The Black Swan: The Impact of the Highly Improbable Reviews

• Lost in Extremistan with nothing but a Bell Curve

  
  By A1NUA9J2JJQW0C on 2007-04-18
  If, as Socrates would have it, the only true knowledge is knowledge of one's own ignorance, then Nassim Nicholas Taleb is the world's greatest living teacher. In The Black Swan, Taleb's second book for laypeople, he gives a full treatment to concepts briefly explored in his first book "Fooled by Randomness." The Black Swan is basically a sequel to that book, but much more focused, detailed and scholarly. This is a book of serious philosophy that reads like a stand-up comedy routine. (Think Larry David...)
  
  The Black Swan is probably the strongest statement of enlightened empiricism since Ernst Mach refused to acknowledge the existence of the atom. Of course, in theory, everyone today is supposed to be an empiricist - all right-thinking intellectuals claim to base their views solely on positive scientific observation. But very few sincerely confront the implications of rigorous empiricism. Specifically, few confront "the problem of induction," illustrated here by the story of the black swan.
  
  Briefly: observing an event once does not predict it will occur again in the future. This remains true regardless of the number of observations one adds to the pile. Or, as Taleb, recapitulating David Hume, has it: the observation of even a million white swans does not justify the statement "all swans are white." There is no way to know that somewhere out there a black swan is not hiding, disproving the rule and nullifying our "knowledge" of swans. The problem of induction tells us that we cannot really learn from our experiences. It makes knowledge very problematic, if not impossible. And yet, humans do behave -almost without exception- as though they believe that experience teaches us lessons. This is forgivable; there is no better path to knowledge. But before proceeding, one must account for the limits that the problem of induction places on our claims to knowledge. And humans seem, at every turn, to lack this critical self-awareness.
  
  In one of the many humorous anecdotes that seem to comprise this entire book, Taleb recounts how he learned his extreme skepticism from his first boss, a French gentleman trader who insisted that he should not worry about the fluctuating values of economic indicators. (Indeed, Taleb proudly declares that, to this day, he remains blissfully ignorant of supposedly crucial "indicators" like housing starts and consumer spending. This is a shocking statement from a guy whose day job is managing a hedge fund.) Even if these "common knowledge" indicators are predictive of anything (dubious - see above), they are useless to you because everyone else is already accounting for them. They are "white swans," or common sense. Regardless of their magnitude, white swans are basically irrelevant to the trader - they have already been impounded into the market. In this environment, one can only profitably concern oneself with those bets which others are systematically ignoring - bets on those highly unlikely, but highly consequential events that utterly defy the conventional wisdom. What Taleb ought to worry about, the Frenchman warned, was not the prospect of a quarter-percent rise in interest rates, but a plane hitting the World Trade Center!
  
  Yep, the precise facts of 9-11 were actually presaged by this French gentlemen, as a rogue wave that just might be lurking over the horizon. And, to the contemporary American mind, this is THE quintessential Black Swan. Of course, the Frenchman's insight was just a coincidence - the thing with Black Swans is that they cannot be foreseen.
  
  Taleb explains that conventional social scientists use induction to collect data, which is then plotted on the good old Gaussian bellcurve. With characteristic silliness, Taleb dubs the land of the bellcurve "Mediocristan" - and informs us that it is the natural habitat of the white swan. He contrasts Mediocristan with "Extremistan" - where chaos reigns, the wholly unexpected happens, power laws and fractal geometry apply and the bellcurve does not. Taleb's fictional/metaphorical 'stans' share something with the 'stans' of the real world: very ill-defined borders. Indeed, one can never tell whether one is in the relatively safe territory of Mediocristan or if one has wandered into the lawless tribal regions of Extremistan. The bellcurve can only help you in Mediocristan, but you have no way of knowing whether you have strayed into Extremistan - beyond the bellcurve's jurisdiction. This means that bellcurves are of no reliable use, anywhere. The full implications of this take a while to sink in, and are sure to cause huge controversy. In July, Taleb will debate Charles Murray (author of -what else?- the Bell Curve). I'll let you know who wins.
  
  Taleb frames his whole argument much more entertainingly than I could here, and he bolsters it with an astonishing command of both cutting-edge social science and the entire history of philosophy. This is an astonishing work of serious philosophy, and it reads like pulp fiction. Readers who enjoyed FBR will find here the same dry wit, the same literary erudition, and deep sense of the absurd that made that book so much fun. But this is better, by an order of magnitude - easily the best book I have read in 5 years. I smell a timely pop-science bestseller here to rival Gladwell or Surowiecki, but this is also a classic that will be read for decades to come.
  
  

• Many important ideas, many flaws that detract from the message

  
  By A1K0WOHJX5B8OK on 2007-04-26
  This is an entertaining and enlightening book, and fairly easy to read. It has an important message regarding how the world works; that the world is governed not by the predictable and the average, but by the random, the unknownable, the unpredictable -- big events or discoveries or unusual people that have big consequences. Change comes not uniformly but in unpredictable spurts. These are the Black Swans of the title: completedly unexpected and rare events or novel ideas or technologies that have a huge impact on the world. Indeed, Taleb argues that history itself is primarly driven by these Black Swans.
  
  It is convincing argument, entertainingly presented with plenty of sarcasm, and indeed, anger, by Taleb. For example he rails against the academic community, economists (including specific names), and Nobel Prize committee. Considerable numbers of his arguments "ring true" to me, that is my experience in life confirms that they are more accurate than the traditional approach. Like any important work, 90% of what is in the book is not original; that does not make it less important. Taleb's contribution is in integrating the material together, and showing how these different ideas are tied to the Black Swan.
  
  The themes include: winner-take-all phenonomen, numerous effects of randomness on the world, the invalidity of the Gaussian Bell Curve to most things in world, concepts of scalablity, numerous instabilities in the world, especially the modern world where information travels so quickly, the fallacies about people's inability to predict the future. The importance of these ideas, Taleb's ability to weave them together into a single theory, and the ability of this theory to change the way you look at the world, means the book easily deserves my highest recommendation.
  
  However, the book does have many flaws, unfortunately -- unfortunate because I believe they will take away from the credibility of the message, which is in important one. The are numerous minor flaws such as, for example, the inexplicable invention of a fictional author (disclosed a few pages later), when certainly there must have been some real example that would have worked better. Another example is repeated jabs about the French; these may be amusing but I just don't think they have a place in work like this. There are also diatribes against specific people, including famous economists, which, though amusing, and possibly justified, demonstrate a high level of anger by author and take away from his credibility. Often he also overreaches, for example in saying the usual combination of anti-abortion and pro-death penalty or the opposite combined views of pro-abortion and anti-death penatly cannot be explained logically, when in fact widely known theories such as George Lakoff's (in Moral Politics) have explained hows these groups of views are entirely consistent.
  
