2-dimensional characters to show a simple example.
Further, I want more depth, and more insight. The ideas are there, but they could have been explained in 10 pages. Use the rest of the book to explain the implications, and how we can use this knowledge in real life. There were too many diatribes against Nobel winners and foolish economists, and too few insights, such as putting a lot of money in Bonds and a little in highly risky stocks.
Some good ideas overall, but it could have been so much better.
Nice thesis, but its development could be improved
While reading Taleb's "The Black Swan," I cannot be as excited as many of those who see this as a breath of fresh air, as a new way of looking at things. The central point being made by Taleb is quite on target; there are unpredictable events that can occur that simply cannot be anticipated or predicted. We are too often overconfident in our ability to predict and try to shape the future. But I do have questions about his book. First, his thesis is hardly novel. Robert Nisbet (a social scientist, a species of being beneath contempt in Taleb's universe) said essentially the same thing over thirty years ago (Quoting from his "The Year 2000 and All That"):
"It is very different with studies of change in human society. Here the Random Event, the Maniac, the Prophet, and the Genius have to be reckoned with. We have absolutely no way of escaping them. The future-predictors don't suggest that we can avoid them or escape them. . . . What the future-predictors. . .say in effect is that with the aid of institute resources, computers, linear programming, etc., they will deal with the kinds of change that are not the consequences of the Random Event, the Genius, the Maniac, and the Prophet [which sound like black swans to this reader]. To which I can only say: there really aren't any; not any worth looking at anyhow."
That's the basic point of Taleb's book, so he's not exactly breaking new ground. Taleb says on page xxvii that he's sticking "my neck out" to claim that "our world is dominated by the extreme, the unknown, and the very improbable. . . ." What sticking out his neck? A well regarded academic said much the same thing thirty years ago and, to the best of my knowledge, Nisbet wasn't perceived as "sticking his neck out" or punished for his apostasy.
Second, his presentation misses the point on a number of matters. He mentions the punctuated equilibrium approach to evolutionary change. This view contends that there is stasis over long periods of time and then a quick burst of evolutionary change. Taleb focuses, in this book, on such punctuational events. However, most of the time, there is stasis. We cannot simply ignore what is normal over long periods of time and only focus on those rare black swans that transform things. Take elections. For a period of time, there is predictability in electoral and party dynamics. Then, every so often, for reasons that can't be predicted beforehand [a black swan event], the electoral and party system changes in a relatively short period of time. Does that mean we should ignore "ordinary politics" associated with "calm political periods"? No, that's absurd--but that's also Taleb's argument. We should ignore "central tendency" (in statistical terms) and only consider outliers (extraordinary events)? That doesn't make much sense.
He also cites people who actually undermine some of his arguments. Kahneman's work on cognitive biases is very important and supports well the book's argument. But Taleb cites (but does not discuss in detail) Gigerenzer, who argues that heuristics and cognitive biases, as a result of evolution, are very accurate, contrary to Kahneman's work. Since Taleb cites Gigerenzer, he ought to note that the latter's view of cognition moves in a different direction, in opposition to the book's thesis. In contradiction to Taleb's discussion on pages 81-82, Gigerenzer argues that intuition is at least as valid and accurate as the cognitive, thinking system.
Third, as a number of reviewers note, there's a lot of anger in this book. Sarcasm and venom directed at entire professions based on an isolated anecdote here or there seem to run against the author's own arguments about how we ought to make decisions. In Kahneman's terms, Taleb falls prey to the "representativeness heuristic" [overgeneralizing from small sample sizes], falls prey to the "availability heuristic" [using whatever vivid examples come quickly to mind, such as the dopey political scientist wed to game theory--as if this justifies dismissing the entire discipline from one example], and he obviously falls prey to "confirmation bias" since he does not challenge his own thesis and try to falsify it but focuses instead on providing evidence to support his perspective [RIP his devotion to Karl Popper]. His snide dismissal of thinkers like Wittgenstein tends to be theater with little substance. If you want to trash someone, provide some reason and logic for doing so. And while I agree with many of Taleb's criticisms of thinkers and systems of thought, I am unimpressed with his snide put downs that don't advance understanding.
Fourth, he tends to set up "straw men" and then demolish these. For instance, he criticizes planning. The idea of planning covers a lot of territory--from the old Soviet plans to strategic planning. The former? His analysis is right on. The latter? If done well, strategic planning is a boon for an organization and he is not accurate in his judgment. His statement on planning is so broadly stated that it becomes close to meaningless.
In the final analysis, the author advances a provocative and useful thesis. Black swans are important factors in change processes. How we humans deal with the world tends to make us oblivious to rare and unpredictable events and their consequences. Very good points. However, this is hardly a unique insight. And the supporting logic and rationale is sometimes not so compelling; a focus on the outliers and an exhortation to ignore the routine is unconvincing. His style of argumentation by dismissal rather than by addressing concrete ideas and theories with which he disagrees is not helpful. So, it's an intriguing book, but it has problems that the reader needs to evaluate.
"It is very different with studies of change in human society. Here the Random Event, the Maniac, the Prophet, and the Genius have to be reckoned with. We have absolutely no way of escaping them. The future-predictors don't suggest that we can avoid them or escape them. . . . What the future-predictors. . .say in effect is that with the aid of institute resources, computers, linear programming, etc., they will deal with the kinds of change that are not the consequences of the Random Event, the Genius, the Maniac, and the Prophet [which sound like black swans to this reader]. To which I can only say: there really aren't any; not any worth looking at anyhow."
That's the basic point of Taleb's book, so he's not exactly breaking new ground. Taleb says on page xxvii that he's sticking "my neck out" to claim that "our world is dominated by the extreme, the unknown, and the very improbable. . . ." What sticking out his neck? A well regarded academic said much the same thing thirty years ago and, to the best of my knowledge, Nisbet wasn't perceived as "sticking his neck out" or punished for his apostasy.
Second, his presentation misses the point on a number of matters. He mentions the punctuated equilibrium approach to evolutionary change. This view contends that there is stasis over long periods of time and then a quick burst of evolutionary change. Taleb focuses, in this book, on such punctuational events. However, most of the time, there is stasis. We cannot simply ignore what is normal over long periods of time and only focus on those rare black swans that transform things. Take elections. For a period of time, there is predictability in electoral and party dynamics. Then, every so often, for reasons that can't be predicted beforehand [a black swan event], the electoral and party system changes in a relatively short period of time. Does that mean we should ignore "ordinary politics" associated with "calm political periods"? No, that's absurd--but that's also Taleb's argument. We should ignore "central tendency" (in statistical terms) and only consider outliers (extraordinary events)? That doesn't make much sense.
He also cites people who actually undermine some of his arguments. Kahneman's work on cognitive biases is very important and supports well the book's argument. But Taleb cites (but does not discuss in detail) Gigerenzer, who argues that heuristics and cognitive biases, as a result of evolution, are very accurate, contrary to Kahneman's work. Since Taleb cites Gigerenzer, he ought to note that the latter's view of cognition moves in a different direction, in opposition to the book's thesis. In contradiction to Taleb's discussion on pages 81-82, Gigerenzer argues that intuition is at least as valid and accurate as the cognitive, thinking system.
Third, as a number of reviewers note, there's a lot of anger in this book. Sarcasm and venom directed at entire professions based on an isolated anecdote here or there seem to run against the author's own arguments about how we ought to make decisions. In Kahneman's terms, Taleb falls prey to the "representativeness heuristic" [overgeneralizing from small sample sizes], falls prey to the "availability heuristic" [using whatever vivid examples come quickly to mind, such as the dopey political scientist wed to game theory--as if this justifies dismissing the entire discipline from one example], and he obviously falls prey to "confirmation bias" since he does not challenge his own thesis and try to falsify it but focuses instead on providing evidence to support his perspective [RIP his devotion to Karl Popper]. His snide dismissal of thinkers like Wittgenstein tends to be theater with little substance. If you want to trash someone, provide some reason and logic for doing so. And while I agree with many of Taleb's criticisms of thinkers and systems of thought, I am unimpressed with his snide put downs that don't advance understanding.
Fourth, he tends to set up "straw men" and then demolish these. For instance, he criticizes planning. The idea of planning covers a lot of territory--from the old Soviet plans to strategic planning. The former? His analysis is right on. The latter? If done well, strategic planning is a boon for an organization and he is not accurate in his judgment. His statement on planning is so broadly stated that it becomes close to meaningless.
In the final analysis, the author advances a provocative and useful thesis. Black swans are important factors in change processes. How we humans deal with the world tends to make us oblivious to rare and unpredictable events and their consequences. Very good points. However, this is hardly a unique insight. And the supporting logic and rationale is sometimes not so compelling; a focus on the outliers and an exhortation to ignore the routine is unconvincing. His style of argumentation by dismissal rather than by addressing concrete ideas and theories with which he disagrees is not helpful. So, it's an intriguing book, but it has problems that the reader needs to evaluate.
