# Nassim Nicholas Taleb - The Black Swan (Highlights)  ## Metadata **Review**:: [readwise.io](https://readwise.io/bookreview/37984463) **Source**:: #from/readwise #from/kindle **Zettel**:: #zettel/fleeting **Status**:: #x **Authors**:: [[Nassim Nicholas Taleb]] **Full Title**:: The Black Swan **Category**:: #books #readwise/books **Category Icon**:: 📚 **Highlighted**:: [[2024-02-22]] **Created**:: [[2024-02-22]] ## Highlights ### Prologue #### ON THE PLUMAGE OF BIRDS (Loc 326) - First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact (unlike the bird). Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable. (Loc 335) ^681921526 - rarity, extreme impact, and retrospective (though not prospective) predictability.* (Loc 338) ^681921527 - Consider that thinking is time-consuming and generally a great waste of energy, that our predecessors spent more than a hundred million years as nonthinking mammals and that in the blip in our history during which we have used our brain we have used it on subjects too peripheral to matter. (Loc 418) ^681921528 #### A NEW KIND OF INGRATITUDE (Loc 421) - everybody knows that you need more prevention than treatment, but few reward acts of prevention. (Loc 448) ^681921530 #### LIFE IS VERY UNUSUAL (Loc 451) - Almost everything in social life is produced by rare but consequential shocks and jumps; all the while almost everything studied about social life focuses on the “normal,” particularly with “bell curve” methods of inference that tell you close to nothing. (Loc 460) ^681921532 #keypoint #### PLATO AND THE NERD (Loc 463) - Models and constructions, these intellectual maps of reality, are not always wrong; they are wrong only in some specific applications. The difficulty is that a) you do not know beforehand (only after the fact) where the map will be wrong, and b) the mistakes can lead to severe consequences. (Loc 476) ^681921534 #### TOO DULL TO WRITE ABOUT (Loc 481) - Ideas come and go, stories stay. (Loc 508) ^681921536 #### THE BOTTOM LINE (Loc 508) - Anyone looking for confirmation will find enough of it to deceive himself—and no doubt his peers.* (Loc 514) ^681921538 - To summarize: in this (personal) essay, I stick my neck out and make a claim, against many of our habits of thought, that our world is dominated by the extreme, the unknown, and the very improbable (improbable according to our current knowledge)—and all the while we spend our time engaged in small talk, focusing on the known, and the repeated. This implies the need to use the extreme event as a starting point and not treat it as an exception to be pushed under the rug. I also make the bolder (and more annoying) claim that in spite of our progress and the growth in knowledge, or perhaps because of such progress and growth, the future will be increasingly less predictable, while both human nature and social “science” seem to conspire to hide the idea from us. (Loc 516) ^681921539 #summary ### Part One - Umberto Eco’s Antilibrary, or How We Seek Validation - Indeed, the more you know, the larger the rows of unread books. Let us call this collection of unread books an antilibrary. (Loc 570) ^681921541 #definition - Let us call an antischolar—someone who focuses on the unread books, and makes an attempt not to treat his knowledge as a treasure, or even a possession, or even a self-esteem enhancement device—a skeptical empiricist. (Loc 576) ^681921542 #definition #### ANATOMY OF A BLACK SWAN (Loc 596) - In a classical case of static thinking, nobody took into account the differentials in birthrate between communities and it was assumed that a slight Christian majority would remain permanent. (Loc 622) ^681921544 - I was too young to taste the pleasures of the place, as I became a rebellious idealist and, very early on, developed an ascetic taste, averse to the ostentatious signaling of wealth, allergic to Levantine culture’s overt pursuit of luxury and its obsession with things monetary. (Loc 631) ^681921545 #writing/vocabulary #writing-vocabulary #### On Walking Walks (Loc 642) - This made them quite scared of me, so I could not afford to back down, or even blink. Had I concealed my participation in the riot (as many friends did) and been discovered, instead of being openly defiant, I am certain that I would have been treated as a black sheep. (Loc 649) ^681921547 #writing/vocabulary #writing-vocabulary #### “Paradise” Evaporated (Loc 658) - It may be that the invention of gunfire and powerful weapons turned what, in the age of the sword, would have been just tense conditions into a spiral of uncontrollable tit-for-tat warfare. (Loc 663) ^681921549 - The number of cultured people dropped below some critical level. Suddenly the place became a vacuum. Brain drain is hard to reverse, and some of the old refinement may be lost forever. (Loc 667) ^681921550 #### HISTORY AND THE TRIPLET OF OPACITY (Loc 677) - the illusion of understanding, or how everyone thinks he knows what is going on in a world that is more complicated (or random) than they realize; (Loc 684) ^681921552 - the retrospective distortion, or how we can