  Another flaw is that Taleb seems to go a little toward the extreme of saying that we can predict almost nothing about the future, and though he does not say so explicitly, this seems to imply we have no moral responsibility to the future. This, combined with Taleb's advice to the reader about their behavior based on the "Black Swan" view of world just rubbed me the wrong way, for several reasons. One is that Taleb personally has very little in common with most people; never having as far as I know had a regular career (essentially what he calls non-scalable, e.g. dentist, engineer, baker) he nevertheless recommends that people choose these kinds of careers rather than a scalable career (e.g. financial trader, author, actor which are subject to a few lucky successful people and a lot of failures). This advise is odd first because Taleb is in a non-scalable profession (derivatives trader, then hedge fund manager) -- indeed it appears he is quite wealthy. Even more odd because he says all these types of non-scalable types of work are boring and evens makes sarcastic comments (the book is extremely sarcasm heavy) for example about dentists being able to do well by diligently drilling teeth for 30 years. The second things that bothered me is that Taleb seems be somewhat amoral to me; in this type of book where plenty of his own emotions come through, plenty of his personality, he has plenty of criticism of others for their wrong models and wrong view of the world, and how this has hurt the world, but there remains a lack of moral responsibility to his advice.
  
  Perhaps the best comparison I could make are to other important works that do not suffer from these flaws, for example the Age of Fallibility by George Soros and Irrational Exuberance by Robert Shiller (1st and 2nd editions). But probably Black Swan will sell better than either of these because of it's "edginess," i.e. aggresiveness; I personally have a distaste for this approach.
  
  Despite my criticisms, the main ideas of the book as so important as to merit reading and indeed great consideration.
  
  

• Chapters 15 - 17 are excellent. The remainder is mediocre

  
  By A2PEVP36Y5A2EQ on 2007-07-30
  Starting with the good (chapters 15 - 17), within chapter 15 Taleb explains where the Bell curve works and where it does not. The Bell curve captures well variables that don't deviate much from the mean. Otherwise, it does not work. Taleb suggests we often fool ourselves in believing that correlation, regression coefficients, or standard deviation convey much information. This is because those coefficients are unstable (and can flip sign when possible) depending on the time selected. This is because the underlying variables are often not stationary enough for these coefficients to be stable.
  
  Chapter 16 is excellent as an introduction to Mandelbrot's fractal geometry as an alternative to Gaussian based investment theory. He supports well that these mathematical tools do capture randomness (of non-stationary variables) far better than the Normal distribution. However, he admits that Mandelbrotian models are not predictive. When looking at the same data set, he and numerous colleagues each came up with different underlying parameters to build fractal-like models. And a small difference in such parameters makes a huge difference in outcome. That's why you will not hear much of fractal geometry within the quantitative financial community. Nevertheless, this is a fascinating subject that deserves further exploration. For this purpose, I recommend Mandelbrot's The Misbehavior of Markets
  
  Within Chapter 17, Taleb further elaborates on the flaws of the Normal distribution. He underlines that half of the return of the stock market over the past 50 years was associated with just 10 days with the greatest daily change. This is an example where stock returns have outliers of such magnitude that using the Normal distribution is not appropriate. Taleb describes the run-ins he experienced with the living legends of modern finance including Myron Scholes and Robert Merton due to his rejection of the Normal distribution assumption that underlies all their models.
  
  The remainder of the book is disappointing. Hundreds of pages can be summed up in just stating that we can't predict rare events. Taleb goes way overboard in attributing everything to luck. He thinks MicroSoft beat out Apple just due to luck. Taleb does not consider that MicroSoft open system allowed it to mushroom while Apple locked itself into a proprietary corner. Also, according to Taleb both the rise and fall of Rome were due entirely to luck. But, Rome was best at developing military strategy and transportation networks. However, it eventually suffered from imperial overstretch. Explanations are not always narrative fallacies as Taleb believes. They often beat out ignorance.
  
  When it comes to practical advice, Taleb misfires. His single strategy on how to deal with Black Swans is an asset allocation consisting of 85% risk free investments (T-bill) and the remainder into very high risk investments. I tested this allocation using a small cap index for the high risk component vs a more standard 60%/40% allocation between stock and bond indices respectively. The standard 60%/40% allocation performed way better.
  
  The uneven quality of this book is disappointing given the author's outstanding credentials. Taleb has a Wharton MBA and a Ph.D. in financial mathematics. He was a managing director of derivatives and proprietary trading at several leading Wall Street institutions. And, he was professor in mathematics at several universities. He is also fluent in 9 languages including classical Greek, Latin, and Aramaic. As a result, he has developed into an outstanding polymath. Taleb is an excellent author when he applies himself as in Fooled by Randomness Revision (Not Available in US): The Hidden Role of Chance in the Markets and Life that has become a classic on Wall Street. By comparison, this book is mediocre.
  
  If you find the subject of this book intriguing, let me suggest a few other books that are more rewarding. Scott Plous'sThe Psychology of Judgment and Decision Making explores the flaws in human judgments far more thoroughly and clearly than Taleb in `The Black Swan.' Perry Mehrling's Fischer Black and the Revolutionary Idea of Finance is also an excellent book. Ideally, that may be who Taleb would have liked to become. Fischer Black was brilliant and as skeptical as Taleb regarding much of the body of economics and finance. Yet, he left a great legacy of elegant models that people still use extensively including the famous Black-Scholes option model. Yes those models were often based on Taleb's dreaded Normal distribution. But, with minor modifications those models have remained valuable. Another recommendation is William Poundstone's Fortune's Formula: The Untold Story of the Scientific Betting System That Beat the Casinos and Wall Street that describes the career of a bright MIT mathematician, Ed Thorp. The latter showed how to successfully deal with uncertainty in gambling and investing. Even Taleb recognized Thorp's unique expertise within `Black Swan.' Finally, if you are looking for something much more pragmatic within the domain of investing I recommend Burton Malkiel's The Random Walk Guide To Investing. This book discloses bunch of simple strategies and investment allocations that are far better than Taleb's 85% T-Bill/15% high risk investment.
  
  
  

• Fun to read. Making the mind working

  
  By A3D7U2LFH28V43 on 2007-04-18
  First of all I had fun reading it. I was many times in a non-reading mood, and some of the drafts came to me. I print them out in order to read another time, and suddenly I was finding myself after reading a few pages. Joyful style but with content. Very interesting content. The stuff that make you thinking, thinking, and thinking again.
  
  The principles of the book are quite simple.
  
  The unknown is more frequent than we tend to think.
  
  The effect of unexpected things is rather huge. Much more than we dare to fantasize.
  
  "we know" is in many cases a big illusion. The human mind tends to think it knows, but does not always have solid ground for this dellusion of "I know".
  
  As in the good old medieval days, "experts" are many times empty heads with empty (and expensive) suits. The "truth" behind science, is limited to some areas, and in many areas having a degree and posing scienist, is truth irelevant.
  
  "Narrative falacy" talks about our tendency to build stories around facts. In love it may serve a purpose, but when starting to beleive the stories and accomodating facts to the stories, things become stupid.
  
  Much more is there for the taking.
  
  
  
  

• An author in love with himself

  
  By A1BRZNJ7N7ZAJE on 2007-05-07
  Ok, let me summarize this book for you: Nicholas Nassim Taleb is smarter than everyone. He's smarter than scientists, philosophers, economists, entrepreneurs and every person who has ever walked on earth. Oh, and he can beat the street too.
  
