THE BLACK SWAN NASSIM TALEB PDF
was. The astonishing success of Google was a black swan; so was 9/ For Nassim Nicholas. Taleb, black swans underlie almost everything about our world . The Roots of Unfairness: the Black. Swan in Arts and Literature. Nassim Nicholas Taleb1. 2nd. Draft, November Literary Reseach/Recherche Litteraire. PDF | On Feb 1, , Gene Callahan and others published Nassim Nicholas Taleb: The black swan: The impact of the highly improbable.
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PDF | What constitutes a Black Swan? And under what conditions may a Black Swan be expected to arise? As Nassim Taleb describes it, a Black Swan is an. Nassim Taleb is a famous essayist who spent two decades as a trader before he Taleb asserts how the Black Swan events explain many things that take place. The Black Swan Summary by Nassim Nicholas Taleb - is an insightful classic which sets new boundaries when it comes to understanding life.
Taleb introduced the idea of the "fourth quadrant" in the exposure domain. These are deemed by Taleb to be more robust to estimation errors. For instance, he suggests that investing money in 'medium risk' investments is pointless, because risk is difficult, if not impossible to compute. His preferred strategy is to be both hyper-conservative and hyper-aggressive at the same time.
An alternative suggestion is to engage in highly speculative bets with a limited downside. Taleb asserts that by adopting these strategies a portfolio can be "robust", that is, gain a positive exposure to black swan events while limiting losses suffered by such random events.
Jaynes that economic life increases in entropy under regulatory and other constraints. Instead of doing steady and moderate exercise daily, he suggests that it is better to do a low-effort exercise such as walking slowly most of the time, while occasionally expending extreme effort.
He claims that the human body evolved to live in a random environment, with various unexpected but intense efforts and much rest. In other words, studies that ignore the random nature of supply of nutrients are invalid. Praise and criticism[ edit ] In a article in The Times , the journalist Bryan Appleyard described Taleb as "now the hottest thinker in the world".
His book, The Black Swan, is an original and audacious analysis of the ways in which humans try to make sense of unexpected events. The magazine offered a mixture of praise and criticism for Taleb's main points, with a focus on Taleb's writing style and his representation of the statistical literature. Robert Lund, a mathematics professor at Clemson University , writes that in Black Swan, Taleb is "reckless at times and subject to grandiose overstatements; the professional statistician will find the book ubiquitously naive.
His writing is full of irrelevances, asides and colloquialisms, reading like the conversation of a raconteur rather than a tightly argued thesis.
But it is hugely enjoyable — compelling but easy to dip into. Yet beneath his rage and mockery are serious issues. The risk management models in use today exclude the very events against which they claim to protect the businesses that employ them. These models import a veneer of technical sophistication Quantitative analysts have lulled corporate executives and regulators into an illusory sense of security.
Taleb said that Scholes was responsible for the financial crises of , and suggested that "this guy should be in a retirement home doing Sudoku. His funds have blown up twice. He shouldn't be allowed in Washington to lecture anyone on risk. Scholes claimed that Taleb does not cite previous literature, and for this reason Taleb is not taken seriously in academia.
I was told to focus and I never did. I was told to never procrastinate and I waited 20 years for The Black Swan and it sold 3 million copies.
I was told to avoid putting fictional characters in my books and I did put in Nero Tulip and Fat Tony because I got bored otherwise. We tend to conclude that similar sounding phrases have absurdly different meanings. The lack of proof that something exists does not mean that it does not exist. It is not because there has never been an earthquake in your city, that it will never occur, will it? There is also the tendency of our brain to seek evidence, the so-called fallacy of confirmation.
Our brain is accustomed to searching for evidence that things exist or will occur.
But given our ignorance, to seek evidence that what we believe is real can greatly limit our line of thought and make us ignore information that does not support our beliefs. It is often more valuable to search for facts that go against our beliefs than those which support it. That leads to much more powerful discoveries and allows us not to be blinded. Your Brain Makes Up Stories… Another flaw in our operating system is that we are in the habit of creating stories based on collections of events that occur in our lives.
The author calls this failure a narrative fallacy. It is characterized by exploiting our limited ability to analyze sequences of events without adding an explanation to them. Explanations tie the facts and make them easier to remember, but our brains always seek to tell a story where events are correlated and meaningful. However, by condensing facts into a single narrative, we end up generating a loss of information and have a great tendency to oversimplify things.
The Black Swan: Second Edition
We discard the data that makes no sense in our history, and that leaves us at the mercy of the swans. Two Ways to Think… According to cognitive psychologists, we have two kinds of thoughts.
Type 1 thinking is instinctive, fast, immediate, and based on your experience with the world. This system is advantageous for having high speed and helps you react quickly to external stimuli but is also very prone to errors. System 2, on the other hand, is slow, rational and self-aware, much more useful in the classroom not at a time of quick thinking between life and death. The problem is that we often confuse thoughts from system 1 with system 2 because at level 1 we have no control over them.
The Black Swan PDF Summary
Often, we believe that the thoughts that come from system 1 are based on analysis rather than reflexes, and this harms our cognition. System 1 leaves us blind to Black Swans and often misinterprets them as well.
System 1 considers primarily anecdotal data and based on our experience rather than using statistics or empirical data. Know your brain. Have you ever dreamt of being a great author or creating a great company in an innovative market?