A superficial and self-aggrandizing book. Taleb seems to want to claim credit for concepts with which any student of statistics or investing ought to already be throughly familiar. I was hoping for an interesting read that might lead me to more detailed sources, but got neither from this book. Completely disappointing and poorly written.
Nassim Nicholas Taleb opines in his book that a great honor that could be bestowed upon him is if some scholar took the time and effort to auther a rebuttal book titled "The White Swan." Unfortunately, I will disappoint Mr Taleb and offer only an on-line review written by a decided philistine and usurp the title for this brief critique.
Mr Taleb is certainly correct on many of his contentions: that improbable "off-the-radar" events shape our world, that "professionals" in the prognostication industries (e.f. financial analysis and advice, economics, CEO's) are collectively charlatans, and that the human mind is biased through millennia of mammalian evolution to believe in causality and embrace the narrative where only random events may exits.
But his book is lacking in a number of respects. The most prominent forms of evidence which he offers is to cite either his own superior intellect, life-experience, and erudite approach to life (and the repeated narcissistic autobiographic references do become very tiresome even within the first 20 pages) or to engage in demagoguery. He draws parallels between himself and those he respects and emulates (like Poincarre) and dismisses his critics and foes as philistines (hence my self-description above). Indeed, I have no doubt that most financial analysts and CEO's are philistines. But that fact and allusion to that fact does not constitute evidence to support Mr Taleb's arguments.
Second, he gets some concepts and facts painfully wrong.
He casually and repeatedly dismisses "the bell curve", and does so inaccurately. He implies that the bell curve does not allow for rare events. That is incorrect. The "tails" of the bell curve extend to infinity and encompass the numerically improbable, but inevitable events. Any element that can be quantified (wealth distribution as one example Mr Taleb reference several times) can and will have examples of rare outliers, which nevertheless exist within the bell curve. Bill Gates' wealth is at the far extreme right of the bell curve, multiple standard deviations from the mean. But it is not outside the bell curve. Some variables are not "normally" distributed but these two can properly be described by appropriate skewed methods, such as nonparametric analyses. Granted, the principal type of "Black Swan" that Mr Taleb describes is the qualitatively unpredicted event (e.g. jumbo jets crashing into the Twin Towers) that falls well outside the realm of the bell curve, but many, many of the "exceptions" that he cites are within the bell curve. He is simply wrong in dismissing the bell curve.
Though Mr Taleb dismisses facts and knowledge as irrelevant (and is thus free to draw any conclusions from any observation, no matter how incorrect his facts are), there are some readers who will insist that he gets his facts correct before he cites fictitious scenarios. To wit: at one point he states that doctors will avoid prescribing drugs which may be proven to offer benefit to a large proportion of patients because of the fear of uncommon side effects and their potential attendant lawsuits (the "Black Swan" of this example). He is wrong. In this era of evidence-based medicine, the entire medical profession has devoted enormous effort in exactly the opposite direction. The Federal government now scorecards hospitals on the same. The risk is much greater that a physician failing to prescribe such an effective medicine will be sued for failing to adhere to "standard of care" than be sued for the rare "Black Swan" side effect.
As another example: research and discovery. Correctly, Mr Taleb cites important examples of serendipity in scientific discovery (Alexander Fleming and penicillin). But Mr Taleb is clearly ignorant of planned discovery and development. Most medications which have emerged in the last two decades did not come about via serendipity but through a concerted process of target identification, receptor mapping, chemical synthesis (guided by knowledge of what side-branches impart what properties of absorption and solubility), with preclinical and clinical testing to follow.
He insists that the automobile and the atom bomb are the results of accumulated serendipity. Perhaps that is true for one or more of the key elements that led to the invention, but let's not ignore the Manhattan Project nor the incremental engineering developments that have evolved the automobile from the Model T to its modern counterpart.
For Mr Taleb, facts are inconvenient items because they fail to support his hypotheses.
Finally, the writing in general is quite poor. Again, Mr Taleb invokes an intellectual giant such as Poincarre to make the point that digressions and other irrelevancies are an example of a superior mind and only an ignoramus editor would dare suggest otherwise. Ever the philistine, I will offer that flight-of-ideas is also a symptom of some forms of psychiatric disorders. A poorly constructed chapter with random allusions transparent only to the author is a form of literary autism.
In conclusion, worth a read, but borrow this book from your library, don't buy it.
Mr Taleb is certainly correct on many of his contentions: that improbable "off-the-radar" events shape our world, that "professionals" in the prognostication industries (e.f. financial analysis and advice, economics, CEO's) are collectively charlatans, and that the human mind is biased through millennia of mammalian evolution to believe in causality and embrace the narrative where only random events may exits.
But his book is lacking in a number of respects. The most prominent forms of evidence which he offers is to cite either his own superior intellect, life-experience, and erudite approach to life (and the repeated narcissistic autobiographic references do become very tiresome even within the first 20 pages) or to engage in demagoguery. He draws parallels between himself and those he respects and emulates (like Poincarre) and dismisses his critics and foes as philistines (hence my self-description above). Indeed, I have no doubt that most financial analysts and CEO's are philistines. But that fact and allusion to that fact does not constitute evidence to support Mr Taleb's arguments.
Second, he gets some concepts and facts painfully wrong.
He casually and repeatedly dismisses "the bell curve", and does so inaccurately. He implies that the bell curve does not allow for rare events. That is incorrect. The "tails" of the bell curve extend to infinity and encompass the numerically improbable, but inevitable events. Any element that can be quantified (wealth distribution as one example Mr Taleb reference several times) can and will have examples of rare outliers, which nevertheless exist within the bell curve. Bill Gates' wealth is at the far extreme right of the bell curve, multiple standard deviations from the mean. But it is not outside the bell curve. Some variables are not "normally" distributed but these two can properly be described by appropriate skewed methods, such as nonparametric analyses. Granted, the principal type of "Black Swan" that Mr Taleb describes is the qualitatively unpredicted event (e.g. jumbo jets crashing into the Twin Towers) that falls well outside the realm of the bell curve, but many, many of the "exceptions" that he cites are within the bell curve. He is simply wrong in dismissing the bell curve.
Though Mr Taleb dismisses facts and knowledge as irrelevant (and is thus free to draw any conclusions from any observation, no matter how incorrect his facts are), there are some readers who will insist that he gets his facts correct before he cites fictitious scenarios. To wit: at one point he states that doctors will avoid prescribing drugs which may be proven to offer benefit to a large proportion of patients because of the fear of uncommon side effects and their potential attendant lawsuits (the "Black Swan" of this example). He is wrong. In this era of evidence-based medicine, the entire medical profession has devoted enormous effort in exactly the opposite direction. The Federal government now scorecards hospitals on the same. The risk is much greater that a physician failing to prescribe such an effective medicine will be sued for failing to adhere to "standard of care" than be sued for the rare "Black Swan" side effect.
As another example: research and discovery. Correctly, Mr Taleb cites important examples of serendipity in scientific discovery (Alexander Fleming and penicillin). But Mr Taleb is clearly ignorant of planned discovery and development. Most medications which have emerged in the last two decades did not come about via serendipity but through a concerted process of target identification, receptor mapping, chemical synthesis (guided by knowledge of what side-branches impart what properties of absorption and solubility), with preclinical and clinical testing to follow.
He insists that the automobile and the atom bomb are the results of accumulated serendipity. Perhaps that is true for one or more of the key elements that led to the invention, but let's not ignore the Manhattan Project nor the incremental engineering developments that have evolved the automobile from the Model T to its modern counterpart.
For Mr Taleb, facts are inconvenient items because they fail to support his hypotheses.
Finally, the writing in general is quite poor. Again, Mr Taleb invokes an intellectual giant such as Poincarre to make the point that digressions and other irrelevancies are an example of a superior mind and only an ignoramus editor would dare suggest otherwise. Ever the philistine, I will offer that flight-of-ideas is also a symptom of some forms of psychiatric disorders. A poorly constructed chapter with random allusions transparent only to the author is a form of literary autism.
In conclusion, worth a read, but borrow this book from your library, don't buy it.
An author in love with himself
Ok, let me summarize this book for you: Nicholas Nassim Taleb is smarter than everyone. He's smarter than scientists, philosophers, economists, entrepreneurs and every person who has ever walked on earth. Oh, and he can beat the street too.
His first book is good. This one is just bad. He talks too much about how great he or some friend is, but that even isn't what annoyed me the most.
What really made me write a 1 star review is that there isn't really anything new on the whole book. Really, not one original idea. If you've read a good science book in the last ten years you can skip this one. If you haven't, you can find the same content elsewhere without reading what looks like a lazy draft from a self-centered kid.
His first book is good. This one is just bad. He talks too much about how great he or some friend is, but that even isn't what annoyed me the most.
What really made me write a 1 star review is that there isn't really anything new on the whole book. Really, not one original idea. If you've read a good science book in the last ten years you can skip this one. If you haven't, you can find the same content elsewhere without reading what looks like a lazy draft from a self-centered kid.
