Book Review: The Black Swan — The Impact of the Highly Improbable
Who Should Read This Book
This book is for anyone not afraid of having their model of the world (and themselves) challenged while looking to augment their formal education. It is also for those interested in the role of uncertainty, luck, and rare events in their lives. If you have read Taleb’s other works and fallen in love with them, this book is yet another must-read.
Synopsis
The Black Swan — The Impact of the Highly Improbable is the second instalment in a series of five books authored by Nassim Nicholas Taleb titled Incerto. The four other books are Fooled by Randomness (2001), The Bed of Procrustes (2010), Antifragile (2012), and Skin in the Game (2018).
This book examines the impact of rare events, what the author calls Black Swans, on our personal lives as well as the history of the world. These Black Swans have three attributes: rarity, extreme impact, and a propensity from our side to ignore them; in fact, the author states that we tend to rationalize our inability to predict rare events a bit too much.
The author presents an idea about the future, of how unpredictable it is, and he proposes an explanation for this unpredictability. In Taleb’s view, all we know today about a specific phenomenon is inconsequential, as one Black Swan can topple our entire model of this phenomenon.
The author’s style has not changed much between this book and its predecessor, Fooled by Randomness. If his style has not thwarted you from reading Fooled by Randomness, we highly recommend that you read this one as well, as it is an equally enjoyable, refreshing, and mind-bending read.
The book is divided into four parts:
- Part 1: Umberto Eco’s Anti-library, or How We Seek Validation
Taleb explains in Chapter 1 that the generation and appearance of Black Swans as the result of a simplified view of the events happening around us. This oversimplified model of the world blinds us to rare events: “Categorizing always produces a reduction in true complexity. It is a manifestation of the Black Swan generator“.
In this part also, Taleb introduces the worlds of Extremistan and Mediocristan, where Gaussian probability distributions rule the latter while power laws run the former. Black Swans occur when you live in Extremistan but behave as in Mediocristan.
The first part of the book discusses four main ideas:
- The error of confirmation explains our tendency to look for evidence that confirms our beliefs rather than expose our ignorance. This leads us to “thinking that the world in which we live is more understandable, more explainable, and therefore more predictable than it is”.
- The narrative fallacy explains our ability to construct coherent stories from past events and find causality in seemingly unrelated events. This ability helps us make sense of complex histories of the world at the cost of producing incorrect links and relationships between events and causes and effects. This cognitive bias or shortcoming is well-explained in the text from a biological, physiological, psychological, and evolutionary standpoint.
- The problem of induction, originally attributed to the Scottish philosopher David Hume, and how the problem disappears if we believe we live in Mediocristan.
- The problem of silent evidence examines our bias for ignoring evidence that perished or was lost and focusing solely on what we see or remember. Taleb uses the example of nostalgia to illustrate his point; we tend to view the “golden” eras of the past because the faulty parts did not survive or were suppressed and forgotten.
- Part 2: We Just Can’t Predict
Part two of this book discusses our ability, actually our inability, to predict the future. In effect, the author provides research summaries that show how overconfident we are in what we think we know about how the future will unfold.
Taleb then presents the case for “More Information Means Worse Knowledge” and provides a brilliant explanation of why that is.
He then elucidates his views on experts and how some professions can have ones while others can’t. He explains this by referring to the constant evolution of some disciplines; knowledge (and not just craft) is required in such fields, and knowledge as indicated by the problem of induction, is just so difficult to obtain.
I found most interesting his explanation of why some rare events, such as technological innovations, are fundamentally unpredictable. In the author’s view, the consequence of this theory is that the science of writing history by looking in the rearview mirror is akin to fraud.
In the last chapter of Part Two, the author discusses how attempts to tame volatility can end with a blow-up. Instead of taming randomness, the author argues that asymmetric exposure to Black Swans can bring significant gains.
- Part 3: Those Gray Swans of Extremistan
Part Three of The Black Swan is arguably the most fascinating as it explains why the world humans inhabit is from Extremistan rather than Mediocristan.
Why does the world we produce have such disparities between individual incomes? Why do big cities grow bigger, marginally better ideas in arts claim all the success, and a tiny fraction of the words we know are used in our daily conversations?