assess matters only after the fact, as if they were in a rearview mirror (history seems clearer and more organized in history books than in empirical reality); (Loc 685) ^681921553 - the overvaluation of factual information and the handicap of authoritative and learned people, particularly when they create categories—when they “Platonify.” (Loc 687) ^681921554 #### Nobody Knows What’s Going On (Loc 688) - Yet when I asked him if it was going to be the same with our conflict, he replied, “No, of course not. This place is different; it has always been different.” Somehow what he detected in others did not seem to apply to him. (Loc 694) ^681921556 - It was as if the historical rupture had a specific cause, and that the catastrophe could have been averted by removing that specific cause. (Loc 701) ^681921557 #### History Does Not Crawl, It Jumps (Loc 714) - These events were unexplainable, but intelligent people thought they were capable of providing convincing explanations for them—after the fact. Furthermore, the more intelligent the person, the better sounding the explanation. (Loc 717) ^681921559 - the studious examination of the past in the greatest of detail does not teach you much about the mind of History; it only gives you the illusion of understanding it. (Loc 741) ^681921560 #### Dear Diary: On History Running Backward (Loc 746) - Because your memory is limited and filtered, you will be inclined to remember those data that subsequently match the facts, (Loc 749) ^681921562 - Surprisingly, the book that influenced me was not written by someone in the thinking business but by a journalist: William Shirer’s Berlin Diary: The Journal of a Foreign Correspondent, 1934–1941. (Loc 758) ^681921563 - Simply, the diary purported to describe the events as they were taking place, not after. (Loc 767) ^681921564 - The journal was purportedly written without Shirer knowing what was going to happen next, when the information available to him was not corrupted by the subsequent outcomes. (Loc 772) ^681921565 #### Education in a Taxicab (Loc 786) - I noticed that very intelligent and informed persons were at no advantage over cabdrivers in their predictions, but there was a crucial difference. Cabdrivers did not believe that they understood as much as learned people—really, they were not the experts and they knew it. Nobody knew anything, but elite thinkers thought that they knew more than the rest because they were elite thinkers, and if you’re a member of the elite, you automatically know more than the nonelite. (Loc 791) ^681921567 - The overlap between newspapers was so large that you would get less and less information the more you read. (Loc 795) ^681921568 - Yet everyone was so eager to become familiar with every fact that they read every freshly printed document and listened to every radio station as if the great answer was going to be revealed to them in the next bulletin. (Loc 796) ^681921569 #### CLUSTERS (Loc 799) - Categorizing is necessary for humans, but it becomes pathological when the category is seen as definitive, preventing people from considering the fuzziness of boundaries, let alone revising their categories. (Loc 808) ^681921571 - If you selected one hundred independent-minded journalists capable of seeing factors in isolation from one another, you would get one hundred different opinions. But the process of having these people report in lockstep caused the dimensionality of the opinion set to shrink considerably—they converged on opinions and used the same items as causes. (Loc 810) ^681921572 - Any reduction of the world around us can have explosive consequences since it rules out some sources of uncertainty; it drives us to a misunderstanding of the fabric of the world. (Loc 829) ^681921573 - Public information can therefore be useless, particularly to a businessman, since prices can already “include” all such information, and news shared with millions gives you no real advantage. (Loc 835) ^681921574 - I then completely gave up reading newspapers and watching television, which freed up a considerable amount of time (Loc 837) ^681921575 #### Where Is the Show? (Loc 842) - My idea is that not only are some scientific results useless in real life, because they underestimate the impact of the highly improbable (or lead us to ignore it), but that many of them may be actually creating Black Swans. (Loc 852) ^681921577 #### 8 ¾ LBS LATER (Loc 855) - Except that I was a quant exactly in reverse: I studied the flaws and the limits of these models, looking for the Platonic fold where they break down. (Loc 879) ^681921579 - I was convinced that I was totally incompetent in predicting market prices—but that others were generally incompetent also but did not know it, or did not know that they were taking massive risks. (Loc 882) ^681921580 #### The Four-Letter Word of Independence (Loc 895) - (Independence is person-specific: I have always been taken aback at the high number of people in whom an astonishingly high income led to additional sycophancy as they became more dependent on their clients and employers