Taleb's central premise is that we delude ourselves with popular stories, false knowledge, myths, overvalued facts, and the appearance of science. He calls this the narrative fallacy, and counsels, "The way to avoid the ills of the narrative fallacy is to favor experimentation over storytelling, experience over history, and clinical knowledge over theories." Good advice.
Given this push for what David Brooks calls "epistemological modesty," you may expect a humble book, -- and it so, you would be disappointed. Taleb lambasts the hubris of Wall Street, yet he is a product of this culture; and the book shows it. His belief in uncertainty combined with his sharp views is broadly ironic. Some reviewers call it arrogant.
I put the bravado aside, and even found it entertaining at times, for Taleb's case is well put, and the book is brisling with thoughtful aphorisms and vivid stories. Here are a few of my favorite lines:
- Luck is more important than skill.
- Risk is the most when you feel the safest.
- Look for evidence that proves your ideas wrong.
- There are no experts of things that move.
- Too much information becomes toxic.
- The wise plead ignorance to world events.
- We cannot compare current reality with an alternative.
- Our highest currency is respect.
- "Randomness" is unknowledge.
- Be prepared for multiple contingencies.
- "I don't know," is a sign of intelligence.
- We are swayed by the sensational.
- Seize every opportunity, for they are rare.
- Go to parties -- chitchat leads to breakthroughs.
These are thoughtful nuggets to consider. And despite the pride that occasionally dances on the pages, Taleb is a good writer and an even better philosopher. The book is part memoir, part postmodern treatise on skepticism, part rant. It is an idiosyncratic, fresh and fascinating narrative.
This book is also a full frontal assault on the Wall Street establishment that uses statistics, bell curves and Black-Scholes theory to sell portfolio allocation. For investors, Taleb advocates a "barbell strategy" where you put 85-90% of your money in cash or equivalents, and the remainder in extremely risky investments that are scalable. He goes on at some length to talk about the dynamics of scalable investments and scalable careers such as sales, venture capital, and entrepreneurial ventures. In the end, he recommends against entering scalable professions due to the many risks involved. More irony.
For those who do hit it big and make what Taleb calls FU money, he recommends a dedication to scholarship, for he sees the pursuit of money and material goods as a nightmare. And he warns that scalable success may not come for a long time, or it may never come, and sojourners in scalable professions will have to endure the cruelty of critics. This line of thinking feels balanced and wise.
I was fascinated when I read this book in the winter of 2008, partly because Taleb had correctly forecast a major stock market crash, and partly because I had recent experience working as a marketing consultant for a large Wall Street investment firm (which no longer exists). That consulting experience and this book have left an imprint on my mind.
I have not studied Edmond Burke or David Hume, so currently, Nassim Nicholas Taleb my favorite skeptic, and The Black Swan is one of my favorite books.
When Taleb was Tweeting, he praised "Straw Dogs" by the contemporary British philosopher, David Gray. Gray's book takes skepticism to new and brilliant heights, and in my option it flies goes over the top. Perhaps some day I will review Straw Dogs as well, but for now I'll stick with Black Swans.
Straw Dogs: Thoughts on Humans and Other Animals
Given this push for what David Brooks calls "epistemological modesty," you may expect a humble book, -- and it so, you would be disappointed. Taleb lambasts the hubris of Wall Street, yet he is a product of this culture; and the book shows it. His belief in uncertainty combined with his sharp views is broadly ironic. Some reviewers call it arrogant.
I put the bravado aside, and even found it entertaining at times, for Taleb's case is well put, and the book is brisling with thoughtful aphorisms and vivid stories. Here are a few of my favorite lines:
- Luck is more important than skill.
- Risk is the most when you feel the safest.
- Look for evidence that proves your ideas wrong.
- There are no experts of things that move.
- Too much information becomes toxic.
- The wise plead ignorance to world events.
- We cannot compare current reality with an alternative.
- Our highest currency is respect.
- "Randomness" is unknowledge.
- Be prepared for multiple contingencies.
- "I don't know," is a sign of intelligence.
- We are swayed by the sensational.
- Seize every opportunity, for they are rare.
- Go to parties -- chitchat leads to breakthroughs.
These are thoughtful nuggets to consider. And despite the pride that occasionally dances on the pages, Taleb is a good writer and an even better philosopher. The book is part memoir, part postmodern treatise on skepticism, part rant. It is an idiosyncratic, fresh and fascinating narrative.
This book is also a full frontal assault on the Wall Street establishment that uses statistics, bell curves and Black-Scholes theory to sell portfolio allocation. For investors, Taleb advocates a "barbell strategy" where you put 85-90% of your money in cash or equivalents, and the remainder in extremely risky investments that are scalable. He goes on at some length to talk about the dynamics of scalable investments and scalable careers such as sales, venture capital, and entrepreneurial ventures. In the end, he recommends against entering scalable professions due to the many risks involved. More irony.
For those who do hit it big and make what Taleb calls FU money, he recommends a dedication to scholarship, for he sees the pursuit of money and material goods as a nightmare. And he warns that scalable success may not come for a long time, or it may never come, and sojourners in scalable professions will have to endure the cruelty of critics. This line of thinking feels balanced and wise.
I was fascinated when I read this book in the winter of 2008, partly because Taleb had correctly forecast a major stock market crash, and partly because I had recent experience working as a marketing consultant for a large Wall Street investment firm (which no longer exists). That consulting experience and this book have left an imprint on my mind.
I have not studied Edmond Burke or David Hume, so currently, Nassim Nicholas Taleb my favorite skeptic, and The Black Swan is one of my favorite books.
When Taleb was Tweeting, he praised "Straw Dogs" by the contemporary British philosopher, David Gray. Gray's book takes skepticism to new and brilliant heights, and in my option it flies goes over the top. Perhaps some day I will review Straw Dogs as well, but for now I'll stick with Black Swans.
Straw Dogs: Thoughts on Humans and Other Animals
I can save you the price of this book...
I can save you the price of this book-- and the time it would take you to read it-- by summarizing its main point: Hard-to-predict events are hard to predict, and because they're hard to predict, we often fool ourselves into thinking that we can predict them. But we can't.
Seriously, that's pretty much it. I was very disappointed by this book, mostly because the reviews were so good, and the author is both a serious academic and a Wall Street star.
After spending hundreds of pages explaining that we can't predict rare events very well, mostly because they're rare, the author slides into what I assume he believes is proof that essentially, everything that happens comes down to luck. Why did Rome fall? Blind luck. Why did Microsoft defeat Apple in the marketplace? Blind luck. And so on.
Of course, over the years, we've developed explanations for those events and most other things that have happened. The author airily dismisses all such attempts to explain historical events after the fact as "narrative fallacies." Well, no, not always; sometimes those explanations are actually explanations of what clearly happened.
The author even offers what he claims is the sole practical way to deal with the Black Swans we encounter in the operations of the financial sector: We should invest at least 85% of our assets in risk-free T-bills and the remainder in very high-risk investments, such as junk bonds. This idea is an old one, and computer simulations consistently show that it will return less than the 60% stocks and 40% bonds allocation that most financial planners have advocated for many years.
Finally, I didn't care for the tone of the book. It comes off as smug and almost cutsie at times. This is a serious subject, and it deserves a serious treatment. Of course, this is my personal, subjective reaction; others may not be as bothered by the tone as I was.
In summary, I found this book to be uneven and disappointing. Why not one star? Because the chapters that deal with how we let the bell curve seduce us into erroneous thinking are actually quite good. If only the rest of the book had been so good...
Seriously, that's pretty much it. I was very disappointed by this book, mostly because the reviews were so good, and the author is both a serious academic and a Wall Street star.
After spending hundreds of pages explaining that we can't predict rare events very well, mostly because they're rare, the author slides into what I assume he believes is proof that essentially, everything that happens comes down to luck. Why did Rome fall? Blind luck. Why did Microsoft defeat Apple in the marketplace? Blind luck. And so on.
Of course, over the years, we've developed explanations for those events and most other things that have happened. The author airily dismisses all such attempts to explain historical events after the fact as "narrative fallacies." Well, no, not always; sometimes those explanations are actually explanations of what clearly happened.
The author even offers what he claims is the sole practical way to deal with the Black Swans we encounter in the operations of the financial sector: We should invest at least 85% of our assets in risk-free T-bills and the remainder in very high-risk investments, such as junk bonds. This idea is an old one, and computer simulations consistently show that it will return less than the 60% stocks and 40% bonds allocation that most financial planners have advocated for many years.
Finally, I didn't care for the tone of the book. It comes off as smug and almost cutsie at times. This is a serious subject, and it deserves a serious treatment. Of course, this is my personal, subjective reaction; others may not be as bothered by the tone as I was.
