The Black Swan: The Impact of the Highly Improbable

I had initially thought that this book would be a history of the “highly improbable” as so many other business-like books, but to my surprise I’m greeted with an argumentative and vivid philosophy book. At its core the book is an interesting take on how we think about the unlikely, high impact events that he calls the “black swan”, in a world that attributes ever greater impact to those highly unlikely due to network effects. These black swans range from vertiginous market crashes to an artist’s meteoric rise, and they carry so much impact that they completely dominate their field or realm. The one thing that was a thorn in the book was the author’s ego, as he frequently found the urge to display his superiority and sophistication; it detracted from the enjoyment of reading, but not from the merit of the arguments which is much more important. Aside from that, it’s an interesting read and very easy to get into.

The most important point I got from the book was wariness to the misapplication of statistics, often caused by ignoring assumptions behind the math. Taleb bashes the Gaussian (normal distribution) we rely too much on the normal distribution since it’s mathematically easy. Much of the world functions recursively and the power law governs a great deal of phenomena, often making the tails of those distributions “fatter” (more probable) than the Gaussian. Sometimes unscrupulous users will try to fit the Gaussian or Gaussian-derived models onto these non-normal phenomena, to disastrous results like the 2008 financial crisis. More broadly, the Gaussian assumes that we live in a world with distributions where the most concentrated is in the middle then dropping off on the tails, but in the modern era governed by network effects and the power law it’s increasingly less so. This should prompt us to focus not at the middle, but at the tails of distributions, where the most interesting things happen.