and more addicted to making even more money.) (Loc 902) ^681921582 - it made me feel ashamed whenever I diverted time away from study for the pursuit of material wealth. (Loc 904) ^681921583 - Yegvenia ended up posting the entire manuscript of her main book, A Story of Recursion, on the Web. (Loc 974) ^681921584 - “truck drivers who read books do not read books written for truck drivers” (Loc 983) ^681921585 #### THE BEST (WORST) ADVICE (Loc 1003) - Other professions allow you to add zeroes to your output (and your income), if you do well, at little or no extra effort. (Loc 1024) ^681921587 - I separated the “idea” person, who sells an intellectual product in the form of a transaction or a piece of work, from the “labor” person, who sells you his work. (Loc 1027) ^681921588 - If you are an idea person, you do not have to work hard, only think intensely. You do the same work whether you produce a hundred units or a thousand. (Loc 1028) ^681921589 #### BEWARE THE SCALABLE (Loc 1040) - A scalable profession is good only if you are successful; they are more competitive, produce monstrous inequalities, and are far more random, with huge disparities between efforts and rewards—a few can take a large share of the pie, leaving others out entirely at no fault of their own. (Loc 1044) ^681921591 - One category of profession is driven by the mediocre, the average, and the middle-of-the-road. In it, the mediocre is collectively consequential. The other has either giants or dwarves—more precisely, a very small number of giants and a huge number of dwarves. (Loc 1046) ^681921592 #### The Strange Country of Extremistan (Loc 1122) - Consider by comparison the net worth of the thousand people you lined up in the stadium. Add to them the wealthiest person to be found on the planet—say, Bill Gates, the founder of Microsoft. (Loc 1122) ^681921594 #example - In Extremistan, inequalities are such that one single observation can disproportionately impact the aggregate, or the total. (Loc 1132) ^681921595 - Look at the implication for the Black Swan. Extremistan can produce Black Swans, and does, since a few occurrences have had huge influences on history. This is the main idea of this book. (Loc 1138) ^681921596 #keypoint #### Extremistan and Knowledge (Loc 1140) - What you can know from data in Mediocristan augments very rapidly with the supply of information. But knowledge in Extremistan grows slowly and erratically with the addition of data, some of it extreme, possibly at an unknown rate. (Loc 1152) ^681921598 #### The Tyranny of the Accident (Loc 1163) - Mediocristan is where we must endure the tyranny of the collective, the routine, the obvious, and the predicted; Extremistan is where we are subjected to the tyranny of the singular, the accidental, the unseen, and the unpredicted. (Loc 1164) ^681921600 - we all become stingy and calculating when our wealth grows and we start taking money seriously. (Loc 1243) ^681921601 #### HOW TO LEARN FROM THE TURKEY (Loc 1251) - Consider that the feeling of safety reached its maximum when the risk was at the highest! (Loc 1269) ^681921603 #### A Black Swan Is Relative to Knowledge (Loc 1318) - From the standpoint of the turkey, the nonfeeding of the one thousand and first day is a Black Swan. For the butcher, it is not, since its occurrence is not unexpected. So you can see here that the Black Swan is a sucker’s problem. In other words, it occurs relative to your expectation. (Loc 1319) ^681921605 - In general, positive Black Swans take time to show their effect while negative ones happen very quickly—it is much easier and much faster to destroy than to build. (Loc 1329) ^681921606 #### Sextus the (Alas) Empirical (Loc 1349) - The methods of empirical medicine, relying on seemingly purposeless trial and error, will be central to my ideas on planning and prediction, on how to benefit from the Black Swan. (Loc 1364) ^681921608 #### The Skeptic, Friend of Religion (Loc 1383) - Bayle’s Dictionnaire historique et critique was the most read piece of scholarship of the eighteenth century, but like many of my French heroes (such as Frédéric Bastiat), Bayle does not seem to be part of the French curriculum and is nearly impossible to find in the original French language. (Loc 1389) ^681921610 - Pierre-Daniel Huet wrote his Philosophical Treatise on the Weaknesses of the Human Mind in 1690, a remarkable book that tears through dogmas and questions human perception. (Loc 1394) ^681921611 - Indeed, scholarship without erudition can lead to disasters. (Loc 1400) ^681921613 #### I Don’t Want to Be a Turkey (Loc 1401) - So, this book was not written by a Sufi mystic, or even by a skeptic in the ancient or medieval sense, or even (we will see) in a philosophical sense, but by a practitioner whose principal aim is to not be a sucker in things that matter, period. (Loc 1403) ^681921615 - Of course I am not advocating total risk phobia (we will see that I favor an aggressive type of risk taking): all I will be showing you in this book is how to avoid crossing the street blindfolded. (Loc 1409) ^681921616 #### Zoogles