In summary, I found this book to be uneven and disappointing. Why not one star? Because the chapters that deal with how we let the bell curve seduce us into erroneous thinking are actually quite good. If only the rest of the book had been so good...
Rambling and Often Vague but Occasionally Insightful
This is an overly complex, opaque and rambling exposition of some interesting ideas which, unfortunately, the author doesn't explicate with precision or take very far. The notion that we can't predict the future and that, certainly, the evidence of the past is not exhaustively or even substantially predictive of what is to come is, of course, hardly new though it's true that many of us often seem to forget this. Taleb does a decent job of highlighting this mistake in our thinking and of showing how, given the unlimited randomness of the universe (whether in fact or in principle it amounts to the same thing in our experience), we can and usually do make a ton of missteps in our lives, our careers, etc. Taleb has apparently been a trader and currently manages money and makes a point of noting that he uses his realization that the world is full of "black swans" (impossible to predict phenomena that can have a massive impact on us) to guide his money management and other endeavors. His basic view is to keep most money safely invested in low risk, relatively low return securities while putting a small amount out there in high risk but high potential return investments, any one of which, should a "black swan" hit, will cover and surpass the losses from all the rest. An interesting strategy to say the least. But along the way Taleb treats us to a great deal of personal posturing about how clever he is and how foolish most of the rest of the world tends to be and that grates after awhile. Too often, too, Taleb seems to be indulging in boasting and name dropping for their own sakes.
He does treat us to a bit of Popper and other heavy hitting thinkers. Karl Popper, of course, is the Austrian expatriate philosopher of science who formulated his falsifability principle which expresses the notion that no amount of positive observations is ever going to conclusively prove a general statement about all instances of those observations (seeing a million white swans can never prove that there are no black swans as long as we haven't seen all the swans in the universe). Taleb takes this a little further and relates the black swan question to statistical methodology, arguing that the Gaussian Bell Curve (that presumes most observations of a phenomenon will cluster together so that the outliers will be so small as to be insignificant) provides a flawed mechanism for gauging risk in certain arenas of life. He offers a distinction between arenas dealing with limited ranges of possibilities vs. those where the ranges are unmeasurable and, in principle, astronomical. In the latter kind of arena, he notes, a statistical outlier is not going to be insignificant but, rather, overwhelming. Negative black swans can, he explains, destroy all the positive returns one has earned while the positive kind will overwhelm the negative returns. On his view, most in the investment field wrongly rely on Gaussian analyses for gauging and managing risk when that field, in fact, has virtually unlimited (or unmeasurable) ranges of difference in its phenomena. Thus a negative black swan in such a field can put one out of business, at the least.
Having concluded from his own experiences, some of which are quite interesting, that life is more generally like the unlimited arena than the limited one, he takes the position that we must go through life looking out for the black swans while knowing they can never be predicted. In essence we must stop thinking in a traditional Bell Curve mindset. He counsels prudence and a defensive posture both in investing and in life. Good advice, but not especially profound or enlightening. On balance the book is interesting though Taleb tends to have trouble getting to the point and often beats round and round the same bush. One gets the sense he's padding a bit, in the absence of any overarching theory or approach to offer beyond the urge to caution. His most important points are hammered home repetitively while he spends too much time knocking the "competition".
When I began the book I had rather high hopes because his epistemological approach promised to be interesting. But by the end, I was deeply disappointed. When he finally brings the book to a close on the rather odd note of thanking the reader for having read it, I was left scratching my head. Expecting some subtle yet highly practical philosophical thought, I got common sense in the guise of an attack on the standard statistical model instead, and plenty of anecdotes about Taleb's personal life and the many important people he has hobnobbed with over the years and how smart the smart ones think he is. I'm sure he's a smart guy but I'd have preferred if he took up more of the book developing his thesis and less of it touting himself.
SWM
He does treat us to a bit of Popper and other heavy hitting thinkers. Karl Popper, of course, is the Austrian expatriate philosopher of science who formulated his falsifability principle which expresses the notion that no amount of positive observations is ever going to conclusively prove a general statement about all instances of those observations (seeing a million white swans can never prove that there are no black swans as long as we haven't seen all the swans in the universe). Taleb takes this a little further and relates the black swan question to statistical methodology, arguing that the Gaussian Bell Curve (that presumes most observations of a phenomenon will cluster together so that the outliers will be so small as to be insignificant) provides a flawed mechanism for gauging risk in certain arenas of life. He offers a distinction between arenas dealing with limited ranges of possibilities vs. those where the ranges are unmeasurable and, in principle, astronomical. In the latter kind of arena, he notes, a statistical outlier is not going to be insignificant but, rather, overwhelming. Negative black swans can, he explains, destroy all the positive returns one has earned while the positive kind will overwhelm the negative returns. On his view, most in the investment field wrongly rely on Gaussian analyses for gauging and managing risk when that field, in fact, has virtually unlimited (or unmeasurable) ranges of difference in its phenomena. Thus a negative black swan in such a field can put one out of business, at the least.
Having concluded from his own experiences, some of which are quite interesting, that life is more generally like the unlimited arena than the limited one, he takes the position that we must go through life looking out for the black swans while knowing they can never be predicted. In essence we must stop thinking in a traditional Bell Curve mindset. He counsels prudence and a defensive posture both in investing and in life. Good advice, but not especially profound or enlightening. On balance the book is interesting though Taleb tends to have trouble getting to the point and often beats round and round the same bush. One gets the sense he's padding a bit, in the absence of any overarching theory or approach to offer beyond the urge to caution. His most important points are hammered home repetitively while he spends too much time knocking the "competition".
When I began the book I had rather high hopes because his epistemological approach promised to be interesting. But by the end, I was deeply disappointed. When he finally brings the book to a close on the rather odd note of thanking the reader for having read it, I was left scratching my head. Expecting some subtle yet highly practical philosophical thought, I got common sense in the guise of an attack on the standard statistical model instead, and plenty of anecdotes about Taleb's personal life and the many important people he has hobnobbed with over the years and how smart the smart ones think he is. I'm sure he's a smart guy but I'd have preferred if he took up more of the book developing his thesis and less of it touting himself.
SWM
Wrong Species, Chicken Little not Swan
As with many post-modern works this volume promises far more than it delivers; a glimpse of wisdom but never anything we can really use. The Black Swan is merely the unanticipated event that screws things up royally. Taleb, Professor of the Sciences of Uncertainty, is copious with references but thin in his digesting or explanation of many. I cannot exchange one-on-one with Taleb on the tails of the financial market changes he's most concerned with but I have read his book and must admit the second half was so aggravating I was dreaming of this review.
He is correct suggesting that the media is irritatingly compelled to give, often silly, "explanations" for every Dow fluctuation. The evening news is not science. I'm convinced that daily market fluctuations are more due to people, like Taleb, traders, playing with models or guesses trying to hit it big with other peoples' money than media reasons. Randomness and distributions are involved with more than the stock market, statistics and philosophies. My problem with this book is that Taleb throws out everything and replaces it with nothing. The title invokes the wrong species; it seems clear that Chicken Little and the Impact of the Highly Improbably is a much more appropriate title.
Anyone who has tracked data (any kind, your weight, S&P500, maximum temperature, rainfall, or gasoline prices) over any amount of time knows that the progression is seldom smooth. This is particularly true when tracing the values of individual firms; which is one of the devises used by Taleb to make his points. If a particular investment firm goes belly up because they adopted an extreme strategy, honest or not, why throw out all strategies? If you want very much higher than average returns on your investments, then you must incur higher than average risks; meaning, without statistics, that your down side can be significant. But, if you're targeting average or slightly above average returns, there are strategies Prof Taleb doesn't explain except to reject in blanket fashion. Perhaps it's a statistical unworthy ancestor but why is there no mention of the central limit theorem? Gaussian, certainly but evidenced as well. Yes averaging minimizes the extreme; dismissed as "grey swan." He purposely avoids even basic technical definitions, relying on flip condemnation. But, I care less about the rarified investment world that Taleb seems obsessed with, or his lack fit with the philosophers. I find the most egregious prose in this book is leveled against "social sciences" although Taleb exhibits virtually no knowledge of the subject, not its depth or especially its range.
Consider the question of forecasting the traffic levels on a road system in Taleb's home area. This is an area of statistical forecasting shared by civil engineers, planner, geographers, and yes, economists. Taleb will prefer to drive his BMW (why am I certain he drives a BMW?) on roads whose planners have anticipated the traffic levels with a high degree of accuracy for those average days he drives to his editor to discuss profits of his newest book. The planners, indeed Taleb, will be most interested in the normal day not the one day when 12 inches of snow falls or when the unexpected meteor crashes at the end of his driveway. He will listen to the news and realize 12 inches of snow is coming, perhaps he should not venture out, or he'll creep along cursing the weather station. Or, in the second case, he could be squashed by the meteor. We live, everyday, with average and normal conditions and behavior; many of us, social scientists, meteorologists, planners, just regular people try to cope with the normal operations of society, not the unanticipated extremes of the distribution. We plan for tomorrow not someday when the "sky may fall." Yes, some days we get it wrong but most we get it right or at least come close. Being ready for the extremes is meaningful, and the notion I thought this book was going to be about, but the normal tomorrow is what I train people to deal with.
