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Taleb - The Black Swan, 2nd ed. (2010) - Synopsis

Taleb - The Black Swan, 2nd ed. (2010) - Synopsis

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Published by Mark K. Jensen
Synopsis of Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable, 2nd ed. (New York: Random House Trade Paperbacks, 2010). -- Discussed at Digging Deeper (www.ufppc.org) on November 22, 2010.
Synopsis of Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable, 2nd ed. (New York: Random House Trade Paperbacks, 2010). -- Discussed at Digging Deeper (www.ufppc.org) on November 22, 2010.

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Published by: Mark K. Jensen on Nov 22, 2010
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UFPPC (www.ufppc.org) Digging Deeper CXLIII: November 22, 2010, 7:00 p.m. 
Nassim Nicholas Taleb,
The Black Swan: The Impact of the Highly Improbable
,2nd ed.
 
(New York: Random House Trade Paperbacks, 2010). Originallypublished 2007.
[
Thesis.
 Taleb is a self-proclaimed"skeptical empiricist" (2), but he believeshe knows that "our world is dominated bythe extreme, the unknown, and the veryimprobable" (xxxii)—in other words, thatwe live in what he dubs "Extremistan."No one really knows what is going on.People believe otherwise because we"fall for the confirmation error" (85).]
Note to the Second Edition.
Inaddition to a long "Postscript essay," onlya few footnotes have been updated "topreserve the integrity of the original text"(xix).
Prologue.
A Black Swan (capitalized) isan event that (1) is an
outlier 
, (2) it"carries an extreme impact," and (3) isexplained retrospectively (xxi-xxiii)."Black Swan logic makes
what you don't know
far more relevant than what you doknow" (xxiii). History cannot bepredicted; what is surprising is ourblindness to this fact (xxiv-xv). Ourminds seem ill adapted to learning this(xxv-xxvii). Silent heroes areunrecognized and made to feel useless(xxvii-xxviii). Taleb is not interested inthe usual—this is "often irrelevant"(xxix).
Platonicity 
is the tendency tomistake the map for the territory (xxix-xxx). To make his anti-narrativeargument, "this book is a story" (xxxi).
PART ONE: UMBERTO ECO'SANTILIBRARY, OR HOW WE SEEK VALIDATION.Ch. 1: The Apprenticeship of anEmpirical Skeptic.
Autobiographical (3-8). Witnessing the Lebanese civil warschooled Taleb in unpredictability (8-10).Interested in the philosophy of history,William Shirer's
Berlin Diary 
(1941)taught him the most, because itportrayed events
as they happened,
providing "a training course in thedynamics of uncertainty" (14; 10-14).Information increases one's likelihood of mistakes: "avoid the newspapers" (17;14-17). Studying at the Wharton Schoolconvinced Taleb that no one "know[s]what is going on"; he experienced "BlackMonday" (Oct. 19, 1987) as a vindicationof his ideas (17; 17-22).
Ch. 2: Yevgenia's Black Swan.
A tale(invented) of a surprise bestseller; Yevgenia Nikolayevna Krasnova, whoappears in the index is a transparent
alter ego
for the author (23-25).
Ch. 3: The Speculator and theProstitute.
 Just as in some categoriesthere are wide variations (Extremistan,e.g. personal wealth) and in others thereare not (Mediocristan, e.g. body weight),so some realms of paid activity are"scalable"—are not dependent on timeworked—e.g. trading, and others are(prostitution) (26-34). It is in Extremistanthat "we are subjected to the tyranny of the singular, the accidental, the unseen,and the unpredicted" (35; 25-37).
Ch. 4: One Thousand and One Days,or How Not to Be a Sucker.
Theproblem of induction; its history (Hume,Sextus Empiricus, Algazel) (38-50).
Ch. 5: Confirmation Shmonfirmation!
 Though a Popperian search forfalsification is the best approach forlearning about the world, we have built-incognitive biases that deter us from usingit (51-61).
Ch. 6: The Narrative Fallacy.
Humansare inclined to a "narrative fallacy" that
 