If this is what you seek, Taleb has an interesting point of view. The human being needs constant, tangible results and rewards to continue to pursue something. A number of small, constant rewards usually bring more happiness and fulfillment than a substantial reward. There are two types of progress. The uniform and linear, and the nonlinear, which tend to occur in large jumps, alternating with stagnation. But while we prefer to believe that the world works in a linear perspective, this is not the right way to approach the problem.
Nonlinear situations are the most constant in life, and linear conditions tend to be the real exception.
About Nassim Nicholas Taleb
His learning comes from things so diverse and in many cases random that to believe that the linear model is the best model ends up becoming a fallacy. The linear model is adopted in classrooms and books just because they are easier to understand.
Besides, the humans have the limitation that in viewing the past, they select the parts of a process that fit his impressions and ignores the parts that do not conform to his preconceptions. Our mind creates a record that ignores the facts which do not fit our mental model, and Taleb calls this the silent evidence.
For example, humans tend to see authors of famous books as extremely talented and attribute the reason for their success to their talents.
Many writers with various works never get to have a book published by a major publisher and become a bestseller. Therefore, they end up not getting known by the public. As we do not have access to the works of hundreds of thousands of authors who have never had their books published by the major publishers, we tend not to take into account their importance and relevance.
We, as human beings, tend to consider only the Black Swans who have had the right combination of talent and luck to secure their place in the hall of fame.
The presence or absence of talent cannot be proven as a cause of success in the publishing world. Silent evidence did not create a black swan and therefore did not receive public attention. Therefore, it is important to be open to the possibility of having unplanned results for our activities. That can help us advantageously benefit the Black Swans when they appear. There is a law in statistics, called the law of iterated expectations.
It states that the expectation of attaining knowledge by itself is equivalent to the knowledge itself. In practice, Taleb explains that this law acts as follows in our expectations: If I expect something to happen by a certain date in the future, I expect this something in the present.
If you know what the discovery will do in the future, you have almost discovered it. To understand the future to the point of predicting it, you need to incorporate elements of the future into your present, that is, to add uncertainty components in your experiments. Swans in Practice… If you are ready to embrace your ignorance, here are some practical tips from Taleb to learn how to capture more value from the Black Swans. The first step is to focus on the potential consequences of the unexpected instead of focusing on the likelihood that the improbable will occur.
The Black Swan Summary
The effects of making a mistake in weather forecasting, for example, are often trivial, while the consequences of making mistakes in stock market forecasts can be devastating. For this, the idea is to prioritize their beliefs according to the damage they can cause rather than the chance of them happening.
What do you believe could have the most significant impact on your life today? That is the point that should take your sleep, not the one which you believe to be most likely with a minor impact.
For example, if you invest in stocks, it is better to consider extreme scenarios than usual perceived risk scenarios. Instead of putting your money in medium-risk investments how do you know the risk is medium? So you do not have to worry about risk management and place yourself partially at the mercy of Black Swans. The goal is to be very exposed to the positive Black Swans and remain paranoid about the negatives. The events with the most significant impacts on your life will be unexpected, the black swans, because of our cognitive biases and our inability to predict these events.
So learning through trial and error matters a lot and our brains have a hard time accepting this. Embracing this process can help you accomplish more. Avoid making predictions about the great complex issues that may deceive you in the future.
Be mistaken about simple concerns, not complex ones. If the subject is future, you must always be skeptical and open-minded for positive and negative events. Never discredit something, just by seeming improbable. One way to keep your mind open to positive cases, for example, would be to increase your exposure to situations where they could happen, such as social events, dinners, and set the stage for unexpected but valuable encounters.
The book has an unusual analytical style that is personal and literary at some point, but his heterodox and unique perspective can sometimes be rigorous and accurate as well. We leave you to find out the details. Confront facts, research on your own and expand your knowledge 2. Luck matters 4. Is forecasting optional or mandatory business activity Confront facts, research on your own and expand your knowledge In the 17 century, the European schoolboys were taught by their teachers that the swans are white.
Their theory overlapped with the fact that every swan they examined had a snowy white plumage. Without any previous preparations, Vlamingh started his exploring expedition by searching the continent for wildlife and unique ingredients. Soon after he discovered creatures that were not familiar to him nor his crew such as kangaroos, teddy bears — koalas, Australian Dingo and would you know it a black feathered bird that looked exactly like the White Swans in Europe.
Detailed observations and investigations were made before Willem de Vlamingh realized that they were Swans just like the ones that he has seen in his homeland, so he challenged the scientists back in Europe to reformulate their beliefs and scientific facts. Luck matters If you think about a story any business story, the first thing that comes to our minds would be the challenges that an average businessman faces during his path.
Every story begins in the present or the prosperity that the businessman encounters after so many years of struggle. Afterward, the story takes a step back by reminding us of his humble and penniless beginnings. Different natural phenomena The human mind has been at the very center of unexplored mysteries that intrigued philosophers since ancient times.
Later on, the humans realized that our minds could see different percept realities out of one situation.Click To Tweet It is my great hope someday, to see science and decision makers rediscover what the ancients have always known.
The Impact of the Highly Improbable: With a new section: “On Robustness and Fragility”
Do you ask yourself these questions as you are reading this? In the 17 century, the European schoolboys were taught by their teachers that the swans are white. In Mediochristian our sampling of information and data available is very large, and no single fact will change the way the model works. Deaths in terrorist attacks, book sales by an author, inflation rates.
These models import a veneer of technical sophistication An alternative suggestion is to engage in highly speculative bets with a limited downside. Confront facts, research on your own and expand your knowledge 2. I was told to focus and I never did.