Are Not All Boogles (Loc 1479) - Knowledge, even when it is exact, does not often lead to appropriate actions because we tend to forget what we know, or forget how to process it properly if we do not pay attention, even when we are experts. (Loc 1489) ^681921618 #### Evidence (Loc 1528) - Alas, with tools, and fools, anything can be easy to find. You take past instances that corroborate your theories and you treat them as evidence. (Loc 1530) ^681921620 #### NEGATIVE EMPIRICISM (Loc 1540) - We can get closer to the truth by negative instances, not by verification! (Loc 1546) ^681921622 - The person who is credited with the promotion of this idea of one-sided semiskepticism is Sir Doktor Professor Karl Raimund Popper, who may be the only philosopher of science who is actually read and discussed by actors in the real world (though not as enthusiastically by professional philosophers). (Loc 1554) ^681921623 #### Counting to Three (Loc 1577) - Wason noticed that the subjects had a rule in mind, but gave him examples aimed at confirming it instead of trying to supply series that were inconsistent with their hypothesis. Subjects tenaciously kept trying to confirm the rules that they had made up. (Loc 1588) ^681921625 Negative figure in painting - Scientists believe that it is the search for their own weaknesses that makes them good chess players, not the practice of chess that turns them into skeptics. Similarly, the speculator George Soros, when making a financial bet, keeps looking for instances that would prove his initial theory wrong. (Loc 1594) ^681921626 #### Saw Another Red Mini! (Loc 1603) - Just consider that the statement “all swans are white” is equivalent to “all nonwhite objects are not swans.” What confirms the latter statement should confirm the former. (Loc 1606) ^681921628 #### Not Everything (Loc 1611) - Show a child a photograph of someone overweight, tell her that he is a member of a tribe, and ask her to describe the rest of the population: she will (most likely) not jump to the conclusion that all the members of the tribe are weight-challenged. But she would respond differently to generalizations involving skin color. If you show her people of dark complexion and ask her to describe their co-tribesmen, she will assume that they too have dark skin. (Loc 1616) ^681921630 Biad in our genes. #### ON THE CAUSES OF MY REJECTION OF CAUSES (Loc 1660) - The first of the problems of human nature that we examine in this section, the one just illustrated above, is what I call the narrative fallacy. (It is actually a fraud, but, to be more polite, I will call it a fallacy.) The fallacy is associated with our vulnerability to overinterpretation and our predilection for compact stories over raw truths. It severely distorts our mental representation of the world; it is particularly acute when it comes to the rare event. (Loc 1681) ^681921632 - The narrative fallacy addresses our limited ability to look at sequences of facts without weaving an explanation into them, or, equivalently, forcing a logical link, an arrow of relationship, upon them. (Loc 1687) ^681921633 #### SPLITTING BRAINS (Loc 1698) - not theorizing is an act—that theorizing can correspond to the absence of willed activity, the “default” option. (Loc 1702) ^681921635 - the left brain seems more precisely to be where pattern interpretation resides, and it may control language only insofar as language has a pattern-interpretation attribute. (Loc 1731) ^681921636 #### The Madman’s Narrative (Loc 1828) - Such insight should warn us that mere absence of nonsense may not be sufficient to make something true. (Loc 1846) ^681921638 AI #### Narrative and Therapy (Loc 1853) - How can you get rid of such a persistent throb? Don’t try to willingly avoid thinking about it: this will almost surely backfire. A more appropriate solution is to make the event appear more unavoidable. (Loc 1864) ^681921640 #### TO BE WRONG WITH INFINITE PRECISION (Loc 1870) - Whenever there is a market move, the news media feel obligated to give the “reason.” (Loc 1873) ^681921642 - There are fact-checkers, not intellect-checkers. Alas. (Loc 1898) ^681921643 #### THE SENSATIONAL AND THE BLACK SWAN (Loc 1909) - Likewise, if I asked you how many cases of lung cancer are likely to take place in the country, you would supply some number, say half a million. Now, if instead I asked you how many cases of lung cancer are likely to take place because of smoking, odds are that you would give me a much higher number (I would guess more than twice as high). (Loc 1917) ^681921645 #### The Pull of the Sensational (Loc 1972) - As Stalin, who knew something about the business of mortality, supposedly said, “One death is a tragedy; a million is a statistic.” Statistics stay silent in us. (Loc 1982) ^681921647 #### How to Avert the Narrative Fallacy (Loc 2049) - The way to avoid the ills of the narrative fallacy is to favor experimentation over storytelling, experience over history, and clinical knowledge over theories. (Loc 2059) ^681921649 - Finally, there may be a way to use a narrative—but for