Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable (aff). New York: Random House, 2010. 444 pages.
I will confess up front that this book was challenging for me to read. It does not fall naturally into my comfort zone. I am not a mathematician (by any stretch of the imagination!), and I have never taken a class on statistics or probability. Much of this material was over my head. So why did I read it? For several reasons.
First, it is a bestseller that has greatly influenced people’s thinking throughout the last decade. I like to be familiar with books that have impacted society. I also try to discipline myself to read books that stretch me and don’t merely echo what I already know. I won’t read many books in this field, but I like to read the most influential ones. Third, this subject matter is exceedingly relevant to leadership. It discusses the impact highly improbable events have and how to prepare for them should they occur. While leaders may not want to fixate on such possibilities, they do well to give them some consideration.
I will not attempt to summarize Taleb’s teaching, because I would not do it justice, and it would soon become too technical for such a review. Instead I’ll mention a few quotes and observations and then leave you to read the book yourself.
Taleb is from Lebanon, so he brings with him an international pedigree. He is well read and has a delightful sense of humor. He has met some fascinating people and is familiar with many of the most significant events that have influenced modern society. His breadth of knowledge makes this book stimulating on many levels.
Taleb discusses “Black Swans” in this book, which he explains is another term for the problem of induction (27). He notes that a Black Swan is three things: First, it is an “outlier” that “lies outside the realm of regular expectations” (xxii). Second, it “carries an extreme impact.” Third, human nature makes us concoct explanations for its occurrence after the fact.
Taleb goes to great lengths throughout the book to emphasize these points and becomes quite agitated regarding the third one. He derides the alleged “experts” who did not see the Black Swan coming, but then make the rounds on talk shows explaining how the Black Swan could have been predicted. Taleb exposes much of this talk as fallacious.
Taleb argues that because it is impossible to predict outliers, it is, therefore, impossible to predict the course of history (xxiv). Taleb discusses many technical terms that quickly soar over my head. So, I will not embarrass myself or confuse you by delving into them. He discusses Platonicity, which he argues leads people to assume they understand more than they do. He asserts that people often fall prey to the Narrative Fallacy, which is when people formulate a story that explains events in history. Yet Taleb demonstrates that often our attempt to formulate a story fails to explain what happened and does not enable us to predict the next equally improbable occurrence. He states, “Ideas come and go, stories stay” (xxxi).
Taleb makes many attention-grabbing, thought-provoking statements. For example, he proclaims, “Read books are far less valuable than unread books” (1). Obviously, we already know what is in books we have read. The true treasures lie in the books we have not yet read. He also asserts, “Death is often a good career move for an author” (30).
Taleb notes that one of the great mistakes people make is assuming “the world in which we live is more understandable, and therefore more predictable than it actually is” (9). He warns readers to “Beware the scalable” (28). Taleb notes two major approaches to probability. The first is Mediocristan, which is when the sample is so large that no single instance can significantly change the aggregate of the total (32). The second is Extremistan, in which inequalities are such that a single observation can disproportionately impact the aggregate, or the total (33).
Taleb argues that we must be careful not to assume something is a Mediocristan event when it is actually Extremistan. He uses the example of a turkey. Suppose a turkey notices that from January 1st to November, the farmer is kind to him and feeds him daily. He might conclude after 250 days of exactly the same treatment that he can predict with great accuracy what to expect for each day going forward. But then on the Wednesday before Thanksgiving, he experiences an Extremistran event! You might conclude, “Yes, but only one day out of all those days did anything unusual happen.” But that one day cannot be averaged into the other days. It must be treated as a game changer (40). Taleb makes this argument. Too many “experts” work with averages from the past without having all the relevant data available to them. Taleb claims that history does not typically flow systematically and predictably, but in occasional leaps (11).
Taleb notes that 9/11 was a Black Swan to the airline passengers, but not to the terrorists. Looking back later, “experts” suggested we should have been able to foresee the events. But it was unprecedented, and no one predicted it. Likewise, the captain of the Titanic had never witnessed a naval accident and did not foresee one of the most famous tragedies of marine travel (42).
Taleb works with an investment company, so he is not risk averse. He notes, “Of course, I am not advocating total risk phobia (we will see that I favor an aggressive type of risk taking): all I will be showing you in this book is how to avoid crossing the street blindfolded” (49).
Taleb states, “It is true that a thousand days cannot prove you right, but one day can prove you wrong” (57). He discusses issues such as “Confirmation Bias” and “Narrative Fallacy” (58-62). He notes that explanations bind facts together (64). Readers will certainly become more cynical toward the panels of experts who speak confidently about events after the fact.