  His first book is good. This one is just bad. He talks too much about how great he or some friend is, but that even isn't what annoyed me the most.
  
  What really made me write a 1 star review is that there isn't really anything new on the whole book. Really, not one original idea. If you've read a good science book in the last ten years you can skip this one. If you haven't, you can find the same content elsewhere without reading what looks like a lazy draft from a self-centered kid.
  
  
• A disappointing follow-up to "Fooled by Randomness"
  By A39YA14EWZMAPO on 2007-05-10
  I'm a mathematician and former trader, and I've always enjoyed Taleb's work, from his technical tome on derivatives, "Dynamic Hedging," to the brilliant "Fooled by Randomness." These books provided a healthy dose of empirical skepticism about a field that sometimes gets carried away with its own "precise" models -- as well as some insightful commentary on why people are bad at recognizing randomness and making predictions, and how we should be wary of charlatans (and fools) trying to sell us false certainty, especially about financial markets. Unfortunately, "The Black Swan" doesn't say much that "Fooled by Randomness" didn't already say (and say better), and I was disappointed by most of the new material.
  
  First, Taleb's ideas on uncertainty have gone a bit over the edge. Before, he denounced the poor use of over-simplified models (i.e. the bell curve) to model uncertainty; he now seems to have given up on models altogether (save for a brief and justified nod to Benoit Mandelbrot). Rather than just attack bad science, and encourage better science in its place, he seems to view the entire scientific enterprise as hopeless -- adopting the somewhat anti-intellectual attitude that we should stop trying to "understand" markets at all, and be more like Fat Tony, the trader from Brooklyn. His portrayal of mathematical finance types is a complete caricature, which is amusing because, whether he likes it or not, he's one of them! (Taleb has taught in the mathematical finance program at NYU's prestigious Courant Institute.) The idea that mainstream academics are too myopic to see beyond their bell-curve models is laughable, and in many cases, decades out of date -- even undergrads learn about the flaws in the Black-Scholes model, and the problem of "fat tails."
  
  While "Fooled by Randomness" suggests (wisely) that we pay attention to the magnitude of events and not just their probabilities, in "The Black Swan" he throws out probability altogether. This results in some bizarre advice, such as that people should structure their lives (and financial portfolios) to capture "positive black swans," i.e. huge but unlikely turns of good fortune, because "unlikely" is a meaningless probabilistic notion. For example, he suggests that people should put 90% of their assets in extremely safe instruments (like T-bills), while gambling the remaining 10% on risky ventures and hoping to hit it big. He claims that this limits one's downside while waiting for a big windfall ... but what happens when the "risky" 10% gets wiped out in a year or two? Do you then start investing your remaining assets (possibly losing more), or do you just stick with low-yield T-bills for the rest of your life? Taleb seemingly hasn't thought it out that far. By the "positive black swan" logic, thousands of unemployed "actors," waiting for that big break that never comes, have the right idea -- not to mention people who waste their money on lottery tickets (hey, the downside is only a buck, but the upside is millions!). This seems to be a complete reversal from "Fooled by Randomness," which had a brighter view of skilled ("Mediocristan") pursuits like dentistry, where one avoids living at the behest of good or bad fortune altogether.
  
  Finally, Taleb has always exuded snobbery in his writing -- in the past it has almost been charming -- but this time it quickly wears out its welcome. He never fails to remind the reader that he sees himself as an erudite "gentleman trader," a rogue philosopher among philistines and eggheads. Yawn.
  
  I still give this book 3 stars, because it does have some decent content, but read "Fooled by Randomness" instead. If you've already read that book, there's no need to buy this one -- but if you're in the mood to read about the problems of uncertainty and prediction in the markets, check out "When Genius Failed" by Lowenstein, "A Random Walk Down Wall Street" by Malkiel, or (for the eggheads) "Fractals and Scaling in Finance" by Mandelbrot.
  
  
• Disappointing, Underwhelming
  By AT05Y13PIYPSG on 2007-06-20
  After reading "Fooled By Randomness", I eagerly looked forward to reading Taleb's latest book, only to be disappointed. He mentions both in the prologue and acknowledgments, "the book just wrote itself", and it shows. He could have fitted most of the 300 pages into 50 and gotten his points across. In any event, this book does not add anything more to "Fooled By Randomness" (194 pages) and is often rambling and incoherent. Perhaps if one read The Black Swan first, it may have been interesting but not if you read Taleb's previous excellent book.
  
  
• A bad book for all the wrong reasons.
  By ATN1SSKTJD8Z8 on 2007-07-23
  I really wish this were a good book, because the basic idea behind it is original, important and clever. That makes Taleb's careless handling of his topic all the more disturbing.
  
  The rock-solid foundation of this book is Taleb's insight that the most important events in history, and presumably to come in the future, are essentially unpredictable; they can't be forecast using the information we have prior to their occurrence. That's a huge point and Taleb goes on to offer some compelling evidence that it is indeed true. He uses the analogy of a Turkey deciding that humans must have his best interests at heart because they show up every day of his life to feed him a good meal, he projects that - based on all of his evidence - this will continue. This works great until a couple of days before Thanksgiving. Suddenly his predictions have failed him catastrophically.
  
  Great idea, and - I believe - true. But Taleb undercuts his own thought baby with shoddy writing, poor research and personal opinion masquerading as evidence.
  
  The writing: A well-written book allows a reader to flow naturally from one paragraph to the next and from one idea to the next, even when the subject matter is complex. Taleb's writing is tough to follow and slow to get through. Beyond that, you really struggle to comprehend what he is trying to get across to you for huge portions of this book.
  
  The research: When Taleb used examples to back his ideas that came from fields with which I was unfamiliar, I felt pretty good about them. However, whenever he used examples from areas where I have deeper knowledge, I noticed that his knowledge was lacking badly (being a trader comes to mind). This started to make me question all of his supporting evidence.
  
  The opinion: Taleb leans heavily on the idea that most of what happens in the world is luck, even when we try desperately to ascribe some sort of tangible cause to it. At one point he uses the example of Mac operating software being far superior to that of Windows, but Windows being dominant in the market. He chalks it up entirely to luck! I'm sure he'd say I'm falling prey to a logical fallacy, but Apple and Steve Jobs had a huge head start on Microsoft, but refused to let anyone else run their operating system - so to run it, you had to buy a Mac. Microsoft let anyone run their operating system and consequently took the dominant share of the market.
  
  This book is really a shame. The idea is just too good to be used this poorly. It made me sad to read this thing. Taleb the thinker deserved a far better writer than Taleb the author. What a waste.
  
  You might still try reading this to understand Taleb's idea, because it's a huge insight, but watch all of his other content because it's riddled with holes.
  
  
• Don't insult my intelligence
  By A1P2D3F37PXMM6 on 2007-06-27
  Taleb's concept is certainly not his: "absence of evidence is not evidence of absence" is as old as the Greek philosophers. And is something anyone who studies science should already know. It's one of the classic "logical fallacies".
  
  That natural systems very often do NOT follow Gaussian distribution is something anyone who has taken intro stats should know.
  
  That non-linear systems are common; that positive feedback loops exist in nature; these things we know.
  