a good purpose. Only a diamond can cut a diamond; we can use our ability to convince with a story that conveys the right message—what storytellers seem to do. (Loc 2064) ^681921650 #### Nonlinearities (Loc 2135) - These nonlinear relationships are ubiquitous in life. Linear relationships are truly the exception; we only focus on them in classrooms and textbooks because they are easier to understand. (Loc 2144) ^681921652 #### Human Nature, Happiness, and Lumpy Rewards (Loc 2178) - So to have a pleasant life you should spread these small “affects” across time as evenly as possible. Plenty of mildly good news is preferable to one single lump of great news. (Loc 2185) ^681921654 - The same property in reverse applies to our unhappiness. It is better to lump all your pain into a brief period rather than have it spread out over a longer one. (Loc 2194) ^681921655 #### When You Need the Bastiani Fortress (Loc 2237) - we have the freedom to choose our peers. (Loc 2244) ^681921657 #### THE STORY OF THE DROWNED WORSHIPPERS (Loc 2340) - As drowned worshippers do not write histories of their experiences (it is better to be alive for that), so it is with the losers in history, whether people or ideas. (Loc 2368) ^681921659 Survival's bias #### A HEALTH CLUB FOR RATS (Loc 2456) - Note the following central fact: every single rat, including the strong ones, will be weaker after the radiation than before. (Loc 2470) ^681921661 #### Vicious Bias (Loc 2479) - Owing to the invisibility of the dead rats, the more lethal the risks, the less visible they will be, since the severely victimized are likely to be eliminated from the evidence. (Loc 2480) ^681921663 #### The Evolution of the Swimmer’s Body (Loc 2502) - The lucky ones, with the feeling of having been selected by destiny, will continue gambling; the others, discouraged, will stop and will not show up in the sample. (Loc 2508) ^681921665 - Those born with a natural tendency to develop a swimmer’s body become better swimmers. (Loc 2516) ^681921666 Or they have the gift so they can insist. #### WHAT YOU SEE AND WHAT YOU DON’T SEE (Loc 2519) - Not only do these cancer patients not vote (they will be dead by the next ballot), but they do not manifest themselves to our emotional system. More of them die every day than were killed by Hurricane Katrina; they are the ones who need us the most—not just our financial help, but our attention and kindness. And they may be the ones from whom the money will be taken—indirectly, perhaps even directly. (Loc 2525) ^681921668 - In his essay “What We See and What We Don’t See,” Bastiat offered the following idea: we can see what governments do, and therefore sing their praises—but we do not see the alternative. But there is an alternative; it is less obvious and remains unseen. (Loc 2534) ^681921669 #further-reading - In some cases, as with the cancer patients who may be punished by Katrina, the positive consequences of an action will immediately benefit the politicians and phony humanitarians, while the negative ones take a long time to appear—they may never become noticeable. (Loc 2543) ^681921670 - But, according to researchers, during the remaining three months of the year, close to one thousand people died as silent victims of the terrorists. How? Those who were afraid of flying and switched to driving ran an increased risk of death. There was evidence of an increase of casualties on the road during that period; the road is considerably more lethal than the skies. (Loc 2548) ^681921671 #### Doctors (Loc 2558) - A life saved is a statistic; a person hurt is an anecdote. Statistics are invisible; anecdotes are salient. (Loc 2561) ^681921673 #### THE TEFLON-STYLE PROTECTION OF GIACOMO CASANOVA (Loc 2566) - Your life came under a serious threat but, having survived it, you retrospectively underestimate how risky the situation actually was. (Loc 2568) ^681921675 #### The Cosmetic Because (Loc 2682) - The main identifiable reason for our survival of such diseases might simply be inaccessible to us: we are here since, Casanova-style, the “rosy” scenario played out, and if it seems too hard to understand it is because we are too brainwashed by notions of causality and we think that it is smarter to say because than to accept randomness. (Loc 2694) ^681921677 - Note here that I am not saying causes do not exist; do not use this argument to avoid trying to learn from history. All I am saying is that it is not so simple; be suspicious of the “because” and handle it with care—particularly in situations where you suspect silent evidence. (Loc 2705) ^681921678 #### Non-Brooklyn John (Loc 2752) - A nerd is simply someone who thinks exceedingly inside the box. (Loc 2777) ^681921680 #### The Uncertainty of the Nerd (Loc 2820) - Probability is a liberal art; it is a child of skepticism, not a tool for people with calculators on their belts to satisfy their desire to produce fancy calculations and certainties. (Loc 2847) ^681921682 #### Distance from Primates (Loc 2914) - I propose that if you want a simple step to a higher form of life, as distant from the