The Black Swan by Nassim Nicholas Taleb
Thoughts spiraling through my mind while reading this book and a summary of lessons learnt.
With ample anecdotal evidence supplied for each idea propounded, Taleb and his simple, conversational style of writing manage to keep the book engaging enough for the readers to devour its contents in one sitting.
With universal applicability of its ideas into domains as diverse as economics, politics and science, this book transcends the genre of philosophy and history. The concepts and ideas proposed in this book can be efficiently applied to all aspects of our day-to-day, or even minute-to-minute, decision-making, in every sphere of our lives- personal and professional.
With each turn of the page making you question your existing beliefs and imposing an urgent need on you to re-evaluate your thought-process, the book’s eighteen chapters are intertwined by one common theme- the impact of randomness and its unpredictability (despite our various claims of forecasting and seemingly efficient modelling skills), aka The Black Swan effect.
How do we learn? We humans learn from experience, we learn from observations. We don’t hear prophecies from the sky. We don’t get dreams from the divine. We figure it out all by ourselves, for our selves- by just noticing the world around us. And we keep building up on our knowledge. We learn from our mistakes. We adapt. We form believes, we begin to question them overtime and go on to find, for ourselves, another set of core values that better align with the changing times, new revelations and attitudes. We keep re-assessing ourselves and our knowledge. We sometimes even conceive theories, but we still rely on empirical evidence to validate them. Stemming from an over-dependence on empirical evidence, that’s how fragile our knowledge is- one observation of deviation changes everything. That one observation of deviation from the norm is, what Taleb terms as, the Black Swan.
Black Swans are unexpected, unpredictable and sudden events that upturn our existing views and stances on various issues as well as bring our present institutions into question. Taleb points out the three qualifiers for an event to be termed as Black Swan: rarity, extreme impact, and retrospective (though not prospective) predictability. It becomes important to note here that while such events are not predictable before their occurrence, people do manage to come up with considerable theories and explanations that make their occurence quite predictable, retrospectively. Real life is abound with examples of Black Swans.
Taleb then goes on to enumerate the various biases and fallacies that taint our thought processes, making our blindness towards reality seem rational.
We tend to focus on what we know so much that we tend to ignore what we don’t. But the key is to never stop exploring. Never being satisfied. Always looking for more, better.
Taleb then moves on to elucidate numerous fallacies that lead us into misinterpreting facts or data, misconstruing our views about pertinent issues.
However, a very strong human bias exists where we tend to focus on the known. We sometimes specifically look for facts or try to manipulate facts in order for them to confirm our pre-existing beliefs, a fallacy that is termed as the confirmation bias by psychologists. Thinking about it from the perspective of the human brain, it’s convenient to look for facts or to interpret facts in such a way that they align with our pre-existing notions than having to question our beliefs by a new set of data. This is precisely the reason why it is so difficult to bring about a behavioural change in society- because people tend to see and hear only what they want to see and hear. What must be done is that we must keep focusing on what we do not know, what we have not yet done instead of what we have/know. We take what we know a little too seriously, as a constant. This should never be the case. What we need to do is act like skeptical empiricists always looking out for more, regardless of whether it aligns or contradicts or pre-existing notions. Let us all be anti- scholars.
Another interesting aspect pointed out by Taleb is that of silent evidence. While a lot of people affirm their faith in a belief or statement primarily because they consider lack of (a falsifying) evidence for it being untrue a valid justification for its credibility. However, only a single Black Swan is needed to uproot this baseless belief over time.
Taleb also explains the Ludic Fallcy tainting our analytical and forecasting skills. We tend to focus so much on complex models and statistics that we ignore simple logic and reason. Such numeracy constrains us within an small enclosure of numbers and models and we tend to avoid thinking out-of-the-box. Acknowledging this limitation can help solve many social and economic problems using more appropriate interventions.
The interlinked Round Trip fallacy and the limitation of Domain specificity distorts our thinking and clouds our views. A very applicable example given by Taleb to explain this phenomenon is the theory of if A= B, then B=A . This becomes all the more interesting when we view it from the perspective of discrimination against Muslims. If it were to be believed that around 99% of all terrorists are Muslims, people are hasty in concluding that all Muslims are terrorists. However, statistics would prove it wrong since only 0.01% of the entire Muslim population indulge in terrorist activities (considering the huge Muslim population). Hence, it’s reckless to conclude that any Muslim you come across has a high chance of being a terrorist. Whatsoever the facts, people continue to fall into this fallacy, which has resulted in increased discrimination against certain religious communities and xenophobia. The problems becomes aggravated due to our domain specificities and render our education useless since so many of us aren’t able to swiftly apply theoretical concepts studies in classrooms in real-world situations. All of us have learnt in our Math classes that if A=B, then B need not necessarily be A. However, we fail to see this logic in real world. If only people could understand this, our society can become more inclusive. Xenophobia, homophobia and fears surrounding migrants could all be assuaged.
Another interesting idea explored in this book is forward vs backward engineering concept. Taleb goes on to efficiently explain this concept using an analogy- to an ice cube. It’s easier for people to vividly imagine the accurate melting process of an ice cube kept on a table. However, if we were to be asked to imagine the initial look of a pool water on the floor, our intuitive response would be an ice cube kept on the table. However, the pool of water might just have been gas that would have condensed or just water kept in a glass that might have toppled. This concept of forward engineering and backward engineering of events comes to the forefront when we try to interpret historical events.
Another important idea explored in the book is that of the distinction between Mediocristan and Extremistan. While events, factors or people from the realm of Mediocristan rarely represent the entire set or hold the power to influence others, those from Extremistan have a wide-reaching effect/influence. This concept becomes useful when we’re trying to assess risks associated with different independent events. For instance, the risk associated with the COVID-19 pandemic has largely been touted by experts as insignificant since the mortality rate is low. However, while this statistic might serve as a valid justification when viewed from an individual’s perspective, it becomes irrelevant when you look at it from the perspective of a community. One person who catches the coronavirus is not the only person affected by it- he might spread it to other people he comes in contact with and might, directly or indirectly, affect his employers, family, friends, and even the government’s exchequer. Hence, the risk definitely can’t be termed insignificant.
To sum it up, this book is an extremely intriguing psychological thriller, which debunks some troublesome biases and fallacies that we face in our thinking processes. What’s interesting is that every reader can relate to this book on a personal level, since, while reading this book, one recounts her/his own personal experiences and is awed how she/he fell for these logical traps in the past. It’s a great (and fairly easy to understand) read for all those interested in understanding human psychology and behaviour better. Taleb’s efficient use of real-life examples and studies/ statistics makes it a delightful read. People from disciplines as varied as finance, economics and psychology, can benefit from this book and can utilise its insights to enhance their day-to-day decision-making. To satiate your curiosity on risk and randomness awaken after having read this book, do follow- up on Taleb’s other books: Fooled By Randomness and Skin in The Game.