  Serious students of economics, physics, chemistry, climate, or biology may sometimes view the world through bell-curve tinted glasses. So remind us. But don't insult our intelligence by combining lack of originality with insufferable arrogance.
  
  
• An Ugly Duckling
  By A3FDBBQ0NK2SSO on 2007-08-01
  Oh dear. If you've read Taleb's previous book, Fooled By Randomness, don't bother with The Black Swan. Fooled By Randomness was deservedly successful, filled with contrarian thinking that makes sense, delivered in an original and engaging style. But success went to Taleb's head. In The Black Swan, Taleb seems more interested in talking about himself. He doesn't do his reputation any favors by doing so. He describes what he seems to think of as charming quirkiness, nearly giving an octogenarian Nobel Prize laureate a heart attack by heckling him at a lecture. Taleb loves to take blowhards down a notch or two. But when someone challenges his ideas, it's because they haven't read his book, or they didn't understand his brilliance.
  
  The Black Swan jumps around, switching from a tale of a non-existent Russian author to Taleb's experiences in Lebanon to the mathematics of probability. The language is repetitive, using "black swan" and "extremistan" long after their cuteness has worn off.
  
  Read Fooled By Randomness or Devil Take the Hindmost or Fortune's Formula. Read Harry Potter. Anything but The Black Swan.
  
  
• This One is Too Far Out of the Box to be Useful
  By A3GZT9TAU6D4GV on 2007-05-06
  Stirred by the mention of "uncertainty" (a pet topic), I purchased this zany refutation of everything conventional. A total contrarian, and full of cynicism, I'm not really sure even still what this author advocates... that we should NOT plan for tomorrow, because the sun might not rise? To buy flood insurance?? Who knows? - Because he certainly proposes that we can't learn ANYTHING from experience.
  He says it's the 9/11s and Tsunamis that have a great impact in our lives. How true, and yet most of us cannot ignore the "small hours" (Rob Thomas's latest song about poignant moments) or the individual people who have had huge impacts upon us. So what exactly is his point?
  Can we truly say that we shouldn't plan on going to college, and someday actually attend because of the random tornados that might intervene? Or on some day having children? Give me a break. This author's very metaphor of a "black swan" being rare, unpredictable, and big impact is inappropriate... Please -- I ask you -- what big impact does a black swan have, or ever had upon the first one's discovery? Why didn't he name the book "earthquake" -- Now there's an unpredictable, rare and big impact event!!
  When you read some of the names of theorists this author has insulted, it becomes apparent that he has some real issues, and is in a deep search for some attention from anywhere he can get it. Self-discredited, he doesn't like Bell curves -- well that's because this individual is way out in six sigma land -- an outlier to be ignored. That unpredictable things will happen is not argued, but that we should not have logical expectations is inane. Disappointed -- This book won't sell, despite a snazzy look and (poor) metaphor. It is of little value to anyone who wants to make things happen in the real, mostly predictable, world.
  
  
• An improbable review?
  By A2FEYFS5EI1VG8 on 2007-05-29
  I agree with other reviews that this is a poor follow on to "Fooled by Randomness." I've found myself skipping sections and not missing anything.
  
  Mostly this book is soaked with the author's extreme arrogance. And it is nothing more than listening to a babbling know-it-all. The type of guy that you get stuck talking to at a party until you start praying for a fire alarm.
  
  As a scientist, I don't agree with the notion that an outlier event disproves a hypothesis or central tendency statistics. It merely proves that outliers exist and mathematical models are attempts to predict and are often flawed. Duh, we already knew that.
  
  Further, the whole notion that no one could have predicted the internet or Google is absurd. We've seen them grow--and participated in that growth. How is that improbable and unpredictable?
  
  The book is mildly engaging at times, and apparently I'm one of the few that disliked it. Maybe my PhD made me too dumb to understand.
  
  
• This was very disappointing book
  By A1XBU7J49AEWGT on 2007-06-07
  "The Black Swan" was very disappointing for several reasons. It needed someone to edit it, it was too long and rambling. Taleb goes on and on and on. Please, give us a break. Early on I decided that I didn't like the book, but I finished it. Taleb comes across as a pompous, arrogant know it all. I could sum up "The Black Swan" this way; it is better to be lucky than good! A much better book on risk is "Against The Gods,The Remarkable Story of Risk".
  
  
• Pretentious
  By ASGGU3P8R131J on 2007-06-10
  Sorry to be so negative about a book that so many others find interesting, but I found it pretentious and filled with arrogance. Taleb seems mainly interested in letting the reader know how smart he considers himself to be. Maybe if I had given it more than 40 pages, it would gotten better, but that was all I could stand to read.
  
  
• Poorly organized, badly written, sprawling and not particularly enlightening
  By ARSE4QURRY2JT on 2007-07-03
  I picked up this book thinking that the premise was interesting.
  Sadly this book is horrific.
  The author is encumbered with an unchecked ego and his sense of superiority drips disdain on his readers and the rest of the world.
  
  He decries editors, yet could have used a good one.
  
  The book is rambling, poorly organized and his points aren't that interesting. One of his main arguments uses the story of an author whose unconventional book becomes a best seller only to have the sequel flop. This is complete fiction though--there is little to no real science in this book, just the ramblings of an egomaniac. His main points are neither new nor particularly exciting. This book seems just to have been written to show off how smart he thinks he is.
  
  Overall it would be mildly interesting if he didn't write so poorly, but alas there is little to be gained from this book other than frustration and the loss of a few hours of your life.
  
  
  
• Too True to be Good
  By A2T798BAKM4X5A on 2007-07-01
  I found the book highly polemical and the authors style annoying. His bile seems to be primarily directed at academic economists, and secondarily at corporate risk management. I don't think the general public is taking academic economics too seriously, and most undergrad b school majors or econ majors couldn't understand it, even if they wanted to.
  Asymetrical distributions with thicker tails have been used more or less forever by statisticians and anyone seriously dealing with risk.
  If everyone strictly believed in EMT, who would get involved in hedge funds or private equity? After LTCM blew up, a vivid counter example was on Page 1 of every newspaper in the country.
  As far as corporate risk management is concerned, there are a lot of black swans that are irrelevent since they wouldn't include actionable information, even if the probabilities were quantifiable. For example, an astroid hits the earth or world war III. We are all dead. Even much less extreme events are essentially unmanagable at a corporate level. The example of the casino risk managers seem like a caricature of enterprise risk management (although it may be true), but doesn't represent current best practice.
  There are some real problems regarding risk management in the financial area, and although Taleb mentions them in passing, they deserve more thoughtful and lengthy treatment. These are more in the grey swan category, and you don't need Karl Popper to understand what's going on. I think a grounding in the history of speculative excesses could provide some perspective on the current situation. One timely example being financial engineeering whose main purpose is to reduce transparency -- see the WSJ on CDO's in conjunction with the Bear Sterns blip.
  If Taleb would get an editor, or better yet, a ghost writer, this could have been a valuable book.
  
  
  
  
• SUCKER
  By A12KTV9WS009D9 on 2007-09-20
  The author spends over 300 pages lecturing us on how not to be a sucker and the meaning of a Black Swan. It can all be summed up in three trite words, "Expect the unexpected." And, lo and behold, we realize early on that we've been the author's sucker to actually buy this book and read his psycho babble dribble! This book is a Black Swan: An unexpectedly bad diatribe against classic thinking by a psuedo intellectual. Don't waste your time or money.
  
