The Black Swan: The Impact of the Highly Improbable

These notes are old and were written while reading — they don’t necessarily reflect my current views.

Taleb talks about his concept of the black swan by using the turkey metaphor. He reiterates the two types of risks and explains why empericism is flawd.

He explains that the human brain is much better at handling small steady rewards and a big crash than small steady losses with a large payout.

He rants extensively against forecasters of any kind. He uses the unpredictability of black swans and chaos theory as his main arguments supporting this critique. He promotes economists like Hayek and Keynes and critiques the economists like Samuelson trying to make economic more like physics.

Taleb is not a big fan of the Gausian. He says it has its time and place but is often overused. It breaks down in systems where the probability of further actions is contingent on the first. For example does he state that in academics many papers are cited without being read. The author just inserts them from the citations of a paper he/she is referencing. This leads to effects that some authors are disproportionately cited to others. Furthermore, having a known name as an author is a large factor in future success. We can’t expect randomness in self-referential systems.

He points out that when we use the Gausian that might be helpfulm for small deviations, but for rare events the error from a wrongly guessed sigma compounds exponentially, making the model useless for these cases (sigma just cant be accurately enough).

Fractal randomness.

His reading list:

Popper, Batistat, Montaigne