animal as you can get, then you may have to denarrate, that is, shut down the television set, minimize time spent reading newspapers, ignore the blogs. Train your reasoning abilities to control your decisions; nudge System 1 (the heuristic or experiential system) out of the important ones. Train yourself to spot the difference between the sensational and the empirical. (Loc 2924) ^681921684 ### Part Two - We Just Can’t Predict #### INFORMATION IS BAD FOR KNOWLEDGE (Loc 3075) - When you are employed, hence dependent on other people’s judgment, looking busy can help you claim responsibility for the results in a random environment. (Loc 3082) ^681921687 - The more information you give someone, the more hypotheses they will formulate along the way, and the worse off they will be. They see more random noise and mistake it for information. (Loc 3104) ^681921688 - The problem is that our ideas are sticky: once we produce a theory, we are not likely to change our minds—so those who delay developing their theories are better off. (Loc 3105) ^681921689 - the more detailed knowledge one gets of empirical reality, the more one will see the noise (i.e., the anecdote) and mistake it for actual information. (Loc 3111) ^681921690 #### What Moves and What Does Not Move (Loc 3133) - Simply, things that move, and therefore require knowledge, do not usually have experts, while things that don’t move seem to have some experts. (Loc 3156) ^681921692 #### Herding Like Cattle (Loc 3212) - Worse yet, the forecasters’ errors were significantly larger than the average difference between individual forecasts, which indicates herding. (Loc 3228) ^681921694 #### I Was “Almost” Right (Loc 3233) - These “experts” were lopsided: on the occasions when they were right, they attributed it to their own depth of understanding and expertise; when wrong, it was either the situation that was to blame, since it was unusual, or, worse, they did not recognize that they were wrong and spun stories around it. (Loc 3262) ^681921696 - We attribute our successes to our skills, and our failures to external events outside our control, namely to randomness. (Loc 3266) ^681921697 - Ninety-four percent of Swedes believe that their driving skills put them in the top 50 percent of Swedish drivers; 84 percent of Frenchmen feel that their lovemaking abilities put them in the top half of French lovers. (Loc 3268) ^681921698 #### “OTHER THAN THAT,” IT WAS OKAY (Loc 3340) - The unexpected almost always pushes in a single direction: higher costs and a longer time to completion. (Loc 3357) ^681921700 #### The Beauty of Technology: Excel Spreadsheets (Loc 3376) - A classical mental mechanism, called anchoring, seems to be at work here. You lower your anxiety about uncertainty by producing a number, then you “anchor” on it, like an object to hold on to in the middle of a vacuum. This anchoring mechanism was discovered by the fathers of the psychology of uncertainty, Danny Kahneman and Amos Tversky, early in their heuristics and biases project. (Loc 3388) ^681921702 #### DON’T CROSS A RIVER IF IT IS (ON AVERAGE) FOUR FEET DEEP (Loc 3423) - The first fallacy: variability matters. The first error lies in taking a projection too seriously, without heeding its accuracy. Yet, for planning purposes, the accuracy in your forecast matters far more than the forecast itself. (Loc 3439) ^681921704 - Even if you agree with a given forecast, you have to worry about the real possibility of significant divergence from it. (Loc 3461) ^681921705 #### Get Another Job (Loc 3467) - Some forecasters cause more damage to society than criminals. (Loc 3480) ^681921707 #### Inadvertent Discoveries (Loc 3528) - The classical model of discovery is as follows: you search for what you know (say, a new way to reach India) and find something you didn’t know was there (America). (Loc 3530) ^681921709 - The term serendipity was coined in a letter by the writer Hugh Walpole, who derived it from a fairy tale, “The Three Princes of Serendip.” These princes “were always making discoveries by accident or sagacity, of things which they were not in quest of.” (Loc 3532) ^681921710 - Almost half a century ago, the bestselling novelist Arthur Koestler wrote an entire book about it, aptly called The Sleepwalkers. It describes discoverers as sleepwalkers stumbling upon results and not realizing what they have in their hands. (Loc 3539) ^681921712 #### A Solution Waiting for a Problem (Loc 3577) - Tools lead to unexpected discoveries, which themselves lead to other unexpected discoveries. But rarely do our tools seem to work as intended; it is only the engineer’s gusto and love for the building of toys and machines that contribute to the augmentation of our knowledge. Knowledge does not progress from tools designed to verify or help theories, but rather the opposite. (Loc 3580) ^681921714 - We build toys. Some of those toys change the world. (Loc 3593) ^681921715 #### HOW TO PREDICT YOUR PREDICTIONS! (Loc 3610) - There is actually a law in statistics called the law of iterated expectations, which I outline here in its strong