I recognize that there are extreme, powerful, random events; Taleb, rightfully, keeps coming back to war; he perhaps was closer to it than many. But, if by definition I can't predict the events or change them, what should I do? Taleb, having said I should reject virtually all "science" that helps me predict the normal, the average, and at least some of the fluctuation, advises me to be "noncommoditized in [my] thinking" and to not be a sucker. More than "postmodern" Taleb is also elitist in that he draws our attention to the positive Black Swans in that we "want" to have the benefits of picking the great new stock before it's great. He want us to recognize that the positive Black Swans are "random" and focus less on the negative Black Swans of normal process. The idea of civilization is based on a society protecting itself from the random insults of the real world. Taleb maligns social science but ignores the underlying forces of civilization - to provide protection from extreme hurt to those who don't deserve it. Indeed, the whole notion of a progressive income tax is societies way of dealing with the everyday black swans, so are dams, guardrails, and a host of normal projections of the possible. Taleb seems more concerned for the losses/gains of the super-rich.
Prof Taleb, you have told your reader to throw out most statistical theory. How have fractiles helped you cope with war? Or, better to end it? The posture of this book I contend, is "post modern" and irresponsible. I'm tempted to look at your Fooled by Randomness because I suspect you may have stretched what was left of your idea to write this one, The Black Swan, is too thin of content but way too dense of attitude. Like I said "Chicken Little" not swan-like at all.
He is correct suggesting that the media is irritatingly compelled to give, often silly, "explanations" for every Dow fluctuation. The evening news is not science. I'm convinced that daily market fluctuations are more due to people, like Taleb, traders, playing with models or guesses trying to hit it big with other peoples' money than media reasons. Randomness and distributions are involved with more than the stock market, statistics and philosophies. My problem with this book is that Taleb throws out everything and replaces it with nothing. The title invokes the wrong species; it seems clear that Chicken Little and the Impact of the Highly Improbably is a much more appropriate title.
Anyone who has tracked data (any kind, your weight, S&P500, maximum temperature, rainfall, or gasoline prices) over any amount of time knows that the progression is seldom smooth. This is particularly true when tracing the values of individual firms; which is one of the devises used by Taleb to make his points. If a particular investment firm goes belly up because they adopted an extreme strategy, honest or not, why throw out all strategies? If you want very much higher than average returns on your investments, then you must incur higher than average risks; meaning, without statistics, that your down side can be significant. But, if you're targeting average or slightly above average returns, there are strategies Prof Taleb doesn't explain except to reject in blanket fashion. Perhaps it's a statistical unworthy ancestor but why is there no mention of the central limit theorem? Gaussian, certainly but evidenced as well. Yes averaging minimizes the extreme; dismissed as "grey swan." He purposely avoids even basic technical definitions, relying on flip condemnation. But, I care less about the rarified investment world that Taleb seems obsessed with, or his lack fit with the philosophers. I find the most egregious prose in this book is leveled against "social sciences" although Taleb exhibits virtually no knowledge of the subject, not its depth or especially its range.
Consider the question of forecasting the traffic levels on a road system in Taleb's home area. This is an area of statistical forecasting shared by civil engineers, planner, geographers, and yes, economists. Taleb will prefer to drive his BMW (why am I certain he drives a BMW?) on roads whose planners have anticipated the traffic levels with a high degree of accuracy for those average days he drives to his editor to discuss profits of his newest book. The planners, indeed Taleb, will be most interested in the normal day not the one day when 12 inches of snow falls or when the unexpected meteor crashes at the end of his driveway. He will listen to the news and realize 12 inches of snow is coming, perhaps he should not venture out, or he'll creep along cursing the weather station. Or, in the second case, he could be squashed by the meteor. We live, everyday, with average and normal conditions and behavior; many of us, social scientists, meteorologists, planners, just regular people try to cope with the normal operations of society, not the unanticipated extremes of the distribution. We plan for tomorrow not someday when the "sky may fall." Yes, some days we get it wrong but most we get it right or at least come close. Being ready for the extremes is meaningful, and the notion I thought this book was going to be about, but the normal tomorrow is what I train people to deal with.
I recognize that there are extreme, powerful, random events; Taleb, rightfully, keeps coming back to war; he perhaps was closer to it than many. But, if by definition I can't predict the events or change them, what should I do? Taleb, having said I should reject virtually all "science" that helps me predict the normal, the average, and at least some of the fluctuation, advises me to be "noncommoditized in [my] thinking" and to not be a sucker. More than "postmodern" Taleb is also elitist in that he draws our attention to the positive Black Swans in that we "want" to have the benefits of picking the great new stock before it's great. He want us to recognize that the positive Black Swans are "random" and focus less on the negative Black Swans of normal process. The idea of civilization is based on a society protecting itself from the random insults of the real world. Taleb maligns social science but ignores the underlying forces of civilization - to provide protection from extreme hurt to those who don't deserve it. Indeed, the whole notion of a progressive income tax is societies way of dealing with the everyday black swans, so are dams, guardrails, and a host of normal projections of the possible. Taleb seems more concerned for the losses/gains of the super-rich.
Prof Taleb, you have told your reader to throw out most statistical theory. How have fractiles helped you cope with war? Or, better to end it? The posture of this book I contend, is "post modern" and irresponsible. I'm tempted to look at your Fooled by Randomness because I suspect you may have stretched what was left of your idea to write this one, The Black Swan, is too thin of content but way too dense of attitude. Like I said "Chicken Little" not swan-like at all.
Mythology and International Banking
The author is absolutely right. Banks manage risks simplistically, foolishly. Having been in the business myself I often posed questions about the models being used. But when I asked, "Why should the probability follow a Bell curve; what if the context is discontinuous?" the risk management team leaders would call in their math experts and march on.
The Black Swan is also a fun read. The range of the material from the personal to the professional to the philosophical makes for quite an enjoyable experience. The only critique I would offer is that Nassim (or is it Nero) tends to make light of the serious. But then, if you visit his site, he openly says that his favorite pastime is toying with the academics who lead us out on a limb with their epistemological certainty.
David Hillstrom
The Black Swan is also a fun read. The range of the material from the personal to the professional to the philosophical makes for quite an enjoyable experience. The only critique I would offer is that Nassim (or is it Nero) tends to make light of the serious. But then, if you visit his site, he openly says that his favorite pastime is toying with the academics who lead us out on a limb with their epistemological certainty.
David Hillstrom
2007 Random House, 396 pages (of which 305 pages for main body of book)
The Black Swan is a very unusual book. A couple of days after finishing it I still feel like I'm struggling to integrate its message with life. It reminds me a little of Richard Dawkins' Selfish Gene in that respect: its central thesis, which appears to be unassailably argued, indicates that the standard view of the world is wrong. In Dawkins' case, the primacy of the individual (as opposed to the gene) and in Taleb's case, the view that the world is essentially driven by normal, day-to-day events.
The subtitle of Taleb's book tells you what it is about: The Impact of the Highly Improbable. According to Taleb, high-impact rare events ('Black Swans') are not anything like as rare as we think they are and their effect is so disproportionately large that they effectively drive events in the world.
This may not sound all that provocative, but Taleb's argument is that virtually everybody's view of the world as essentially linear and step-by-step is just an illusion that protects us from understanding that our progress through life is much more random and fragile than we think.
Taleb's outstanding first book, Fooled by Randomness, is about the much greater role of luck in life than is commonly understood. The Black Swan develops this thesis further and shows that rare and unexpected events (what you might think of as a subdivision of luck) drive much of the results in the world.
Since reading Richard Koch's The 80/20 Principle eight or so years ago - after which I began to look at the world through the lens of unequal cause and effect - I have been coming gradually around to Taleb's views. Even so, The Black Swan is difficult to assimilate - and it must seem extremely odd (and itself most improbable) to those who have not had some preparation.
One can see this difficulty in the absolute refusal of modern academic finance to give up theories of how the world works (the bell curve or pattern of 'normal' distribution) that allow them to use complicated mathematics and which are just plain wrong. Taleb thought the Long Term Capital Management debacle in 1998 - in which various Nobel-winning economists proved their (Nobel-winning) ideas did not apply in the real world - would be the end of these dangerously wrong beliefs.
However, it was Taleb who was wrong about that: a whole gang of academics who have invested a good chunk of their lives in an idea that turns out to be worthless (actually significantly negative) won't give it up easily (and perhaps not until they are all dead). The sub-prime mess, with accompanying cries of surprise and of '25-standard deviation events' from various hog-greedy financiers and hedge fund managers, shows the continued prevalence of these appalling ideas.
