''The Black Swan: The Impact of the Highly Improbable'' is a 2007 book by
Nassim Nicholas Taleb, who is a former
options trader
In finance, an option is a contract which conveys to its owner, the ''holder'', the right, but not the obligation, to buy or sell a specific quantity of an underlying asset or instrument at a specified strike price on or before a specified dat ...
. The book focuses on the extreme impact of rare and unpredictable
outlier events—and the human tendency to find simplistic explanations for these events, retrospectively. Taleb calls this the
Black Swan theory
The black swan theory or theory of black swan events is a metaphor that describes an event that comes as a surprise, has a major effect, and is often inappropriately rationalized after the fact with the benefit of hindsight. The term is based o ...
.
The book covers subjects relating to knowledge,
aesthetics
Aesthetics, or esthetics, is a branch of philosophy that deals with the nature of beauty and taste, as well as the philosophy of art (its own area of philosophy that comes out of aesthetics). It examines aesthetic values, often expressed thr ...
, as well as ways of life, and uses elements of fiction and anecdotes from the author's life to elaborate his theories. It spent 36 weeks on the
''New York Times'' best-seller list.
The book is part of Taleb's five-volume series, titled the ''Incerto'', including ''
Fooled by Randomness
''Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets'' is a book by Nassim Nicholas Taleb that deals with the fallibility of human knowledge. It was first published in 2001. Updated editions were released a few years later. ...
'' (2001), ''The Black Swan'' (2007–2010), ''
The Bed of Procrustes
''The Bed of Procrustes: Philosophical and Practical Aphorisms'' is a philosophy book by Nassim Nicholas Taleb written in the aphoristic style. It was first released on November 30, 2010 by Random House. An updated edition was released on Octo ...
'' (2010–2016), ''
Antifragile'' (2012), and
''Skin in the Game'' (2018).
Coping with Black Swan events
A central idea in Taleb's book is not to attempt to predict Black Swan events, but to build
robustness
Robustness is the property of being strong and healthy in constitution. When it is transposed into a system, it refers to the ability of tolerating perturbations that might affect the system’s functional body. In the same line ''robustness'' ca ...
to negative events and an ability to exploit positive events. "Robustness" reflects an attitude where nothing is permitted to fail under conditions of change. Taleb contends that banks and trading firms are vulnerable to hazardous Black Swan events and are exposed to losses beyond those predicted by their defective financial models.
The book asserts that a "Black Swan" event depends on the observer: for 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 has referred to the book as an essay or a narrative with one single idea: "our blindness with respect to randomness, particularly large deviations." The book moves 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
Psychology is the scientific study of mind and behavior. Psychology includes the study of conscious and unconscious phenomena, including feelings and thoughts. It is an academic discipline of immense scope, crossing the boundaries betwe ...
. 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, the
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."
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 Levant () is an approximate historical geographical term referring to a large area in the Eastern Mediterranean region of Western Asia. In its narrowest sense, which is in use today in archaeology and other cultural contexts, it is eq ...
. The author then elucidates his approach to historical analysis. He describes history as opaque, essentially a
black box
In science, computing, and engineering, a black box is a system which can be viewed in terms of its inputs and outputs (or transfer characteristics), without any knowledge of its internal workings. Its implementation is "opaque" (black). The te ...
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'' (an illusion of understanding in which we think we understand a complicated world).
The second chapter discusses a neuroscientist named Yevgenia Nikolayevna Krasnova, who rejects the distinction between fiction and nonfiction, 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 Krasnova became famous. But her next book fails. So, she experienced two black swans. The book goes on to reveal that the so-called author is a work of fiction, based in part on Taleb.
The third chapter introduces the concepts of ''Extremistan'' and ''Mediocristan''. He uses them as guides to define the predictability of the environment one is studying. ''Mediocristan'' environments can safely use
Gaussian distribution. In ''Extremistan'' environments, a Gaussian distribution should be used at one's own peril. In this part he quotes
Benoit Mandelbrot and his critique of the Gaussian distribution.