form: if I expect to expect something at some date in the future, then I already expect that something at present. (Loc 3626) ^681921717 - On the day when we are able to foresee inventions we will be living in a state where everything conceivable has been invented. (Loc 3642) ^681921718 - I’ll summarize my argument here: Prediction requires knowing about technologies that will be discovered in the future. But that very knowledge would almost automatically allow us to start developing those technologies right away. Ergo, we do not know what we will know. (Loc 3655) ^681921719 - We see flaws in others and not in ourselves. Once again we seem to be wonderful at self-deceit machines. (Loc 3660) ^681921720 #### The Three Body Problem (Loc 3701) - Poincaré showed this in a very simple case, famously known as the “three body problem.” (Loc 3714) ^681921722 #### They Still Ignore Hayek (Loc 3761) - For Hayek, a true forecast is done organically by a system, not by fiat. (Loc 3771) ^681921724 Market - The only criticism one might have of Hayek is that he makes a hard and qualitative distinction between social sciences and physics. He shows that the methods of physics do not translate to its social science siblings, and he blames the engineering-oriented mentality for this. (Loc 3788) ^681921725 #### Prediction and Free Will (Loc 3834) - If I can predict all of your actions, under given circumstances, then you may not be as free as you think you are. (Loc 3837) ^681921727 - Tragically, before the proliferation of empirically blind idiot savants, interesting work had been begun by true thinkers, the likes of J. M. Keynes, Friedrich Hayek, and the great Benoît Mandelbrot, all of whom were displaced because they moved economics away from the precision of second-rate physics. (Loc 3862) ^681921728 - One great underestimated thinker is G.L.S. Shackle, now almost completely obscure, who introduced the notion of “unknowledge,” that is, the unread books in Umberto Eco’s library. (Loc 3864) ^681921729 - Legions of empirical psychologists of the heuristics and biases school have shown that the model of rational behavior under uncertainty is not just grossly inaccurate but plain wrong as a description of reality. (Loc 3867) ^681921730 #### Monsieur de Montaigne, Epistemocrat (Loc 3963) - He was a thinking, ruminating fellow, and his ideas did not spring up in his tranquil study, but while on horseback. He went on long rides and came back with ideas. (Loc 3979) ^681921732 #### Epistemocracy (Loc 3985) - It has been more profitable for us to bind together in the wrong direction than to be alone in the right one. (Loc 3991) ^681921734 #### THE PAST’S PAST, AND THE PAST’S FUTURE (Loc 4001) - There is a blind spot: when we think of tomorrow we do not frame it in terms of what we thought about yesterday on the day before yesterday. Because of this introspective defect we fail to learn about the difference between our past predictions and the subsequent outcomes. (Loc 4011) ^681921736 - Asperger people cannot easily put themselves in the shoes of others, cannot view the world from their standpoint. (Loc 4024) ^681921737 #### Prediction, Misprediction, and Happiness (Loc 4029) - Yet you forget that the last time you bought a car, you also had the same expectations. You do not anticipate that the effect of the new car will eventually wane and that you will revert to the initial condition, as you did last time. (Loc 4035) ^681921739 #### Helenus and the Reverse Prophecies (Loc 4051) - Our problem is not just that we do not know the future, we do not know much of the past either. We badly need someone like Helenus if we are to know history. (Loc 4056) ^681921741 #### The Melting Ice Cube (Loc 4058) - However, given the observation of a hurricane in North Carolina, it is dubious that you could figure out the causes with any precision: there are billions of billions of such small things as wing-flapping butterflies in Timbuktu or sneezing wild dogs in Australia that could have caused it. (Loc 4074) ^681921743 #### Once Again, Incomplete Information (Loc 4082) - The computer program responds to a very complicated equation of a nonlinear nature that produces numbers that seem random. The equation is very simple: if you know it, you can predict the sequence. It is almost impossible, however, for a human being to reverse engineer the equation and predict further sequences. (Loc 4084) ^681921745 - I will state the fundamental problem of practice as follows: while in theory randomness is an intrinsic property, in practice, randomness is incomplete information, what I called opacity in Chapter 1. (Loc 4091) ^681921746 - Randomness, in the end, is just unknowledge. The world is opaque and appearances fool us. (Loc 4102) ^681921747 #keypoint #### What They Call Knowledge (Loc 4103) - Plutarch, Livy, Suetonius, Diodorus Siculus, Gibbon, Carlyle, Renan, and Michelet. (Loc 4108) ^681921749 #further-reading - Learn to read history, get all the knowledge you can, do not frown on the anecdote, but do not draw any causal links, do not try to reverse engineer too