causes them to misestimate risk (63; 62-80; see also Daniel Gardner,
The Scienceof Fear 
[2008], which makes the samepoints with greater refinement; bothvolumes share the view that the humanbrain is adapted to natural circumstancesthat are far removed from the ones itinhabits in the modern world, and thatmany characteristics of thecontemporary order are the result of this). The way to avoid this tendency is"to favor experimentation overstorytelling, experience over history, andclinical knowledge over theories" (84; 81-84).
Ch. 7: Living in the Antechamber of Hope.
Those who pursue Black Swanevents live on hope; this is not anapproach to life that is generallysuccessful and it can be psychologicallydifficult to maintain; Taleb invents books(
Il deserto dei tartari
) and characters(Nero Tulip, who becomes Yevgenia'slover) to illustrate his points (85-99).
Ch. 8: Giacomo Casanova's UnfailingLuck: The Problem of SilentEvidence.
Success stories are of littleuse, because we do not know aboutthose who used the same methods andfailed; the successful are "less
uniquely 
talented than we think"; this appliesespecially to highly dangerous activities(103; 100-10). In general, consequencesof actions are often hidden from view:"
that we got here by accident does not mean that we should continue to takethe same risks
" (116; 110-17). "Mybiggest problem with the educationalsystem lies precisely in that it forcesstudents to squeeze explanations out of subject matters and
shames
them forwithholding judgment, for uttering the 'Idon't know'"; but things are
not sosimple
(120; 117-21).
Ch. 9: The Ludic Fallacy, or theUncertainty of the Nerd.
In real life,you don't know the odds (122-30).Summarizing Part One: "[W]e arenaturally shallow and superficial—and wedo not know it. This is not apsychological problem; it comes from themain property of information" (132; 131-33). Taleb's recipe for enlightenment: "Ipropose that if you want a simple step toa higher form of life, as distant from theanimal as you can get, then you mayhave to denarrate, that is, shut down thetelevision set, minimize time spentreading newspapers, ignore the blogs. Train your reasoning abilities to controlyour decisions; nudge System I (theheuristic or experiential system) out of the important ones. Train yourself tospot
the difference between thesensational and the empirical
. Thisinsulation from the toxicity of the worldwill have an additional benefit: it willimprove your well-being. Also, bear inmind how shallow we are withprobability, the mother of all abstractnotions. You do not have to do muchmore in order to gain a deeperunderstanding of the things around you"(133).
PART TWO: WE JUST CAN'T PREDICT.
 There are limits to prediction (135-36).
Ch. 10: The Scandal of Prediction.
"Epistemic arrogance" leads us tooverestimate how much we know, andalso to exaggerate the importance of having more information (137-45). Insome professions some competenceexists (medicine, chess, physics,accountancy...) and in some it does not(stockbrokers, court judges, psychiatrists,intelligence analysis, economists...) (145-51). How "experts" justify their mistakes(151-56). "We cannot truly plan,because we do not understand the future. . . [but w]e could plan
while bearing inmind such limitations
. It just takes guts"(157). "We misunderstand the logic olarge deviations from the norm" (160). The fallacies involved in predicting are sosevere that predictions are not reallypossible (160-64).
 
Ch. 11: How to Look for Bird Poop.
 The unpredictability of discovery (165-71). Popper's demonstration of history'sunpredictability in
The Poverty of Historicism
(171-73). In praise of HenriPoincaré (174-76). The three-bodyproblem (176-79). Hayek on the socialsciences (179-81). Medical "empirics"(182-83). Free will vitiates predictability(183-85). There are never enough datato predict (185-88).
Ch. 12: Epistemocracy, a Dream
.
 Taleb dubs a person who "holds his ownknowledge to be suspect" an
epistemocrat,
(190). Montaigne asepistemocrat (191-92). It is harder to"predict" the past than the future (192-98). Historians have been mistaken topursue
causation—
it's just the narrativefallacy again
 
(198-200).
Ch. 13: Appelles the Painter, orWhat Do You Do If You CannotPredict?
Rank beliefs according toplausibility, and be prepared for allrelevant eventualities (201-03). Thequest to eliminate risk can increase it(203-05). Taleb's investment advice:"put a portion, say 85 to 90 percent, inextremely safe investments, like Treasury bills—as safe a class of instruments as you can manage to findon this planet. The remaining 10 to 15percent you put in extremely speculativebets, as leveraged as possible (likeoptions), preferably venture capital-styleportfolios" (205). Practical advice:cultivate asymmetric situations "wherefavorable consequences are much largerthan unfavorable ones" (cf. Pascal'swager): "Go to parties! . . . And if you areautistic, send your associates to theseevents" (210; 209; 206-11).
PART THREE: THOSE GRAY SWANSOF EXTREMISTAN.
Four "final items"(213).
Ch. 14: From Mediocristan toExtremistan, and Back.
Success andfailure often depend on cumulativeeffects (215-18). These are powerful,and explain why "members of the SwissArmy use English (not French) as a linguafranca" (220; 218-25). "We are glidinginto disorder"; concentration in banking(225-27). The problem is not justinequality, but "the absence of a role forthe
average
in intellectual production"(227-28). "Extremistan is here to stay"(228).
Ch. 15: The Bell Curve, That GreatIntellectual Fraud.
Blame for thetyranny of the Gaussian bell curve, whichapplies only in Mediocristan, notExtremistan, can be laid at the feet of Adolphe Quételet (1794-1874), theinventor of the "average human,
l'homme moyen
" (241; 229-51). Butalmost no one has the perspicacity or"courage" to reject it (251-52; 274).
Ch. 16: The Aesthetics of Randomness
.
Benoît Mandelbrot, "theonly flesh-and-bones teacher I ever had—my teachers are usually books in mylibrary" (254; 253-56). Mandelbrotianfractals (254-62). These fractalsrepresent randomness better thanGaussian functions, but everythingdepends on the exponent, which isunknowable (262-68). Instead of studying the world to understand themarket, we should "study the intense,uncharted, humbling uncertainty in themarkets as a means to get insights aboutthe nature of randomness that isapplicable to psychology, probability,mathematics, decision theory, and evenstatistical problems" (268). Thisapproach can turn some Black Swansinto "Gray Swans" (scientifically tractablerare events) (268-73).
Ch. 17: Locke's Madmen, or BellCurves in the Wrong Places.
Professionals are unwilling to give uptheir obsolete, meaningless statisticaltools (274-77). Diatribe against the"Nobel" prize in economics; in attacking

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mv_abraham added this note
read thru.. my first contact with Taleb. thanks
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