In the following
original essay, Taleb continues hisexamination of Black Swans, the highly improbable andunpredictable events that have massive impact. He claimsthat those who are putting society at risk are "no truestatisticians", merely people using statistics either withoutunderstanding them, or in a self-serving manner. "Thecurrent subprime crisis did wonders to help me drill mypoint about the limits of statistically driven claims," hesays.Taleb, looking at the cataclysmic situation facing financial institutionstoday, points out that "the banking system, betting
Black Swans,has lost over 1 Trillion dollars (so far), more than was ever made in thehistory of banking".But, as he points out, there is also good news.We can identify
where the danger zone is located
, which I call"the fourth quadrant", and show it on a map with more or lessclear boundaries. A map is a useful thing because you knowwhere you are safe and where your knowledge is questionable.So I drew for the
readers a tableau showing theboundaries where statistics works well and where it isquestionable or unreliable. Now once you identify where thedanger zone is, where your knowledge is no longer valid, youcan easily make some policy rules: how to conduct yourself inthat fourth quadrant; what to avoid.
John BrockmanNASSIM NICHOLAS TALEB, essayist and former mathematical trader, isDistinguished Professor of Risk Engineering at New York University’sPolytechnic Institute. He is the author of
Fooled by Randomness
and theinternational bestseller
The Black Swan.
Nassim Taleb's Edge Bio PageREALITY CLUB:
Jaron Lanier, George Dyson
BLOGWATCHTHE FOURTH QUADRANT: A MAP OF THE LIMITS OF STATISTICS
Statistical and applied probabilistic knowledge is the core of knowledge;statistics is what tells you if something is true, false, or merely anecdotal; itis the "logic of science"; it is the instrument of risk-taking; it is the appliedtools of epistemology; you can't be a modern intellectual and not thinkprobabilistically—but... let's not be suckers. The problem is much morecomplicated than it seems to the casual, mechanistic user who picked it up