After the success of Fooled by Randomness, it would appear that Taleb had more freedom to write (and be published) however he wanted. It makes The Black Swan more idiosyncratic and aggressive than Fooled by Randomness. I imagine this will act as a polariser and some people who would otherwise appreciate the content may not like the delivery. Personally, though, I loved it.
As someone who has tried working in various jobs in the City of London (the UK equivalent of Wall Street) I feel in some ways that Taleb is a kindred spirit: I can't stand arrogant, ignorant 'empty suits' either. I thought his "Get Another Job" section (p. 163) was perfect:
"There are those people who produce forecasts uncritically. When asked why they forecast, they answer, "Well, that's what we're paid to do here."
My suggestion: get another job.
This suggestion is not too demanding: unless you are a slave, I assume you have some amount of control over your job selection. Otherwise this becomes a problem of ethics, and a grave one at that. People who are trapped in their jobs who forecast simply because "that's my job," knowing pretty well that their forecast is ineffectual, are not what I would call ethical. What they do is no different from repeating lies simply because "it's my job.""
Taleb's very severe and aggressive criticism of risk measurement techniques in modern finance could be interpreted as an intemperate rant. I don't subscribe to this view and suspect Taleb chose this approach deliberately in order to make it clear that the prevalent financial risk management techniques and his ideas cannot in any way coexist: they are absolutely and totally mutually exclusive. (Taleb mentions that after finding it impossible to refute his ideas some people then try to combine them with their old ways of operating.)
I also liked the way Taleb approached and structured his book: he uses stories to get ideas across (as with Nero Tulip in Fooled by Randomness) and has separated his book into sections that allow one to understand his ideas with or without the scientific underlay (I think this is a great idea).
Some people (whether wilfully or not) confused the central theme of Fooled by Randomness, that much of life is driven by luck, with the superficially similar but totally different 'all of life is driven by luck'. In a similar way, I believe some people think that Taleb's message in The Black Swan is unremittingly negative: that we are all permanently exposed to large unexpected events that can wreck all our plans in an instant, and which we can do nothing about.
Taleb's point is rather that most specific forecasting is pointless, as large, rare and unexpected events (which by definition could not have been included in the forecast) will render the forecast useless. However, as Black Swans can be both negative and positive, we can try to structure our lives in order to minimise the effect of the negative Black Swans and maximise the impact of the positive ones.
I think this is excellent advice on how to live one's life and seems to be equivalent, for example, to the focus on downside protection (rather than upside potential) that has led to the success of the 'value' approach to investing. Highly recommended.
The Black Swan is a very unusual book. A couple of days after finishing it I still feel like I'm struggling to integrate its message with life. It reminds me a little of Richard Dawkins' Selfish Gene in that respect: its central thesis, which appears to be unassailably argued, indicates that the standard view of the world is wrong. In Dawkins' case, the primacy of the individual (as opposed to the gene) and in Taleb's case, the view that the world is essentially driven by normal, day-to-day events.
The subtitle of Taleb's book tells you what it is about: The Impact of the Highly Improbable. According to Taleb, high-impact rare events ('Black Swans') are not anything like as rare as we think they are and their effect is so disproportionately large that they effectively drive events in the world.
This may not sound all that provocative, but Taleb's argument is that virtually everybody's view of the world as essentially linear and step-by-step is just an illusion that protects us from understanding that our progress through life is much more random and fragile than we think.
Taleb's outstanding first book, Fooled by Randomness, is about the much greater role of luck in life than is commonly understood. The Black Swan develops this thesis further and shows that rare and unexpected events (what you might think of as a subdivision of luck) drive much of the results in the world.
Since reading Richard Koch's The 80/20 Principle eight or so years ago - after which I began to look at the world through the lens of unequal cause and effect - I have been coming gradually around to Taleb's views. Even so, The Black Swan is difficult to assimilate - and it must seem extremely odd (and itself most improbable) to those who have not had some preparation.
One can see this difficulty in the absolute refusal of modern academic finance to give up theories of how the world works (the bell curve or pattern of 'normal' distribution) that allow them to use complicated mathematics and which are just plain wrong. Taleb thought the Long Term Capital Management debacle in 1998 - in which various Nobel-winning economists proved their (Nobel-winning) ideas did not apply in the real world - would be the end of these dangerously wrong beliefs.
However, it was Taleb who was wrong about that: a whole gang of academics who have invested a good chunk of their lives in an idea that turns out to be worthless (actually significantly negative) won't give it up easily (and perhaps not until they are all dead). The sub-prime mess, with accompanying cries of surprise and of '25-standard deviation events' from various hog-greedy financiers and hedge fund managers, shows the continued prevalence of these appalling ideas.
After the success of Fooled by Randomness, it would appear that Taleb had more freedom to write (and be published) however he wanted. It makes The Black Swan more idiosyncratic and aggressive than Fooled by Randomness. I imagine this will act as a polariser and some people who would otherwise appreciate the content may not like the delivery. Personally, though, I loved it.
As someone who has tried working in various jobs in the City of London (the UK equivalent of Wall Street) I feel in some ways that Taleb is a kindred spirit: I can't stand arrogant, ignorant 'empty suits' either. I thought his "Get Another Job" section (p. 163) was perfect:
"There are those people who produce forecasts uncritically. When asked why they forecast, they answer, "Well, that's what we're paid to do here."
My suggestion: get another job.
This suggestion is not too demanding: unless you are a slave, I assume you have some amount of control over your job selection. Otherwise this becomes a problem of ethics, and a grave one at that. People who are trapped in their jobs who forecast simply because "that's my job," knowing pretty well that their forecast is ineffectual, are not what I would call ethical. What they do is no different from repeating lies simply because "it's my job.""
Taleb's very severe and aggressive criticism of risk measurement techniques in modern finance could be interpreted as an intemperate rant. I don't subscribe to this view and suspect Taleb chose this approach deliberately in order to make it clear that the prevalent financial risk management techniques and his ideas cannot in any way coexist: they are absolutely and totally mutually exclusive. (Taleb mentions that after finding it impossible to refute his ideas some people then try to combine them with their old ways of operating.)
I also liked the way Taleb approached and structured his book: he uses stories to get ideas across (as with Nero Tulip in Fooled by Randomness) and has separated his book into sections that allow one to understand his ideas with or without the scientific underlay (I think this is a great idea).
Some people (whether wilfully or not) confused the central theme of Fooled by Randomness, that much of life is driven by luck, with the superficially similar but totally different 'all of life is driven by luck'. In a similar way, I believe some people think that Taleb's message in The Black Swan is unremittingly negative: that we are all permanently exposed to large unexpected events that can wreck all our plans in an instant, and which we can do nothing about.
Taleb's point is rather that most specific forecasting is pointless, as large, rare and unexpected events (which by definition could not have been included in the forecast) will render the forecast useless. However, as Black Swans can be both negative and positive, we can try to structure our lives in order to minimise the effect of the negative Black Swans and maximise the impact of the positive ones.
I think this is excellent advice on how to live one's life and seems to be equivalent, for example, to the focus on downside protection (rather than upside potential) that has led to the success of the 'value' approach to investing. Highly recommended.
A Paradigm Shift in Risk Management
NNT's book about extremely improbable events and their outsized effect on our lives, is worth the price. For anyone who reads constantly, this 366 page $27 book is about a 3 day effort, at most. It's entertaining and mildy useful. You'd better realize that the stock market is a large casino. All we are doing is gambling, nothing else, since we can't even enumerate all of the risks, let alone assign correct values to them. We "don't know what we don't know". The worst of situations. For that fact alone, I recommend the book as worth reading.
Taleb's introduction of a fictional Nero (and that other female character whose name escapes me) seems like a foray into novel writing. Taleb is indeed a polymath, he's mastered nine languages and multiple sciences. People operating with that level of intellect tend to realize early in life that they are way more intelligent than the rest of us "American Idol" viewers. The next obvious step is for a person like that is serious academic research. Taleb has succeeded at that, too, holding various professorships in Mathematics around the globe. They often say to themselves, "Hey, I'm way smarter than these people, what can I conquer next"? They inevitably try writing. Every person wants to write the great American novel. This isn't it, but Taleb seems to use his extensive knowledge of various subjects to experiment in the field. I'd like to echo M. Strong's review from July 23rd, "Taleb the thinker deserved a far better writer than Taleb the author."
I purchased this book for the insight of the Gaussian Bell curve hypocrisy I was taught in undergrad. I tend to believe and trust Taleb's assertions, but have a few questions of my own.
1. Black Swan events are stated to have shocking consequences for all of us. The classic example is the 911 disaster. Were we all totally shocked and thus exposed to a classical Black Swan? I suspect to the people that planned it, it was no shock or Black Swan at all. I submit to you that a Black Swan is a relativistic concept. Subjective, not objective. Your financial Black Swan may be a mere inconvenience to me, and vice versa.
2. Gray Swans are introduced later in the book. Less catastrophic, and less clearly defined. They need more rigorous study.