Chapter four brings together the topics discussed earlier into a narrative about a
turkey
Turkey ( tr, Türkiye ), officially the Republic of Türkiye ( tr, Türkiye Cumhuriyeti, links=no ), is a list of transcontinental countries, transcontinental country located mainly on the Anatolia, Anatolian Peninsula in Western Asia, with ...
before
Thanksgiving
Thanksgiving is a national holiday celebrated on various dates in the United States, Canada, Grenada, Saint Lucia, Liberia, and unofficially in countries like Brazil and Philippines. It is also observed in the Netherlander town of Leiden and ...
who is fed and treated well for many consecutive days, only to be slaughtered and served as a meal. Taleb uses it to illustrate the philosophical problem of
induction
Induction, Inducible or Inductive may refer to:
Biology and medicine
* Labor induction (birth/pregnancy)
* Induction chemotherapy, in medicine
* Induced stem cells, stem cells derived from somatic, reproductive, pluripotent or other cell t ...
and how past performance is no indicator of future performance. He then takes the reader into the history of
skepticism
Skepticism, also spelled scepticism, is a questioning attitude or doubt toward knowledge claims that are seen as mere belief or dogma. For example, if a person is skeptical about claims made by their government about an ongoing war then the p ...
.
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”, which occurs whenever people begin to think they know more than they actually do. 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 In finance, a barbell strategy is formed when a trader invests in long- and short-duration bonds, but does not invest in intermediate-duration bonds. This strategy is useful when interest rates are rising; as the short term maturities are rolled o ...
" for investment that 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
Speculative may refer to:
In arts and entertainment
*Speculative art (disambiguation)
*Speculative fiction, which includes elements created out of human imagination, such as the science fiction and fantasy genres
**Speculative Fiction Group, a Per ...
bets.
Argument
The term ''black swan'' was a Latin expression: its oldest reference is in the poet
Juvenal
Decimus Junius Juvenalis (), known in English as Juvenal ( ), was a Roman poet active in the late first and early second century CE. He is the author of the collection of satirical poems known as the ''Satires''. The details of Juvenal's life ...
's expression that "a good person is as rare as a black swan" ("'", 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, the premises of an argument may support a conclusion, but do not ensure it, and similarly, in deductive reasoning, an argument is dependent on the truth of its premises. That is, a
false premise
A false premise is an incorrect proposition that forms the basis of an argument or syllogism. Since the premise (proposition, or assumption) is not correct, the conclusion drawn may be in error. However, the logical validity of an argument is ...
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
The book has been described by ''
The Sunday Times
''The Sunday Times'' is a British newspaper whose circulation makes it the largest in Britain's quality press market category. It was founded in 1821 as ''The New Observer''. It is published by Times Newspapers Ltd, a subsidiary of News UK, whi ...
'' as one of the twelve most influential books since World War II.
As of December 2020, it has been cited approximately 10,633 times, 9,000 of which are for the English-language edition. The book spent 36 weeks on the
''New York Times'' Best Seller List; 17 as hardcover and 19 weeks as paperback. It was published in 32 languages.
Mathematics professor
David Aldous
David John Aldous FRS (born 13 July 1952) is a mathematician known for his research on probability theory and its applications, in particular in topics such as exchangeability, weak convergence, Markov chain mixing times, the continuum random ...
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
''The New York Times'' (''the Times'', ''NYT'', or the Gray Lady) is a daily newspaper based in New York City with a worldwide readership reported in 2020 to comprise a declining 840,000 paid print subscribers, and a growing 6 million paid d ...
'' to which Taleb replied with a list of logical errors, blaming Easterbrook for not having read the book.
Giles Foden
Giles Foden (born 11 January 1967)George Stade and Karen Karbiener (eds), ''Encyclopaedia of British Writers, 1800 to the Present'', 2nd edn, Infobase Publishing, 2010, p. 176. is an English author, best known for his novel ''The Last King of S ...