much—but if you do, do not make big scientific claims. (Loc 4114) ^681921750 #### Being a Fool in the Right Places (Loc 4168) - The lesson for the small is: be human! Accept that being human involves some amount of epistemic arrogance in running your affairs. Do not be ashamed of that. (Loc 4169) ^681921752 - What you should avoid is unnecessary dependence on large-scale harmful predictions—those and only those. Avoid the big subjects that may hurt your future: be fooled in small matters, not in the large. (Loc 4172) ^681921753 #### THE IDEA OF POSITIVE ACCIDENT (Loc 4181) - This same point can be generalized to life: maximize the serendipity around you. (Loc 4185) ^681921755 Be ready and focus on your major objectives. #### Volatility and Risk of Black Swan (Loc 4197) - People are often ashamed of losses, so they engage in strategies that produce very little volatility but contain the risk of a large loss—like collecting nickels in front of steamrollers. (Loc 4197) ^681921757 #### Barbell Strategy (Loc 4208) - Instead of putting your money in “medium risk” investments (how do you know it is medium risk? by listening to tenure-seeking “experts”?), you need to put a portion, say 85 to 90 percent, in extremely safe instruments, like Treasury bills—as safe a class of instruments as you can manage to find on this planet. The remaining 10 to 15 percent you put in extremely speculative bets, as leveraged as possible (like options), preferably venture capital–style portfolios.* (Loc 4211) ^681921759 #actionable #### “Nobody Knows Anything” (Loc 4220) - Aside from the movies, examples of positive–Black Swan businesses are: some segments of publishing, scientific research, and venture capital. (Loc 4236) ^681921761 #example - I find it hard to explain that when you have a very limited loss you need to get as aggressive, as speculative, and sometimes as “unreasonable” as you can be. (Loc 4247) ^681921762 - Likewise, do not try to predict precise Black Swans—it tends to make you more vulnerable to the ones you did not predict. (Loc 4256) ^681921763 - This makes living in big cities invaluable because you increase the odds of serendipitous encounters—you gain exposure to the envelope of serendipity. (Loc 4265) ^681921764 - Diplomats understand that very well: casual chance discussions at cocktail parties usually lead to big breakthroughs—not dry correspondence or telephone conversations. (Loc 4267) ^681921765 - The Achilles’ heel of capitalism is that if you make corporations compete, it is sometimes the one that is most exposed to the negative Black Swan that will appear to be the most fit for survival. (Loc 4277) ^681921766 - Do not waste your time trying to fight forecasters, stock analysts, economists, and social scientists, except to play pranks on them. (Loc 4281) ^681921767 #### The Great Asymmetry (Loc 4286) - This idea is often erroneously called Pascal’s wager, after the philosopher and (thinking) mathematician Blaise Pascal. He presented it something like this: I do not know whether God exists, but I know that I have nothing to gain from being an atheist if he does not exist, whereas I have plenty to lose if he does. Hence, this justifies my belief in God. (Loc 4290) ^681921769 - This idea that in order to make a decision you need to focus on the consequences (which you can know) rather than the probability (which you can’t know) is the central idea of uncertainty. (Loc 4300) ^681921770 ### Part Three - Those Gray Swans of Extremistan #### The Matthew Effect (Loc 4377) - In sociology, Matthew effects bear the less literary name “cumulative advantage.” (Loc 4397) ^681921773 #### A Brooklyn Frenchman (Loc 4457) - Luck is far more egalitarian than even intelligence. If people were rewarded strictly according to their abilities, things would still be unfair—people don’t choose their abilities. Randomness has the beneficial effect of reshuffling society’s cards, knocking down the big guy. (Loc 4478) ^681921775 #### The Long Tail (Loc 4490) - Cognitive Diversity: How Our Individual Differences Produce Collective Benefits, by Scott Page. (Loc 4525) ^681921777 #further-reading ### Part Four - The End - I am skeptical about confirmation—though only when errors are costly—not about disconfirmation. (Loc 5720) ^681921779 - I worry less about embarrassment than about missing an opportunity. (Loc 5732) ^681921780 - I am very aggressive when I can gain exposure to positive Black Swans—when a failure would be of small moment—and very conservative when I am under threat from a negative Black Swan. I am very aggressive when an error in a model can benefit me, and paranoid when the error can hurt. (Loc 5733) ^681921781 #keypoint #opinion #### WHEN MISSING A TRAIN IS PAINLESS (Loc 5745) - In refusing to run to catch trains, I have felt the true value of elegance and aesthetics in behavior, a sense of being in control of my time, my schedule, and my life. Missing a train is only painful if you run after it! Likewise, not matching the idea of success others expect from you is only painful if that’s what you are seeking. (Loc 5749) ^681921783