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This microbook is a summary/original review based on the book: The Black Swan: The Impact of the Highly Improbable Fragility
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Publisher: Random House
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Life is unpredictable. Try as we might, we cannot predict the future – and we often do not learn from the past. That’s because life is too complex to be defined through one linear storyline. Instead, history has been defined by Black Swans – unforeseen events that changed the world completely. But why are we so susceptible to Black Swans? And how can we prepare ourselves for these events? Get ready to learn all about the impact of the highly improbable!
Author Nassim Nicholas Taleb writes that our lives are defined by Black Swan events: events that are incredibly difficult, if not impossible, to predict, but that have a large impact on the way we see the world. Take 9/11 as an example. No one could predict that on September 11, 2001, a plane would crash into the World Trade Center in New York City. If this event had been foreseeable, fighter planes might have circled the skies over New York, and pilots would have been able to lock their cabin from the inside.
Black Swan events are not rare occurrences. They happen every day, changing the way we perceive the world. Especially since the Industrial Revolution, Black Swans have started to become the norm in this increasingly complex world.
Before Australia was discovered, swans were always described in terms of their whiteness. But the discovery of black swans in Australia changed that definition of swans completely: clearly, these were swans as well, but they were black. This single discovery completely changed a generally accepted view of the world.
Black Swan events are defined by three attributes. First, they are outliers, so their occurrence lies outside the expected. Second, they have a severe impact, and third, human nature will explain their occurrence after the fact, making them seem like predictable events.
The way our brains work explains why we are simply not good at predicting random events. We are blind to the existence of Black Swans. Instead of focusing on what we know, we should be paying attention to what we don’t know – and adjust to the existence of Black Swans.
We become convinced that we know more than we actually know. Our brains are very good at learning precise facts, but incapable of learning rules. That is also why the lessons drawn from Black Swans tend to be too precise: the Maginot Line was a wall built by the French along the previous invasion line of the Germans during the first World War, for example. A few years later, Hitler almost effortlessly went around it and still invaded France.
This tendency to mistake the map for the territory, or platonicity, makes us think we understand more than we actually do. The so-called “Platonic Fold” is where Black Swans most often occur - that is, when the gap between what we think we know and what we actually know grows dangerously wide.
The first way in which we are blind to Black Swans is in the way we see history. We always see it through the rearview mirror, and in hindsight, history makes perfect sense (more or less). Think about the two World Wars, for example. History has put a lens on them so that now, they are perfectly explainable events. But if you had lived at the time, you would not have been able to predict the advent of these major wars.
Think about your own life – looking back, there is a clear storyline. But at the time, you were probably surprised by quite a few of your personal or professional developments and encounters.
Taleb says our brains like to make up stories about the past and narrate backwards, and this results in the narrative fallacy: we can’t just look at a sequence of facts. We are always tempted to weave causalities in to create a cohesive storyline. This is dangerous, of course, since it gives us the illusion of understanding, when in fact, there is none.
Our minds suffer from three ailments when it comes to history, which are also known as the triplet of opacity. First, we are victims to the illusion that we understand what is going on. In fact though, the world is much more complex than our mind will have us believe.
Second, we experience retrospective distortion, meaning that we can only assess events after they happened. And third, those who have enjoyed an extensive education are usually the ones to fall into the trap of believing they know more than they do. Since they are “experts” or “elite thinkers,” they are less likely to question their knowledge, and more likely to be surprised by a Black Swan.
To avoid at least some of the fallacies in dealing with history, it can help to keep a diary. This allows you to go back to certain days in your life and look at the way you really felt at the time, rather than narrating your life in hindsight.
There are quite a few ways in which our minds trick us into believing that there are no Black Swans. Back in the early days of the human race, humans needed to be able to make quick decisions and quickly infer meaning from statements. Back in those days, the statements “wild animals are predators” and “predators are wild animals” were almost interchangeable.
But in our increasingly complex world, things are not straightforward anymore. If you say, “Most criminals in the U.S. come from a certain ethnic group” it does not also mean that, “Most members of this ethnic group are criminals.” Our brains, however, still fall into the trap of inferring the second sentence, thereby distorting our perception of reality.
Moreover, when we learn new information, we react to it differently depending on the framework surrounding it. That means that we solve logical problems differently in a classroom than we do in daily life, meaning that even when we do have the knowledge, we often still apply it incorrectly.