, writing for ''
The Guardian
''The Guardian'' is a British daily newspaper. It was founded in 1821 as ''The Manchester Guardian'', and changed its name in 1959. Along with its sister papers ''The Observer'' and ''The Guardian Weekly'', ''The Guardian'' is part of the Gu ...
'' in 2007, described the book as insightful, but facetiously written, saying that Taleb's "dumbed-down" style was a central problem, especially in comparison to his earlier book, ''Fooled by Randomness''. The Nobel Prize–winning psychologist
Daniel Kahneman
Daniel Kahneman (; he, דניאל כהנמן; born March 5, 1934) is an Israeli-American psychologist and economist notable for his work on the psychology of judgment and decision-making, as well as behavioral economics, for which he was award ...
wrote "''The Black Swan'' changed my view of how the world works" and explains the influence in his own 2011 book ''
Thinking, Fast and Slow
''Thinking, Fast and Slow'' is a 2011 book by psychologist Daniel Kahneman.
The book's main thesis is a differentiation between two modes of thought: "System 1" is fast, instinctive and emotional; "System 2" is slower, more deliberative, and mo ...
''.
See also
*
Antifragility
Antifragility is a property of systems in which they increase in capability to thrive as a result of stressors, shocks, volatility, noise, mistakes, faults, attacks, or failures. The concept was developed by Nassim Nicholas Taleb in his book, '' ...
*
Apophasis
Apophasis (; , ) is a rhetorical device wherein the speaker or writer brings up a subject by either denying it, or denying that it should be brought up. Accordingly, it can be seen as a rhetorical relative of irony.
The device is also called p ...
*
Baryon asymmetry
In physical cosmology, the baryon asymmetry problem, also known as the matter asymmetry problem or the matter–antimatter asymmetry problem, is the observed imbalance in baryonic matter (the type of matter experienced in everyday life) and antib ...
*
Benoit Mandelbrot
*
Black swan emblems and popular culture
*
Cognitive bias
A cognitive bias is a systematic pattern of deviation from norm or rationality in judgment. Individuals create their own "subjective reality" from their perception of the input. An individual's construction of reality, not the objective input, m ...
*
Confirmation bias
Confirmation bias is the tendency to search for, interpret, favor, and recall information in a way that confirms or supports one's prior beliefs or values. People display this bias when they select information that supports their views, ignoring ...
*
Efficient-market hypothesis
The efficient-market hypothesis (EMH) is a hypothesis in financial economics that states that asset prices reflect all available information. A direct implication is that it is impossible to "beat the market" consistently on a risk-adjusted bas ...
*
Falsifiability
Falsifiability is a standard of evaluation of scientific theories and hypotheses that was introduced by the philosopher of science Karl Popper in his book '' The Logic of Scientific Discovery'' (1934). He proposed it as the cornerstone of a s ...
*
Illusory correlation
In psychology, illusory correlation is the phenomenon of perceiving a relationship between variables (typically people, events, or behaviors) even when no such relationship exists. A false association may be formed because rare or novel occurren ...
*
Raven paradox
The raven paradox, also known as Hempel's paradox, Hempel's ravens, or rarely the paradox of indoor ornithology, is a paradox arising from the question of what constitutes evidence for the truth of a statement. Observing objects that are neither ...
*
Sextus Empiricus
Sextus Empiricus ( grc-gre, Σέξτος Ἐμπειρικός, ; ) was a Greek Pyrrhonist philosopher and Empiric school physician. His philosophical works are the most complete surviving account of ancient Greek and Roman Pyrrhonism, and bec ...
Notes
References
*
External links
Author's websiteBlack Swan GlossarySlideshow lecture explaining the Ludic Fallacy with clarity By Peter Taylor of Oxford University
YouTube Video Explanation''After Words'' interview with Taleb on ''The Black Swan'', September 22, 2007
{{DEFAULTSORT:Black Swan
2007 non-fiction books
Books by Nassim Nicholas Taleb
Contemporary philosophical literature
Epistemology literature
Philosophy books