  
• Vastly overrated and pompous
  By A1SMB8294FOM83 on 2007-09-17
  A superficial and self-aggrandizing book. Taleb seems to want to claim credit for concepts with which any student of statistics or investing ought to already be throughly familiar. I was hoping for an interesting read that might lead me to more detailed sources, but got neither from this book. Completely disappointing and poorly written.
  
  
• Not recommended
  By A2RTSJPAFZCA4J on 2007-09-21
  The author expressed his strong negative options on statistics, econometrics, some finance professors, some Nobel Prize winners, etc. The whole point is that traditional stat, econ, finance techniques are mostly around the first moment (mean) but the distributions in finance tend to be non-normal and it's the risk that we should pay more attention to. That's a point few people would disagree with. What the author may not have known is that there are stat techniques out there that handle all the issues mentioned - while it's true that there's a lot of room for improvement, it's misleading to say that this is an area ignored by the academics and practitioners. While fractals are recommended, it is not clear how they can be directly applied to the area of investment finance.
  
  There is a 2007 issue in American Statistican dedicated to the debate with the author and is highly recommended.
  
  
• good ideas but unfair criticism too
  By AQ7ZQWXAYT8HZ on 2008-09-08
  As a mathematical statistician I am a little taken aback by Taleb's lack of scholarship in understanding and appreciating what professional statisticians do. He puts down economists, Nobel laureates, philosopher and statisticians among others. There is a degree of unseemly arrogance on his part and I am sure that some of the other 300 or so reviews on amazon take him to task on that.
  
  It is a shame too because for many of us, it spoils the really good main point of the book which is that Black Swans exist, make predictions difficult if not impossible but can be handle in the stock trading business at least by using his barbell approach.
  
  I found the first 1/3 rd of the book very philosophical extremely redundant yet provocative. The rest of the book was much more interesting to me particular the last few chapter which had the most technical discussion and many points to agree with and also to quibble with.
  
  A Black Swan is an extreme event that is very rare but so significant that it creates instability in averages and can ruin predictions and be either castastrophic (the negative Black Swan) or bring great fortune (the positive Black Swan). These Black Swans are real and Taleb cites many examples. Taleb is also right with his point that some economists are blind to the Black Swan or at least the unpredictability of them. I have often seen major declines in the stock market explained after the fact with seemingly logical but very suspicious and dubious rationalizations. Taleb deserves credit for recognizing this and realizing that in the world he calls extremistan where the Black Swans exist they must be accounted for but no should attempt the futile business of predicting them!
  
  He also recognizes that there is another world where the Gaussian distribution and other light-tailed parametric distributions prevail and he calls this the world of mediocrastan. Here, the usual parametric statistics is useful but in Taleb's view it is not very common in practice to be in a mediocrastan world. This is the world of parametric statistics and is the place where most elementary courses in statistics reside. But here is also where I think Taleb makes a big mistake. He assume that this is the world where all statisticians and econometricians live and play and so these teachings are irrelevant to the practical world. Well, in many of the areas he discusses the parametric statistical models do not work. But probabilist, statisticians and econometricians have realized this for at least the past 60 years. In the 1930s and 1940s the field of nonparametric statistics developed through the work of Pitman, Mann and Whitney and Wilcoxon to name a few. Also the theory of extreme value distributions goes back to Fisher and Tippett in 1929 and was rigorously developed by Gnedenko in the 1940s. Nonparametric statistics deals with general distributions that do not have a simple parametric form and includes the heavy-tailed distributions that Taleb cares about. Also the asymptotic theory of extreme values that Fisher and Tippett, Gumbel and Gnedenko discovered showed that the extreme events had systematic behavior based on the three extreme-value types of distributions. So the extremes can be treated using asymptotic statistical theory just as well as the averages can be characterized asymptotically through the central limit theorem and the stable laws (in the case of a heavy-tailed population distribution). So in some ways Taleb is off and out of gas because he doesn't address or perhaps is even ignorant of this theory.
  
  In the area of finance as well as in other areas, time series models have been useful in developing forecasts. In the world of mediocrastan the Box-Jenkins ARIMA models are very useful for problems in forecast and stochastic control. This was well established with the very popular book by Box and Jenkins that was first published in 1970. However financial data often falls into the world of extremistan and the stationary distributions when they exist are non-Gaussian and heavy-tailed. It is in this context that ARIMA models fail but the statisticians and econometricians have developed other models including the GARCH models which handle this type of data and allow for better predictions. Taleb mentions the GARCH models but only to make fun of them in a very superficial way that does not discuss any of the mathematics associated with these models. Again, I am not sure if Taleb is ignorant about this body of literature or just dismisses it because he see other models that cannot be used to predict as more appropriate.
  
  Taleb is enamored with Mandelbrot and his theory of fractal geometry and the apparent natural properties of fractals. Well at least fractals look like coastlines on the world globe as well as other common items in our natural environment. But is this enough to say that fractals are the only models relevant to extremistan? I am not yet convinced.
  
  This August I went to the Joint Statistical Meetings in Denver. There was a session on the Black Swan and to his credit Taleb was brave enough to accept the invitation of the statistical community to come to discuss the issues in his book. Unfortunately, I was not able to attend that session. But it got mew curious enough to want to read the book and see what Taleb's premise was all about. I do not yet know much about what came out of that session. I hope that at least Mr. Taleb came out of it with a better appreciation of the intelligence of statisticians and the more sophisticated models that he appears to be ignorant of based on the lack of discussion of them in his book.
  
  Another branch of nonparametric statistics developed in the 1970s that is now called resampling methods. One of the more successful of these methods is the bootstrap. I have done some research into bootstrap methods as well as having authored a text on the topic. I believe that the bootstrap approach to time series analysis is another way that these time series with non-Gaussian innovation distributions or the stationary distributions of the time series model can be handled. I am not yet convinced that in the world of extremistan the hope of some form of forecasting must be abandoned as is Taleb's thesis.
  
  
• Would distill into two good chapters; delete the rest.
  By AX3K8PQB8KXGC on 2007-05-18
  Taleb has some fascinating thoughts on risk and predictions. Had there been an editor brave enough to delete the meandering anecdotes, attacks on every expert named (excpet Mandlebrot and, curiously, Malcolm Gladwell), the relentless self-aggrandizement, and barely concealed rage at those more famous than he, one might find two good chapters in here. Really, really good chapters. As it stands, your best bet is to skim, and not to look for the final summation chapter showing you how to apply this insight. Because it's not there.
  
