Black Swan is the name of a book written by Nassim Nicholas Taleb. It deals with the effect of the highly improbable. The title is taken from the discovery of Black Swans in Australia – an improbable event. Till then it was supposed that Swans were white and there was no way in which a swan could be black. Once it was discovered that the swans were black as well, the whole paradigm of looking at swans changed. Thus, this is the effect an improbable event has on the popular imagination.
As the author states, there is a triplet that is defined as rarity, extreme impact, and retrospective (not prospective) predictability. This is what constitutes a Black Swan moment. “A number of Black Swans explain almost everything in our own world, from the success of ideas and religions to the dynamics of historical events, to elements of our own personal lives” (Taleb, p. 150). Thus, once an event happens and we recognize retrospectively that it would have happened; we are no longer fooled by the same event happening again. And the rarity of the event and the extreme impact it causes are indications that we live in a world where predictions are highly hazardous.
The author’s epiphany came with the Black Monday stock market crash of 1987 when he realized that chance has a greater impact than we would care to admit. According to the author, “History proceeds by jumps and is controlled by the tyranny of the singular, the accidental, the unseen and the unpredicted”. Thus, sudden events with great impact drive history than the normal ones that have no long-term bearing on the course of history.
There is a lengthy description of what he calls “Mediocristan”, “Extremistan” and the like. These are imaginary populations of people who are marked by their singular affiliation to falling for the unexpected and the extreme views of the experts.
Taleb takes the example of 911 to indicate how a Black Swan works. Before the event, there were not many who could foresee that such an event could occur in the United States. Of course, Taleb criticizes experts throughout the book when he says that they are failures at spotting Black Swan events before they happen.
There is a lot of audacity in the book from Taleb when he states that, “We attribute our successes to our skills and our failures to external events outside our control” (Taleb, p. 56) However, he overgeneralizes many occurrences and fails to note the views of many who could see things coming.
In conclusion, it is apparent that Taleb is one of a kind author who can simplify things and complex events for the layman who does not have access to sophisticated statistical modeling tools to predict events. One thing that the book teaches us is to “expect the unexpected” and be ready for it. There is no use wringing our hands after the event is over and it has had a terrible impact. The current financial meltdown may or may not be a Black Swan moment, but, anyone who read the book would have been prepared for the worst outcome. I thoroughly enjoyed reading the book and it has added to my knowledge about random events and the kind of impact that they have.
Sources
Taleb, Nassim. The Black Swan: The Effect of the highly improbable. New York: Allen Lane, 2007.