The Black Swan: The Impact of the Highly Improbable is a book by the essayist, scholar, philosopher, and statistician Nassim Nicholas Taleb, released April 17, 2007 by Random House. The book focuses on the extreme impact of certain kinds of rare and unpredictable events (outliers) and humans' tendency to find simplistic explanations for these events retrospectively. This theory has since become known as the black swan theory.
The book also covers subjects relating to knowledge, aesthetics, and ways of life, and uses elements of fiction in making its points. The author frequently shares anecdotes from his own life to elaborate his theories.
The book's first edition appeared in 2007 and was a commercial success. It spent 36 weeks on the New York Times best-seller list. The second, expanded edition appeared in 2010. The book is part of Taleb's four volume philosophical essay on uncertainty, titled the Incerto and covers the following books: Antifragile (2012), The Black Swan (2007-2010), Fooled by Randomness (2001) and The Bed of Procrustes (2010-2016).
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Overview: Black Swan theory
Taleb, bestselling author of Fooled by Randomness, treats uncertainty and randomness as a single idea. See Black swan theory for Taleb's definition of a Black Swan event.
Black Swan Impact Of The Highly Improbable Video
Coping with Black Swan events
The main idea in Taleb's book is not to attempt to predict Black Swan events, but to build robustness to negative ones that occur and to be able to exploit positive ones. Taleb contends that banks and trading firms are very vulnerable to hazardous Black Swan events and are exposed to losses beyond those that are predicted by their defective financial models.
The book's position is a "Black Swan" event depends on the observer--using the example, what may be a Black Swan surprise for a turkey is not a Black Swan surprise for its butcher--hence the objective should be to "avoid being the turkey", by identifying areas of vulnerability in order to "turn the Black Swans white".
Summary
Taleb refers to the book variously as an essay or a narrative with one single idea: "our blindness with respect to randomness, particularly large deviations." It is Taleb's questioning of why this occurs, and his explanations of it that drive the book forward.
The book's layout follows "a simple logic", moving from literary subjects in the beginning to scientific and mathematical subjects in the later portions. Part One and the beginning of Part Two delve into psychology. Taleb addresses science and business in the latter half of Part Two and Part Three. Part Four contains advice on how to approach the world in the face of uncertainty and still enjoy life.
Taleb acknowledges a contradiction in the book. He uses an exact metaphor, Black Swan idea to argue against the "unknown, the abstract, and imprecise uncertain--white ravens, pink elephants, or evaporating denizens of a remote planet orbiting Tau Ceti."
There is a contradiction; this book is a story, and I prefer to use stories and vignettes to illustrate our gullibility about stories and our preference for the dangerous compression of narratives.... You need a story to displace a story. Metaphors and stories are far more potent (alas) than ideas; they are also easier to remember and more fun to read.
Part one: Umberto Eco's anti-library, or how we seek validation
In the first chapter, the Black Swan theory is first discussed in relation to Taleb's coming of age in the Levant. The author then elucidates his approach to historical analysis. He describes history as opaque, essentially a black box of cause and effect. One sees events go in and events go out, but one has no way of determining which produced what effect. Taleb argues this is due to The Triplet of Opacity.
The second chapter discusses a neuroscientist named Yevgenia Nikolayevna Krasnova and her book A Story of Recursion. She published her book on the web and was discovered by a small publishing company; they published her unedited work and the book became an international bestseller. The small publishing firm became a big corporation, and Yevgenia became famous. This incident is described as a Black Swan event.
Thebook goes on to admit that the so-called author is a work of fiction. Yevgenia rejects the distinction between fiction and nonfiction. She also hates the very idea of forcing things into well defin ed "categories", holding that the world generally is complex and not easy to define. Though female, the character is based, in part, autobiographically on the author (according to Taleb), who has many of the same traits.
The third chapter introduces the concepts of Extremistan and Mediocristan. He uses them as guides to define how predictable the environment one's studying is. Mediocristan environments safely can use Gaussian distribution. In Extremistan environments, a Gaussian distribution should be used at one's own peril.
Chapter four brings together the topics discussed earlier, into a narrative about a turkey. Taleb uses it to illustrate the philosophical problem of induction and how past performance is no indicator of future performance. He then takes the reader into the history of skepticism.
In chapter nine, Taleb outlines the multiple topics he previously has described and connects them as a single basic idea.
In chapter thirteen, the book discusses what can be done regarding epistemic arrogance. He recommends avoiding unnecessary dependence on large-scale harmful predictions, while being less cautious with smaller matters, such as going to a picnic. He makes a distinction between the American cultural perception of failure versus European and Asian stigma and embarrassment regarding failure: the latter is more tolerable for people taking small risks. He also describes the "barbell strategy" for investment he used as a trader, which consists in avoiding medium risk investments and putting 85-90% of money in the safest instruments available and the remaining 10-15% on extremely speculative bets.
Argument
The term black swan was a Latin expression: it's oldest reference is in the poet Juvenal's expression that "a good person is as rare as a black swan" ("rara avis in terris nigroque simillima cygno", 6.165). It was a common expression in 16th century London, as a statement that describes impossibility, deriving from the old world presumption that 'all swans must be white', because all historical records of swans reported that they had white feathers. Thus, the black swan is an oft cited reference in philosophical discussions of the improbable. Aristotle's "Prior Analytics" is the most likely original reference that makes use of example syllogisms involving the predicates "white", "black", and "swan." More specifically, Aristotle uses the white swan as an example of necessary relations and the black swan as improbable. This example may be used to demonstrate either deductive or inductive reasoning; however, neither form of reasoning is infallible, since in inductive reasoning, premises of an argument may support a conclusion, but does not ensure it, and similarly, in deductive reasoning, an argument is dependent on the truth of its premises. That is, a false premise may lead to a false result and inconclusive premises also will yield an inconclusive conclusion. The limits of the argument behind "all swans are white" is exposed--it merely is based on the limits of experience (e.g., that every swan one has seen, heard, or read about is white). The point of this metaphor is that all known swans were white until the discovery of black swans in Australia. Hume's attack against induction and causation is based primarily on the limits of everyday experience and so too, the limitations of scientific knowledge.
Reception
Mathematics professor David Aldous argued that "Taleb is sensible (going on prescient) in his discussion of financial markets and in some of his general philosophical thought, but tends toward irrelevance or ridiculous exaggeration otherwise." Gregg Easterbrook wrote a critical review of The Black Swan in the New York Times to which Taleb replied with a list of logical errors, blaming Easterbrook for not having read the book. Giles Foden, writing for The Guardian in 2007, described the book as insightful, but facetiously written, saying that Nassim's "dumbed-down" style was a central problem, especially in comparison to Taleb's Fooled by Randomness.
The Nobel Prize-winning psychologist Daniel Kahneman wrote "The Black Swan changed my view of how the world works" and explains the influence in his 2011 book Thinking, Fast and Slow.
Since being published in 2007, as of February 2011 it has sold close to three million copies. It spent 36 weeks on the New York Times Bestseller list; 17 as hardcover and 19 weeks as paperback. It was published in 32 languages.
Source of the article : Wikipedia
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