The technical answer is that such random variables, like the size of a city, follow power (or Pareto) laws instead of Gaussians. The intuitive explanation is that slightly better instances of such random variables benefit from a specific cumulative effect that eventually carries them over all the others.
The potency of power laws in the distribution of phenomena we experience daily has made the world highly nonlinear. Add to that the heavy linkage due to globalization, and you get Black Swan of phenomenal size.
- Part 4: The End
This last part is a small one with some afterthoughts, closing remarks, and advice from the author.
Has the Book Achieved Its Aim?
The book is about Black Swans, what generates them, how they heavily impact the significant aspects of our lives, the shortcomings of how we deal with them, and why we have created a world that generates them. Given this scope, the book is a fascinating introduction to the topic.
However, when I finished the book, I could not but feel something was missing. The problem was amply defined, with excruciating precision, but the solution was never provided or even hinted upon. At the time of writing, the first instalment of the Technical Incerto, Statistical Consequences of Fat Tails — Real World Preasymptotics, Epistemology, and Applications, is published and seems to add a fair bit of technical rigour to the discussion.
Key Metrics
Structure, Content, and Writing Style
The Black Swan is the twin brother of Fooled By Randomness regarding writing style, originality, content, and structure. We have reviewed these properties amply in that book’s review and will not do that here to avoid repetition. If you are interested, and I believe you should, given the uniqueness of both the content and the author’s essayist writing style, I would recommend that you have a look.
Format
Form Factor
Paperback
ISBN-10: 0141034599
ISBN-13: 978-0141034591
3.05 x 12.7 x 19.56 cm
400 pages
Themes
- Black Swans or Rare Events
- Writing History
- History Science
- Black Swans are Unpredictable
- Asymetric Losses and Gains
- Predicitng the Future
- The Ludic Fallacy
- The Narrative Fallacy
- Opaqueness of the World
- Power Laws
- Pareto Distributions
- Success and the Role of Luck
- Extreme Impact Events
- Expert Judgement
- Winner-takes-it-all Phenomena
- The Induction Problem (revisited)
- Positive and Negative Black Swans
FAQ
I thought it might be helpful to add some extra information not typically part of the review. I hope you find it useful!
Q1: Do the Incerto Books Overlap?
The Incerto contains five volumes, of which I have read Fooled by Randomness, The Black Swan, Antifragile, and Skin in the Game.
The material presented in all of the books listed above, except for Skin in the Game, contains a significant quantity of original content with minimal overlap.
I cannot, however, state the same for Skin in the Game, which I found a bit repetitive and disappointing. If you have read Fooled by Randomness, The Black Swan, and especially Antifragile, I will not bother with Skin in the Game.
That being said, all the books revolve around the topic of uncertainty; the areas of uncertainty covered, however, differ from one work to the other.
Q2: Which of the Incerto Volumes Are Recommended?
The three books Fooled by Randomness, The Black Swan, and Antifragile are must-read, Antifragile being a personal favourite and one of the most influential books I have come across.
If you have a technical background in statistics, probability, or mathematics, you might find the Statistical Consequences of Fat Tails quite interesting.
Q3: Are There Other Influential Publications on the Same Topic?
I am unaware of other popular science publications on the role of luck and uncertainty of comparable influence and depth as those of Taleb. If you have seen any such books, please leave me a note in the comments section.
Taleb constantly references the works of Sir Francis Bacon, Bertrand Russel, Aristotle, and Karl Popper in his books, so these will certainly be a step further up in terms of depth and rigour in philosophy and epistemology.
Q4: How Valuable Is This Book From a Practical Perspective?
The value of this book from a practical perspective is hard to gauge. On the one hand, it induces a paradigm shift in the reader’s mind of how the world (especially history and our understanding of it) functions under conditions of luck and uncertainty. I believe that there is no going back once you read Taleb’s work.
On the other hand, especially for The Black Swan, the book is silent regarding solutions to the rare event problem and our blindness to it. The reader is left feeling that the best that can be done is to be aware of the limitations imposed by our human nature on what we can and can’t see in this uncertain world.