The Black Swan: The Impact Of The Highly Improbable by Nassim Nicholas Taleb

black swan

Taleb works (or worked) as a quantitative analyst for commodity and currency trading firms in New York City. He regularly takes time off from this job to write his books. I worked in commodity trading for ten years. My understanding of this role is that it needs an extremely bright mind with an exceptional grasp of maths and a very high boredom threshold. In my experience they build and run lots of complex models that yield high amounts of data. I used to work in the decision-making part of trading, the output from the people in this role would be involved with determining how much money my area was allowed to trade with in the various market areas.

This book discusses the idea that sometimes highly unlikely things happen, and that sometimes those things have a large impact on everything else. I do not consider this to be a ground-breaking idea. It seems that Taleb has been lucky enough to give this phenomena a name; the “Black Swan”, so called because they are unusual, and, er, no they have no impact whatsoever on the other swans. Nope, I cannot quite work out why he has called them that.

I am interested in economics, sociology and psychology, and this book promised to be about all those things. I chose this book for discussion at my Las Vegas Non-Fiction Book Group. It is, to an extent, but I was disappointed in how little content this book has. There is an awful lot of off-subject rambling, such as tales of Taleb’s personal life, his views on Europeans, his views on Nobel prize-winners and his views on who is and is not an influential writer.

After making several digs at Europeans, and in particular, the French, Taleb debates whether being a certain nationality shapes one’s personality. He says he thinks not. He also ponders whether long and lean shaped people become good swimmers or whether swimmers become long and lean. His arrogant pompousness (and ten years working in trading) makes me wonder working in trading makes you think you are right all of the time, or if you have to think you are right all the time to work in trading.

He gives a very long and involved story of two stereotypes; a skeptical, intuitive, “outside of the box” thinker who likes to be broadly right (this stereotype is from Brooklyn, remember where you are from does NOT shape your personality according to Taleb), and a mathematical model-loving close-minded lover of forecasts. He revisits these stereotypes to illustrate his theory. In summary, be more like the Brooklyn “Fat Tony”, throw out the forecasting models! I am more of a “Fat Tony” but I know that a forecast will be something close to right most of the time, so it will be very useful. Every other day in 2011 right up to September 11th forecasts were pretty good, and that would be three quarters of the year.

After completing the book I am still struggling to see what his point is. I do not consider Taleb to be a good communicator. Surely nobody would argue that unusual things do not happen sometimes. I doubt very much that, on hearing Taleb’s definition of a “Black Swan” that anyone would deny that 9/11 was one. He tells us that people do not acknowledge these events until after they happen. But that would be because, by their very nature, they are unpredictable.

My favourite part of the whole book is where he tells of the readers who entirely miss his point and email him asking for a list of the Black Swan events that are coming up. He does not know. Nobody knows. Nobody has a crystal ball. Not even people who work in finance. All predictions will be wrong. There are lots of unknown unknowns out there. So, now you know, in case you were wondering. I really wish I had not wasted my time reading this book because I already knew that.

 

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