This can be often seen in medicine. In cancer detection, for example, a thorough scan is employed to see if there are any cancerous cells in the body. However, present technology does not allow doctors to see every single cell in the body. So, even if the scan is negative, that only means there is no evidence of disease (NED), rather than evidence of no disease (END).
We also tend to look for evidence that confirms something we already know. This confirmation bias leads us to search for evidence to confirm what we already believe to be true. That is why climate change deniers pay more attention to essays confirming their views rather than scientific evidence to the contrary.
To avoid confirmation bias and be able to continuously learn, you should embrace negative empiricism: just because all swans you have seen are white, does not mean all swans are white. Similarly, if you see someone commit murder, they are a criminal – but you do not know for sure if someone is a criminal if you don’t catch them in the act.
Verification of your hypothesis, therefore, does not necessarily mean it is true. Rather, you should look for negative instances to prove your point.
Have you heard about cosmic radiation before? It is basically the constant background sound of the creation of the universe, still echoing to this day. It was discovered in 1965 and revived the big bang theory – but the way it was discovered is exemplary for most discoveries in history.
Two radio astronomists were mounting a large antenna at the Bell Labs in New Jersey when they noticed an annoying background hum. Thinking it might be bird poop stuck to the antenna, they scraped it off. They did not immediately realize that they had found tangible proof for the birth of the universe.
All great discoveries were the result of serendipitous events. Penicillin, for example, was discovered by Alexander Fleming when one of the petri dishes in his laboratory got infected with mold and he consequently realized its antibacterial properties.
As the examples of great discoveries show, we are unable to predict future inventions. In statistics, this is called the law of iterated expectations. If you expect something to happen tomorrow, you are already expecting it today. Similarly, if you expected the wheel to be invented, you would already know what the wheel looked like and therefore would have already invented it.
Humankind is afflicted by epistemic arrogance. We are too convinced of what we already know, and as a consequence, too convinced of our ability to predict the future. Even though our knowledge does grow, generally speaking, it is always outdone by the corresponding increase in our confidence. This results in ignorance and confusion.
Especially in an increasingly complex world, the limits of our knowledge are narrow. Just take the example of a turkey – it may have lived on a farm for a year, been fed every day and has no reason to expect that its life will ever be any different. Well, tomorrow happens to be Christmas Day, and therefore, it will be butchered and eaten. So, looking at the past to make predictions about the future is a bad idea.
So, if we cannot predict the occurrence of Black Swans, how are we to deal with their existence? First of all, acknowledge that you are simply human. It is only natural that you may be too convinced by your own current knowledge, so you shouldn’t feel bad about it.
If you are aware of your own limitations, however, you can deal with Black Swans more effectively. Try not to worry about large predictions and start looking at predictions in terms of how much harm they could cause, rather than how plausible they are.
For example, it’s okay to depend on the weather forecast when planning a picnic, but avoid depending on precise government plans. Unpredictability has its upsides. After all, discoveries in art and literature all depend on Black Swans. So, try and maximize your own exposure to them.
So, take every opportunity that comes your way! They are rarer than you think. When you get called by a large publishing house for example, cancel everything else and be there.
Opportunities are much more likely to occur in big cities, since you are exposed to such a larger number of people, making serendipitous encounters happen more often. Trial and error should be a basic guiding principle in your life, so that you can encourage positive accidents that may lead to new discoveries, friendships, or job opportunities.
In short, Taleb recommends seeking asymmetry in your life, “Put yourself in situations where favorable consequences are much larger than unfavorable ones.”
Black Swans are much more common than we think. Every invention and discovery ever made was a Black Swan - and history is studded with unpredictable events. It can be tempting to try and make sense of the world by trying to explain Black Swans after they happen, but that also blinds us to the possibility of them occurring in the future. Black Swans can be negative, in the form of financial crashes, for example. But they can also be positive, in the form of new discoveries.
Adjust to the existence of Black Swans and live your life ready to accept the potential of great breakthroughs. Daniel Kahneman, Nobel Laureate, reviewed “The Black Swan” as a book that “changed my view of how the world works.”
Start writing a diary to avoid falling into the trap of narrating your life backwards.
Nassim Nicholas Taleb is a Lebanese American author, former hedge fund manager, derivatives trader, and a scholar dealing with probability and uncertainty. He holds degrees in mathematical finance and worked as a researcher at... (Read more)
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