  
• An Excellent Blend of History,Philosophy,Probability,Economics,Statistics,and Mathematics
  By A1UI9T8WKJPZN5 on 2007-04-22
  Taleb(T)has written an excellent book that should be required reading for every social scientist who bases his theoretical analysis, empirical work,and applied policy recommendations on the presumed use of the normal probability distribution.The use of the Normal distribution ,usually applied by social scientists,especially economists and psychologists, without any type of goodness of fit test, to their time series data,is the major reason for the predictive and forecast failures that occur with regularity in the social sciences.Taleb's message is that accurate and reliable prediction in the social sciences is not possible because of what Schumpeter called the " regular irregularity "problem of not being able to know,due to changing expectations,what the process or mechanism generating the stochastic time series data is.The social data being generated by the interaction of the ever changing mix of relevant social variables over time is not stable,uniform,and homogeneous over time due to constant financial, social,technological,political, and economic innovation and advance(or obsolescence and decay).Taleb's message is practically identical to the one that John Maynard Keynes delivered to Jan Tinbergen in 1939 and 1940 in their exchange in the Economic Journal over the logical(inductive and analogical) foundations of econometrics.Tinbergen sought to use the method of multiple correlation and regression based on least squares.Unfortunately,least squares is based on the assumption of normality( assume a normal probability distribution).Tinbergen,in his lifetime,never provided a goodness of fit test demonstrating that the time series data was, in fact,normally distributed.
  
  At a much deeper philosophical and epistemological level,T explicitly shows how the social sciences ,over the last 130 years, have failed to grasp the limitations imposed on these fields by Hume's problem of induction.All social sciences have the severe problem that the interactions of human beings with each other in their physical environment constantly creates new combinations of possible outcomes that are not predictable or forseeable.T is correct that this problem is enormous and can't be dealt with by assuming some kind of probability distribution a priori,especially when the generating mechanism for the outcomes is constantly being changed by the very interactions of human decision makers with eachother brought about by reactions to previous forecasts or predictions that may have had some degree of reliability in the past.
  
  I have one minor bone to pick with T.This is T's decision not to explicitly make use of the extremely powerful results presented by Keynes in 1921 in his A Treatise on Probability.Keynes spent all of Part III of this book on Hume's problem of induction and his partial solution in terms of an interval based approach to probability combined with his concept of the weight of the evidence,w.w measures the degree of the completeness of the relevant evidence upon which the probabilities are being calculated.Keynes always sought to differentiate between the highly improbable and the highly uncertain(or highly ambiguous a la Daniel Ellsberg).The highly improbable becomes a severe problem in all social sciences precisely because the weight of the evidence in these fields is relatively low in general.w must have a weight of 1(w is defined on the unit interval between 0 and 1,0<=w<=1) in order to support the claim that the probability distribution has a particular shape(i.e.,a bell shape)that will be applicable in the future.The presumption that the shape is bell shaped rules out BOTH the highly improbable(which Mandelbrot has shown for over 50 years occurs much more often than would be predicted by a normal distribution)and the highly uncertain or ambiguous.The use of Keynes's TP would have added support to T's sound conclusions.Perhaps he is planning to write another book in this area which would explicitly take Keynes's work into account.
  
  T has demonstrated that the social sciences,particularly economics and psychology, are a mess.These fields assume continuity,independencs,and stability,as well as the existence and uniqueness of supposed solutions without providing any empirical/experimental support for such claims.The entire foundation for social science must be rethought.The tool kit presently in use is not correctly measuring and/or describing what is actually occurring.Unfortunately,just as Keynes and Mandelbrot have been rejected,so will Taleb.This is because coming to grips with failure requires that the current practitioners realize that their methodology is not working and decide to change.This is precisely what these fields refuse to do and will continue to refuse to do.They will simply continue to catalog an exploding number of anomalies that future researchers will supposedly have to deal with.
  
  
• Better Than Fooled By Randomness. A Must Read.
  By A2DU49W6TGU9TU on 2007-04-29
  Added on 11 August 2007:
  
  The book is still pretty and interesting at second read. I reread the book for doing a local review (for SWA - Famous Indonesian Business Magazine), and feel elevated again. I think i even grasp something more and enjoy it very much.
  
  I come to think that most of things really do happen with some high portion of randomness. And the Black Swan is something that always happen even at the very small probablility.
  
  Books often available a bit late at this part of the earth, except Harry Potter 7, haha so, I always review books that are somewhat a bit old ( give a couple of months before good selling books are imported).
  
  This book is not easy to read, and does need some concentration. It has one big concept, the Black Swan, but has plenty of small anecdotal stories that wrap well around the whole narative.
  
  If this kind of book makes the New York Time Bestseller list for quiet a while, it is definitely worth reading. Yah, BTW Nassim's success in wrinting is a Black Swan by itself.
  
  =======================================
  Original review:
  
  The long awaited book after the Fooled by Randomness finally arrived at my lap (this is Surabaya, Indonesia) brought by DHL, such a happy moment. I have been afraid that the second book will not be as attractive as the former, but I m wrong! This one has a better NARRATIVE ;-), and still contain so much information and thoughts that often force you to put the book doen and think.
  
  Fooled by Randomness is a Black Swan, so does The Black Swan, things Highly Improbable, a rare event, highly sellable book that is highly intelectual as well. The book contains Hume, Popper, Plato, Kahneman and Tversky, combined with Nassim own story and life. All deliciously weaved into a readable fabric that will glue you to your seat (or bed! In mycase) for days.
  
  There are three type of books: The How To book, the book that will show you how to do something, The Motivational book aka Self Help, and books that "Change The Way You See Things", a perspective change book, such as this one. Books that make you rethink your own perspective and change the way you see life.
  
  With strange chapter title like "Umberto Eco's Antilibrary" (How to seek validation) to "Living in the Antechamber of Hope", you got a chockfull of delicious stuffs, in a sense like "Bitter Sweet Chocolate" ( and NOT Milk Chocolate), which for certain type of people will be the ultimate delicious read.
  
  A warning: this is not an easy read in the usual term, although that this is an easier read compare to Fooled By Randomness and I predict that this book will go to the "best selling" fame and glory. You have to digest and think to get the full impact. For easier read, you can read "The Halo Effect" (finished in a day) which is also a great book with similar line of thought.
  
  I thank Nassim for such an enjoyable reading week ( I read fast, yet it took a week, to finish this) which has sharpen my mind and see life in a more "correct" way. My wife keep complaining that I mention too much of "Randomness" and "Black Swans" lately during our life's activities. Gosh! The Effect of a great book.
  
  
• An Improbable and Wonderful Book
  By ASKFEWDWSK0A on 2007-04-22
  Not since Gregory Bateson has a writer elucidated that how we look at the world can cause focus on the wrong things and thus be drawn to irrelevant, incomplete or incorrect conclusions that carry consequences both large and small. For Bateson focus needed to be on 'relata' rather than things. For Taleb, it is studying extremes rather than central tendencies.
  
  For me, both add immeasurably to the discussion as to how the world may actually work. Thank you Mr. Taleb for taking the time and trouble to engage us in explanation and exposition.
  
  
• The return of Nero Tulip
  By A2E9YABBCXZ0OJ on 2007-09-07
  2007 Random House, 396 pages (of which 305 pages for main body of book)
  
  The Black Swan is a very unusual book. A couple of days after finishing it I still feel like I'm struggling to integrate its message with life. It reminds me a little of Richard Dawkins' Selfish Gene in that respect: its central thesis, which appears to be unassailably argued, indicates that the standard view of the world is wrong. In Dawkins' case, the primacy of the individual (as opposed to the gene) and in Taleb's case, the view that the world is essentially driven by normal, day-to-day events.
  