3. Mandelbrot's Fractal geometry won't help you on the market. But then again, very little will, either. It makes no predictions. Why would it? If there ever was a reliable sure-fire way to make money, then that information would be disseminated at the speed of light and everyone would know about it. But how can we all make money at the same time? Where are all the people we are to make money from, when everyone knows the sure-fire technique (fundamentals, technical analysis?). The answer is of course, is that there is no such technique. It's emotion driven. Mostly speculation.
Good luck!
-jeff
Taleb's introduction of a fictional Nero (and that other female character whose name escapes me) seems like a foray into novel writing. Taleb is indeed a polymath, he's mastered nine languages and multiple sciences. People operating with that level of intellect tend to realize early in life that they are way more intelligent than the rest of us "American Idol" viewers. The next obvious step is for a person like that is serious academic research. Taleb has succeeded at that, too, holding various professorships in Mathematics around the globe. They often say to themselves, "Hey, I'm way smarter than these people, what can I conquer next"? They inevitably try writing. Every person wants to write the great American novel. This isn't it, but Taleb seems to use his extensive knowledge of various subjects to experiment in the field. I'd like to echo M. Strong's review from July 23rd, "Taleb the thinker deserved a far better writer than Taleb the author."
I purchased this book for the insight of the Gaussian Bell curve hypocrisy I was taught in undergrad. I tend to believe and trust Taleb's assertions, but have a few questions of my own.
1. Black Swan events are stated to have shocking consequences for all of us. The classic example is the 911 disaster. Were we all totally shocked and thus exposed to a classical Black Swan? I suspect to the people that planned it, it was no shock or Black Swan at all. I submit to you that a Black Swan is a relativistic concept. Subjective, not objective. Your financial Black Swan may be a mere inconvenience to me, and vice versa.
2. Gray Swans are introduced later in the book. Less catastrophic, and less clearly defined. They need more rigorous study.
3. Mandelbrot's Fractal geometry won't help you on the market. But then again, very little will, either. It makes no predictions. Why would it? If there ever was a reliable sure-fire way to make money, then that information would be disseminated at the speed of light and everyone would know about it. But how can we all make money at the same time? Where are all the people we are to make money from, when everyone knows the sure-fire technique (fundamentals, technical analysis?). The answer is of course, is that there is no such technique. It's emotion driven. Mostly speculation.
Good luck!
-jeff
I read Taleb's previous book with great pleasure and interest, and looked forward to this one.
Unfortunately this one is a jumble, with important ideas wrapped in piles of repetitious ego-driven extraneous stuff. He makes the same points over and over again, without clarifying them after the first presentation or two.
Taleb boasts in the acknowledgments about how he got his editor to spare him the attentions of copy editors, whom he claims ruin the exquisite rhythms of his prose and make too many irrelevant corrections. Too bad, as they would have spared him many obvious errors in usage and grammar as well.
Don't bother with this one. Read the previous one.
Unfortunately this one is a jumble, with important ideas wrapped in piles of repetitious ego-driven extraneous stuff. He makes the same points over and over again, without clarifying them after the first presentation or two.
Taleb boasts in the acknowledgments about how he got his editor to spare him the attentions of copy editors, whom he claims ruin the exquisite rhythms of his prose and make too many irrelevant corrections. Too bad, as they would have spared him many obvious errors in usage and grammar as well.
Don't bother with this one. Read the previous one.
Repetitive, a little boring, and wait for the paperback
I was prepared to love this book; I bought it with great anticipation. I got it home and started reading it immediately, but it was so repetitive that it got boring fast. Taleb's thesis boils down to this: social reality will produce a big punch out of nowhere and it will have a big impact, usually negative. Duh!!! Taleb bemoans Gaussian Curves, and normalized this and that; basically he seems to scramble mumbo jumbo in a word soup that is confusing and not very well argued. Taleb seems to be saying that same thing in tortued prose what Spencer Johnson says in very simple prose in Who Moved My Cheese? And Johnson's book is much cheaper.
Taleb tries to explain human decision making but winds up writing confusing explanations. In place of Taleb, I would recommend Gilbert's Stumbling On Happiness. Stumbling is very well and simply written and it's funny. Taleb's tends to take himself a little too seriously at times and he name drops and is a little precious too, and those tendencies make him a little boring to me.
Taleb tries to explain human decision making but winds up writing confusing explanations. In place of Taleb, I would recommend Gilbert's Stumbling On Happiness. Stumbling is very well and simply written and it's funny. Taleb's tends to take himself a little too seriously at times and he name drops and is a little precious too, and those tendencies make him a little boring to me.
So there are a few decent ideas in this book; it's just too bad that the author takes a million pages to make some rather simple points.
Yes, I was aware of basic psychological biases that humans have such as the recency bias and conservatism bias.
No, I don't care about NNT's childhood story, which he goes on about for pages on end to illustrate some simple points.
Lastly, NNT likes making up words and phrases that often include Latin words to explain his ideas (which aren't even new). This really over-complicates some basic points.
Yes, I was aware of basic psychological biases that humans have such as the recency bias and conservatism bias.
No, I don't care about NNT's childhood story, which he goes on about for pages on end to illustrate some simple points.
Lastly, NNT likes making up words and phrases that often include Latin words to explain his ideas (which aren't even new). This really over-complicates some basic points.
Overly Distilled, Poorly Written
-This is the first book I quit reading in more than a year.
-The author, a self-important fellow named Nassim Nicholas Taleb, is a lousy writer.
-I don't think you can use the word 'erudite' as a noun. As in, Larry Weasel is an athlete and an erudite. I looked it up; I am correct.
-The book is a one trick pony. Ok: until like 1910 the whole world thought that all swans had to be white, but then a black swan was discovered and everyone had to re-examine their premises. This doesn't mean that you have to write a book filled with vague references about Plato, Hume, Judaism, Umberto Eco, the Levant -- all in the first two chapters alone.
-He simultaneously calls himself a philosopher yet dumbs down -- and thins out -- the material until it's damn near unreadable. Philosophers don't use exclamation marks. Taleb uses five on every page. Philosophers also don't brag about how much they read.
-I'm not reading any more of this genre of book; no more Freakonomics, no more Long Tail, no more How Proust Can Change Your Life.
-The author, a self-important fellow named Nassim Nicholas Taleb, is a lousy writer.
-I don't think you can use the word 'erudite' as a noun. As in, Larry Weasel is an athlete and an erudite. I looked it up; I am correct.
-The book is a one trick pony. Ok: until like 1910 the whole world thought that all swans had to be white, but then a black swan was discovered and everyone had to re-examine their premises. This doesn't mean that you have to write a book filled with vague references about Plato, Hume, Judaism, Umberto Eco, the Levant -- all in the first two chapters alone.
-He simultaneously calls himself a philosopher yet dumbs down -- and thins out -- the material until it's damn near unreadable. Philosophers don't use exclamation marks. Taleb uses five on every page. Philosophers also don't brag about how much they read.
-I'm not reading any more of this genre of book; no more Freakonomics, no more Long Tail, no more How Proust Can Change Your Life.
NNT's use of a "narrative" strategy based on a questionable premise (did the sighting of the first black swan in Australia really impact the world?) to attract readers has paid dividends and his book has attained Grey Swan status among Amazon's Business & Investing bestsellers. The author, as he admits, has clearly enjoyed the writing experience which, besides dealing with the Impact of the Highly Improbable, has enabled him to sideswipe individuals and groups he sees mired in a world of Gaussian illusion.
On reading the book for the second time I kept asking myself "is this new to me?" and, if it is, "what is its relevance to me?". On reviewing one's own life to date, as the author recommends, it is clear that much of it has indeed been determined by high-impact unforeseeable events. This does not come as a great surprise - but then Taleb says that it never does, in retrospect! This contrasts with the chilling realization that there are almost certainly more such occurrences ahead. It is interesting to read explanations for why humans "don't know they don't know" they live in an extreme world but many, without realizing it, will already be familiar with psychological phenomena such as "platonism", "tunnelling", "confirmation bias" and the "narrative fallacy".
Interestingly, Taleb seems to miss what could well be the main reason why individuals "don't know they don't know": they just don't want to know they don't know they don't know! It seems to be a natural human reaction to put one's head in the sand when faced with the possibility of unforeseeable, high impact, possibly negative, events - particularly when they believe they can do nothing about them.
What, perhaps, is newer and more relevant to many is the fact that the professionals apparently rely on defective tools for analysing their particular piece of reality. Having some knowledge of the financial world and its questionable mathematical models, I can readily believe that many professionals - and even Nobel Prize winners - are led astray by the humble Bell Curve, as Taleb suggests. In fact the reasonably experienced small investor already has little faith in market "experts". On the other hand this same investor does not automatically transfer his scepticism to experts in other important fields, such as the social sciences, economics, environmental studies and military planning, where predictive errors can be far deadlier.
