Book Review, “The Black Swan” by Nassim Nicholas Taleb

This is a book I’ve wanted to read since it came out about a year ago, but it just made it to the top of my reading stack. I gave a copy to my dad for Christmas, and when he finished, it came back my way. A good deal 😉

The subtitle of this book is “The Impact of the Highly Improbable” and Taleb tells a compelling story about our tendancy to ignore the unexpected. I’ll confess that I felt the topic could have been covered with fewer words (probably because I agreed with his thesis going into the book), but Taleb’s anecdotes are interesting, though I found the reading tedious at times. His hypothetical states of Mediocristan and Extremistan provide a nice framework for the argument…models and plans work in Mediocristan (a land of stability and central tendancies) but fail with the outliers, the fat-tailed (or bimodal dumbbell) distributions of Extremistan (a land of unpredictability). I’ve always been one who liked the first 80% of a problem or task, and got bored with dotting the “i’s” and crossing the “t’s”, and the idea that exhaustive planning is bound to fail in our real world of Extremistan resonates with me. Yes, you have to plan, but realize that you can’t plan for all the eventualities, and that planning and the execution of plans needs to be tempered with a knowledge that things just may pan out in a way totally outside your expectation. The Bell Curve may look appealing, but a high sigma event happens more often than it should. I liked his discussion of scalability…trying to set bounds is itself bound to fail. Why is a bound valid (except, I suppose, where there are certain physical constants that we don’t know how to move beyond…hmmm… sounds like an opportunity for a Black Swan!). The Fractal Randomness model is, as Taleb says, aesthetically pleasing, and allows us (through scaling) to at least partially anticipate the possibility of something so extreme (we are in Extremistan!) that it would have been a Black Swan, but is now a Gray Swan — at least somewhat conceptualized. Taleb says “…Mandelbrot domesticated many of my Black Swans, but not all of them, not completely. But he shows us a glimmer of hope with his method…”

So, if we can’t avoid Black Swans with exhaustive planning, what can we do? Look for ways to expose yourself to the potential of positive Black Swans, and work to mitigate the damage that negative Black Swans can bring. Expose yourself to serendipity, but beware the freak storm blowing on your house of cards.

A thought provoking book and worth a read.

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