  The subtitle of Taleb's book tells you what it is about: The Impact of the Highly Improbable. According to Taleb, high-impact rare events ('Black Swans') are not anything like as rare as we think they are and their effect is so disproportionately large that they effectively drive events in the world.
  
  This may not sound all that provocative, but Taleb's argument is that virtually everybody's view of the world as essentially linear and step-by-step is just an illusion that protects us from understanding that our progress through life is much more random and fragile than we think.
  
  Taleb's outstanding first book, Fooled by Randomness, is about the much greater role of luck in life than is commonly understood. The Black Swan develops this thesis further and shows that rare and unexpected events (what you might think of as a subdivision of luck) drive much of the results in the world.
  
  Since reading Richard Koch's The 80/20 Principle eight or so years ago - after which I began to look at the world through the lens of unequal cause and effect - I have been coming gradually around to Taleb's views. Even so, The Black Swan is difficult to assimilate - and it must seem extremely odd (and itself most improbable) to those who have not had some preparation.
  
  One can see this difficulty in the absolute refusal of modern academic finance to give up theories of how the world works (the bell curve or pattern of 'normal' distribution) that allow them to use complicated mathematics and which are just plain wrong. Taleb thought the Long Term Capital Management debacle in 1998 - in which various Nobel-winning economists proved their (Nobel-winning) ideas did not apply in the real world - would be the end of these dangerously wrong beliefs.
  
  However, it was Taleb who was wrong about that: a whole gang of academics who have invested a good chunk of their lives in an idea that turns out to be worthless (actually significantly negative) won't give it up easily (and perhaps not until they are all dead). The sub-prime mess, with accompanying cries of surprise and of '25-standard deviation events' from various hog-greedy financiers and hedge fund managers, shows the continued prevalence of these appalling ideas.
  
  After the success of Fooled by Randomness, it would appear that Taleb had more freedom to write (and be published) however he wanted. It makes The Black Swan more idiosyncratic and aggressive than Fooled by Randomness. I imagine this will act as a polariser and some people who would otherwise appreciate the content may not like the delivery. Personally, though, I loved it.
  
  As someone who has tried working in various jobs in the City of London (the UK equivalent of Wall Street) I feel in some ways that Taleb is a kindred spirit: I can't stand arrogant, ignorant 'empty suits' either. I thought his "Get Another Job" section (p. 163) was perfect:
  
  "There are those people who produce forecasts uncritically. When asked why they forecast, they answer, "Well, that's what we're paid to do here."
  My suggestion: get another job.
  This suggestion is not too demanding: unless you are a slave, I assume you have some amount of control over your job selection. Otherwise this becomes a problem of ethics, and a grave one at that. People who are trapped in their jobs who forecast simply because "that's my job," knowing pretty well that their forecast is ineffectual, are not what I would call ethical. What they do is no different from repeating lies simply because "it's my job.""
  
  Taleb's very severe and aggressive criticism of risk measurement techniques in modern finance could be interpreted as an intemperate rant. I don't subscribe to this view and suspect Taleb chose this approach deliberately in order to make it clear that the prevalent financial risk management techniques and his ideas cannot in any way coexist: they are absolutely and totally mutually exclusive. (Taleb mentions that after finding it impossible to refute his ideas some people then try to combine them with their old ways of operating.)
  
  I also liked the way Taleb approached and structured his book: he uses stories to get ideas across (as with Nero Tulip in Fooled by Randomness) and has separated his book into sections that allow one to understand his ideas with or without the scientific underlay (I think this is a great idea).
  
  Some people (whether wilfully or not) confused the central theme of Fooled by Randomness, that much of life is driven by luck, with the superficially similar but totally different 'all of life is driven by luck'. In a similar way, I believe some people think that Taleb's message in The Black Swan is unremittingly negative: that we are all permanently exposed to large unexpected events that can wreck all our plans in an instant, and which we can do nothing about.
  
  Taleb's point is rather that most specific forecasting is pointless, as large, rare and unexpected events (which by definition could not have been included in the forecast) will render the forecast useless. However, as Black Swans can be both negative and positive, we can try to structure our lives in order to minimise the effect of the negative Black Swans and maximise the impact of the positive ones.
  
  I think this is excellent advice on how to live one's life and seems to be equivalent, for example, to the focus on downside protection (rather than upside potential) that has led to the success of the 'value' approach to investing. Highly recommended.
  
  
• Great points that need to be made
  By A2Z6BXEMDDLJ5Z on 2007-09-17
  This is a great book but it is not without its flaws. Primarily, Taleb claims WAY too much credit for the ideas in this book (none of them are original, except, as far as I know, his "ludic fallacy"). In fact, most of this book is just Taleb repackaging other people's ideas...without him even giving them credit. This sin is made worse when, in the prologue, he lies about this fact, explicitly claiming that his book is "not a repackaging of other peoples' ideas." Yeah, right. Much of his book is, in fact, a rip off of research on the hindsight bias, though he doesn't use this term nor does he credit the researchers who thought of it.
  
  It doesn't help that he offers up a little too much in the way of a self-serving autobiography, suggesting that not only are these HIS ideas, but that they are great ideas as well. He also, I must add, suggests that far more people are unaware of such concepts than is actually the case. This results in moments of soaring pretension. One of the largest impressions one will get from this book, unfortunately, is that Taleb has a soaring ego and a pathetically desperate need to be seen as "important," a need he tries to fulfill by ripping off others' ideas. He proudly states that he will never read any review of his book, and also scorns academia. This is good for him as his practices would in academia be routinely laughed at, and furthermore, most of the reviews of his books are not positive at all.
  
  This book is largely a discussion of the field of cognitive science called decision making, though Taleb only pays passing lip service to this fact. What he does is take old ideas and provide his own names for them (indeed, renaming others' findings and discussing their research without referencing them, as well as discussing his own replications as if to suggest he was the first person to think of it), largely without proper references or even acknowledgment, and then offers up lively discussions of each topic. These discussions are what make the book work, and are in fact so good that I forgive the book for its sins. (Another such "sin," which caused many reviewers to totally pan the book, was Taleb's bizarre choice to fabricate many of his examples. I personally found that it only made the book more entertaining, but perhaps that is because I had no difficulty thinking of real-life examples he could have used instead.)
  
  Many could react that his entire idea of "Black Swans" is nothing more than Hume's old problem of induction. Taleb tries to step around this retort by claiming that Hume ripped his idea off from another writer, Pierre Bayle. These points made, however, Black Swan is still great stuff. What Taleb basically does is take two related principles and effectively wed them to each other to create a pretty impressive framework. Those two principles are 1) the principle from information theory that in actuality only improbable events can be highly informative and 2) Sir Karl Popper's principle of falsifibility. In fact, in my view, Taleb's book is important if only because of its treatment of Popper. Too many post-Popperian philosophers get off on glibly declaring that Sir Popper "was wrong," that "science doesn't work that way" or that "few people take Popper seriously anymore." What? Well, if that's what you think, then please make your case! If an idea isn't falsifiable then it's meaningless. Taleb sets the record straight by arguing that Popper is pretty much the only modern philosopher who matters. He's all we got, as Taleb says. Not only was Popper right, but too few scientists realize the degree to which he was right. You CANNOT prove things true empirically, only false. That is why black swans are informative and important. (If you want to test the hypothesis that "All swans are white," enumerating white swans is not informative; it's the existence of one black swan that is.) That is also why all this haphazard "null hypothesis significance testing" is a really just a tautological exercise in bad reasoning. Setting the hypothesis of interest up as the alternative hypothesis is what Meehl and Platt called "weak inference." What we should be doing is making more informative "strong inferences" by setting up the hypothesis of interest as the null and trying to DISPROVE it. Taleb calls this negative empiricism.
  