Besides peppering his text with the names and contributions of important thinkers - apparently a deliberate technique to achieve greater credibility - Taleb gives us some fascinating theory in the shape of non-linear relationships, the limitations of the Gaussian distribution, and the ability of so-called "power laws" to turn some Black Swans into Grey Swans. However this review stops a long way from demonstrating that life is largely determined by full-blooded (i.e. totally unpredictable) Black Swans.
Although I don't think that Taleb will make us see our lives in a totally new light it is important that he reminds us - in case 24-hour world news ever allows us to forget - that day-to-day affairs can be subject to unforeseen, and potentially devastating, modification. He also offers us the flip side: some ideas on how we can take advantage of positive Black Swans. It may be due to a lack of imagination but, not being a venture capitalist or a "quant", I couldn't immediately see measures of easy application in this area. Defence against Black Swans seems easier, namely diversification across very disparate fields. Taleb himself suggests a portfolio composed of up to 90% of extremely safe financial instruments (like Treasury bills) and as little as 10% in leveraged speculative bets like options (ideally involving "venture-capital style portfolios"). His general advise is more homely: learn to recognise undertakings exposed to positive and negative Black Swans, don't be narrow minded, seize opportunities, be wary of government plans, etc.
Many interested in the impact of randomness will find the book a good, if fairly demanding, read. In the end, however, it is not entirely satisfactory. This has something to do with the fact that rather than be carried long by a limpid river of reasoning we are subjected to an avalanche of opinionative observations, some relevant, some less so. Some readers might also find many of the chapter and section headings irritating: "The Vagueness of Catherine's Lover Count", "How many Wittgenstein's can dance on the head of a pin?", etc. I suppose its all part of the relatively successful effort to make randomness fun. But although we'd enjoy seeing pompous academics and self-satisfied hedge-fund partners squirming with mice down their necks is it really necessary to rub the long-suffering French up the wrong way?
On reading the book for the second time I kept asking myself "is this new to me?" and, if it is, "what is its relevance to me?". On reviewing one's own life to date, as the author recommends, it is clear that much of it has indeed been determined by high-impact unforeseeable events. This does not come as a great surprise - but then Taleb says that it never does, in retrospect! This contrasts with the chilling realization that there are almost certainly more such occurrences ahead. It is interesting to read explanations for why humans "don't know they don't know" they live in an extreme world but many, without realizing it, will already be familiar with psychological phenomena such as "platonism", "tunnelling", "confirmation bias" and the "narrative fallacy".
Interestingly, Taleb seems to miss what could well be the main reason why individuals "don't know they don't know": they just don't want to know they don't know they don't know! It seems to be a natural human reaction to put one's head in the sand when faced with the possibility of unforeseeable, high impact, possibly negative, events - particularly when they believe they can do nothing about them.
What, perhaps, is newer and more relevant to many is the fact that the professionals apparently rely on defective tools for analysing their particular piece of reality. Having some knowledge of the financial world and its questionable mathematical models, I can readily believe that many professionals - and even Nobel Prize winners - are led astray by the humble Bell Curve, as Taleb suggests. In fact the reasonably experienced small investor already has little faith in market "experts". On the other hand this same investor does not automatically transfer his scepticism to experts in other important fields, such as the social sciences, economics, environmental studies and military planning, where predictive errors can be far deadlier.
Besides peppering his text with the names and contributions of important thinkers - apparently a deliberate technique to achieve greater credibility - Taleb gives us some fascinating theory in the shape of non-linear relationships, the limitations of the Gaussian distribution, and the ability of so-called "power laws" to turn some Black Swans into Grey Swans. However this review stops a long way from demonstrating that life is largely determined by full-blooded (i.e. totally unpredictable) Black Swans.
Although I don't think that Taleb will make us see our lives in a totally new light it is important that he reminds us - in case 24-hour world news ever allows us to forget - that day-to-day affairs can be subject to unforeseen, and potentially devastating, modification. He also offers us the flip side: some ideas on how we can take advantage of positive Black Swans. It may be due to a lack of imagination but, not being a venture capitalist or a "quant", I couldn't immediately see measures of easy application in this area. Defence against Black Swans seems easier, namely diversification across very disparate fields. Taleb himself suggests a portfolio composed of up to 90% of extremely safe financial instruments (like Treasury bills) and as little as 10% in leveraged speculative bets like options (ideally involving "venture-capital style portfolios"). His general advise is more homely: learn to recognise undertakings exposed to positive and negative Black Swans, don't be narrow minded, seize opportunities, be wary of government plans, etc.
Many interested in the impact of randomness will find the book a good, if fairly demanding, read. In the end, however, it is not entirely satisfactory. This has something to do with the fact that rather than be carried long by a limpid river of reasoning we are subjected to an avalanche of opinionative observations, some relevant, some less so. Some readers might also find many of the chapter and section headings irritating: "The Vagueness of Catherine's Lover Count", "How many Wittgenstein's can dance on the head of a pin?", etc. I suppose its all part of the relatively successful effort to make randomness fun. But although we'd enjoy seeing pompous academics and self-satisfied hedge-fund partners squirming with mice down their necks is it really necessary to rub the long-suffering French up the wrong way?
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The Black Swan is probably the strongest statement of enlightened empiricism since Ernst Mach refused to acknowledge the existence of the atom. Of course, in theory, everyone today is supposed to be an empiricist - all right-thinking intellectuals claim to base their views solely on positive scientific observation. But very few sincerely confront the implications of rigorous empiricism. Specifically, few confront "the problem of induction," illustrated here by the story of the black swan.
Briefly: observing an event once does not predict it will occur again in the future. This remains true regardless of the number of observations one adds to the pile. Or, as Taleb, recapitulating David Hume, has it: the observation of even a million white swans does not justify the statement "all swans are white." There is no way to know that somewhere out there a black swan is not hiding, disproving the rule and nullifying our "knowledge" of swans. The problem of induction tells us that we cannot really learn from our experiences. It makes knowledge very problematic, if not impossible. And yet, humans do behave -almost without exception- as though they believe that experience teaches us lessons. This is forgivable; there is no better path to knowledge. But before proceeding, one must account for the limits that the problem of induction places on our claims to knowledge. And humans seem, at every turn, to lack this critical self-awareness.
In one of the many humorous anecdotes that seem to comprise this entire book, Taleb recounts how he learned his extreme skepticism from his first boss, a French gentleman trader who insisted that he should not worry about the fluctuating values of economic indicators. (Indeed, Taleb proudly declares that, to this day, he remains blissfully ignorant of supposedly crucial "indicators" like housing starts and consumer spending. This is a shocking statement from a guy whose day job is managing a hedge fund.) Even if these "common knowledge" indicators are predictive of anything (dubious - see above), they are useless to you because everyone else is already accounting for them. They are "white swans," or common sense. Regardless of their magnitude, white swans are basically irrelevant to the trader - they have already been impounded into the market. In this environment, one can only profitably concern oneself with those bets which others are systematically ignoring - bets on those highly unlikely, but highly consequential events that utterly defy the conventional wisdom. What Taleb ought to worry about, the Frenchman warned, was not the prospect of a quarter-percent rise in interest rates, but a plane hitting the World Trade Center!
Yep, the precise facts of 9-11 were actually presaged by this French gentlemen, as a rogue wave that just might be lurking over the horizon. And, to the contemporary American mind, this is THE quintessential Black Swan. Of course, the Frenchman's insight was just a coincidence - the thing with Black Swans is that they cannot be foreseen.
Taleb explains that conventional social scientists use induction to collect data, which is then plotted on the good old Gaussian bellcurve. With characteristic silliness, Taleb dubs the land of the bellcurve "Mediocristan" - and informs us that it is the natural habitat of the white swan. He contrasts Mediocristan with "Extremistan" - where chaos reigns, the wholly unexpected happens, power laws and fractal geometry apply and the bellcurve does not. Taleb's fictional/metaphorical 'stans' share something with the 'stans' of the real world: very ill-defined borders. Indeed, one can never tell whether one is in the relatively safe territory of Mediocristan or if one has wandered into the lawless tribal regions of Extremistan. The bellcurve can only help you in Mediocristan, but you have no way of knowing whether you have strayed into Extremistan - beyond the bellcurve's jurisdiction. This means that bellcurves are of no reliable use, anywhere. The full implications of this take a while to sink in, and are sure to cause huge controversy. In July, Taleb will debate Charles Murray (author of -what else?- the Bell Curve). I'll let you know who wins.
Taleb frames his whole argument much more entertainingly than I could here, and he bolsters it with an astonishing command of both cutting-edge social science and the entire history of philosophy. This is an astonishing work of serious philosophy, and it reads like pulp fiction. Readers who enjoyed FBR will find here the same dry wit, the same literary erudition, and deep sense of the absurd that made that book so much fun. But this is better, by an order of magnitude - easily the best book I have read in 5 years. I smell a timely pop-science bestseller here to rival Gladwell or Surowiecki, but this is also a classic that will be read for decades to come.