Taleb argues that “The world is more non linear than we think” (86). He asserts that graveyards are filled with people who had courage, optimism, and various other noble qualities. What determined their fate, Taleb suggests, was luck (105). It is difficult to use a formula to predict why some people are successful and others are not. He claims “experts” often emphasize certain facts and neglect others. For example, when analyzing why people end up in prison, experts typically survey inmates. But, Taleb argues, this approach fails to survey criminals who were never caught. Perhaps the lawbreakers who were incarcerated were the less bright felons and not representative of all criminals (108). He argues, “All I am saying is that it is not so simple; be suspicious of the ‘because’ and handle it with care” (120-121). He states, “My being here is consequential low probability occurrence, and I tend to forget that” (119).
Taleb also discusses the Ludic Fallacy (125). He argues, “The world is far, far more complicated than we think” (135). He charges people with “Epistemic Arrogance” in assuming they can develop a tidy theory that explains all historic events (140). He warns, “The problem is that our ideas are sticky; once we produce a theory, we are not likely to change our minds” (144). He challenges “experts” who look for facts that support their theories and ignore facts that challenge them. His biggest concern is that we often assume we can predict events when some of the most important facts are beyond our awareness. He notes, “The problem with experts is that they do not know what they do not know” (147). Taleb states that “We attribute our success to our skills, and our failures to external events outside our control, namely to randomness” (152).
Taleb makes the ominous claim, “I know that history is going to be dominated by an improbable event, I just don’t know what that event will be” (154). Taleb criticizes the field of economics. He suggests that the Nobel Prize for that category ought to be abolished. He notes that “Economics is the most insular of fields; it’s the one that quotes least from outside itself!” (165). At times, Taleb is combative. He suggests, “Being an executive does not require very developed frontal lobes, but rather a combination of charisma, a capacity to sustain boredom, and the ability to shallowly perform on harrowing schedules” (166). Taleb mentions many run-ins he has had with economists and shares how they continue to follow flawed formulas despite their litany of failed predictions.
Taleb argues, “When we think of tomorrow, we just project it as another yesterday” (193). He adds, “Our problem is not just that we do not know the future, we do not know much of the past either” (196). He concludes, “Randomness, in the end, is just unknowledge. The world is opaque and appearances fool us” (198).
Taleb discusses theories such as the Barbell strategy and the Matthew Effect (207-217). He also notes that of the 500 largest companies in 1957, only 74 were still operating in 1997 (221). He concludes that “Luck is far more egalitarian than even intelligence” (222). He also notes that “Big events don’t have big parents” (342). He cites the Great War as an example. After the Napoleonic wars, Europe entered into a time of relative peace. No one foresaw the slaughterhouse that World War I would become. People assumed such wars could never happen. Taleb’s point is that we keep looking for clues that a Black Swan is coming, but they are unprecedented. We flatter ourselves if we assume we can unlock the mysteries of the future based on what we know of the past.
Taleb does not want us to assume that we are merely helpless victims of the next Black Swan. He offers “10 Principles for a Black Swan Robust Society” (374). While we cannot predict what the Black Swan will be, we can prepare ourselves to mitigate the damage the Black Swan causes and perhaps even prosper because of it.
As I stated at the outset, I found this book tough to slog through in places. At times, Taleb’s writing is fascinating as he takes a unique view of events and common thinking. He certainly encourages readers to look more cynically at the panels of experts on TV who speak about things they clearly know little about. It also offers a fresh view of history and how much we do not understand about what actually happened and why. Certainly, it will make you view predictions of the future in an entirely new way.
If you are like me and math and statistics is as foreign to you as the ancient Hittite language, then you will find some discussions confusing. I must confess, I am one of those anal people who feels compelled to read a book to the end, even if I am not enjoying it. After Taleb released the original edition of The Black Swan, he received so many responses that, in later versions, he added several clarifications, which are present in this edition of the book.
I felt at times that he was taking some of the criticism personally, and he occasionally attacks his critics quite energetically. He also claims that no one has ever proven him wrong, which makes him sound arrogant. But he has a self-depreciating humor which helps to offset that haughtiness. Clearly, he is a brilliant man, and he has delved into a field where he is a force to be reckoned with.
This book is probably one of those tomes that people like to cite without having actually read the entire thing. It is an influential book, but it requires robust, careful reading, something many people are unwilling to do. If you feel up to the challenge, or if you have a background in or aptitude for statistics, you certainly should familiarize yourself with this material. If statistics and probability isn’t your area of expertise, perhaps you should read it just to remind yourself of how much knowledge and theory you do not know! The experience might be humbling (as it was for me). Either way, this is one of those books that will continue to exert an influence for many years to come.
Rating: 3