  Much else in the book is equally fascinating (though again, unoriginal), such as his distinction between what he calls "Mediocristan" and "Extremistan." In Mediocristan extreme events do not alter aggregates, or averages. For instance, if you take 100 people and measure their heights and then calculate the mean or average height, if one person happens to be 8 feet tall this will not really alter the mean. Height then belongs in Mediocristan. Not so with income, however. If you take 100 people and have them report their income, if 99 of them make between 20,000 and 80,000 a year and then the 100th person makes 90 million a year, this WILL dramatically change the overall picture, seriously inflating the mean. If, say, the first 50 people make 20,000 and the remaining 50 make 80,000, then the "average" person makes 50,000. If that last person makes 90,000,000 instead of 80,000, then the "average" person makes 949,200! Thus, in Extremistan, one single, improbable event can drastically alter the entire picture. Taleb takes this difference in fascinating directions. He argues that science's reliance on Gaussian distributions (normal curves) is therefore problematic, for such a distribution is really only appropriate for Mediocristan, whereas, Taleb argues, many things in real life are actually Exremistan. Most things physical, like weight, are Mediocristan. Most things social in nature, like income or number of books published, are Extremistan. Other problems with overusing the normal curve lie in the fact that in most applications of it, its assumptions are actually violated! For instance, using the standard coin flipping example to demonstrate how a normal curve results is unrepresentative. This is because with a coin flip the probability of future outcomes is independent of past outcomes. In most real-life events, however, future outcomes are very DEPENDENT on past outcomes. Taleb points out that many mathematicians were initially skeptical of the normal curve, a fact that seems today conveniently forgotten. He also argues that correlation and "standard" deviation may more or less be meaningless concepts. This echoes a point that I have heard an increasing number of methodologists make recently: that all this "correlational" and "regression" research out there is actually meaningless, that it shows nothing and that all one is doing when running such a study is capitalizing on chance.
  
  A major problem with Taleb's rant regarding the normal curve is that, as noted above, most statisticians are actually well-aware of his points. Furthermore, his distinction between "Mediocristan" and "Extremistan" is really nothing more than a cutesy way of describing the difference between distributions that can have large outliers vs. those that cannot. Yes, income can have large outliers. So what? That is why people use the median when discussing income, and never the mean. Though the mean is dragged up by a large outlier, the median is not. Nobody in their right mind would use the mean to describe average income. Taleb ignores such elementary points in his tirade, somewhat weakening his overall point. He could easily come back and say that he is discussing prediction, however, and using the median instead does not mean that one will not miss the fact prediction is still unjustified.
  
  The book's flaws do not sink it however. In the end this is still an immensely entertaining and fascinating read. Taleb's treatment of the subjects of history and the social sciences are particularly brutal and enjoyable, reminiscent of the great Stanislav Andreski's masterpiece, Social Sciences as Sorcery. (Yes, out-of-print books are full of surprises.) Here too however, his arguments are not original. This would be an irrelevant point if he did not go to such great lengths in the first chapters claiming otherwise. I do not want to harp too much, though, as in the end this is still an exciting read. Further, if you aren't already familiar with the topics discussed, this book just might change the way you view the world.
  
  
  
• Overly Distilled, Poorly Written
  By A6WGWRLTMS2FQ on 2007-07-30
  -This is the first book I quit reading in more than a year.
  
  -The author, a self-important fellow named Nassim Nicholas Taleb, is a lousy writer.
  
  -I don't think you can use the word 'erudite' as a noun. As in, Larry Weasel is an athlete and an erudite. I looked it up; I am correct.
  
  -The book is a one trick pony. Ok: until like 1910 the whole world thought that all swans had to be white, but then a black swan was discovered and everyone had to re-examine their premises. This doesn't mean that you have to write a book filled with vague references about Plato, Hume, Judaism, Umberto Eco, the Levant -- all in the first two chapters alone.
  
  -He simultaneously calls himself a philosopher yet dumbs down -- and thins out -- the material until it's damn near unreadable. Philosophers don't use exclamation marks. Taleb uses five on every page. Philosophers also don't brag about how much they read.
  
  -I'm not reading any more of this genre of book; no more Freakonomics, no more Long Tail, no more How Proust Can Change Your Life.
  
  
• Interesting but close to unreadable
  By ARCX2OWDZE3GA on 2007-08-11
  The fundamental premise of the book is that it is the unknown or highly improbable events that have the biigest impact. There are myriad examples of how business, society and individuals closely monitor the known risks yet do not position to limit the downside of negative black swans or expose themselves to positive black swans.
  
  The concepts in the book are good. For example the fallacy of trying to apply rational predictive tools, like normal distribution curves, to social science being one of the best ones. It is interesting with the current subprime mortgage issues causing roller coaster fluctuations on the market over the last couple of weeks: it reinforces that market experts have little idea about what is really going on.
  
  I also like the concept that history is always written with 20/20 hindsight. NNT looks at diaries at the time immediately prior to WW1 which don't predict the turmoil, but to historians after the event it was all as plain as day as to what was happening.
  
  The big problem i have with the book is that it is written in such a pompous and arrogant style. NNT isn't really trying to engage the reader, it seems he is trying to show the world what a superior individual he is to the rest of us. According to him he is a great mathematician, philosopher, writer, trader, statistician amongst the many other talents which he probably didn't have time to mention. This book could have been really good but unfortunately the author forgets that his readers are more important than him and while he leaves you slightly intrigued I found myself more frustrated and disengaged.
  
  
• fooled by the black swan
  By A3O9S822L1RMBE on 2007-05-12
  very difficult to follow. very disjointed writing. a poor follow up to fooled by randomness. reminds me of a music group with a great first hit single - the next song is a flop and the group never achieves the same results. but of course there was no reason to infer that since his first book was excellent, the second would be the same. the black swan is an example of taleb's very point about the pitfalls of inductive reasoning. but it's not like he had 10 bestsellers and this the eleventh was a failure. the flop of the second novel by the fictional author in the book is a fitting end to this book. or maybe i just missed the point of it all
  
  
• Randomness from Random House
  By A32S13BT0105V5 on 2007-07-13
  A poorly organized self indulgent book. An exercise in "proof" by anecdote and name dropping.
  
  

• Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets
• A Demon of Our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation
• The Halo Effect: ... and the Eight Other Business Delusions That Deceive Managers
• When Genius Failed: The Rise and Fall of Long-Term Capital Management
• Against the Gods: The Remarkable Story of Risk