Book 2 of the 52 weeks = 52 Books Challenge – The Black Swan by Nassim Nicholas Taleb
This is a highly engaging book that brilliantly debunks “expert” theories about everything around us. It’s one of those books that challenge what you know, and you can never go back to your old way of thinking.
This book is by no means a quick read. I had to pause and reflect on the ideas put forth in this book.
The central premise is that the world around is too random to be predicted accurately. Black Swans, unpredictable and seemingly improbable events occur more and more frequently, and the approaches generally used by “experts” in every field are generally useless.
White swans being abundantly found everywhere has led us to believe Swans are always white which is not true. The author demonstrates by way of anecdotes how a lot of expert analysis takes place in the same fashion. How an ‘Absence of Evidence’ comes to be equated to ‘Evidence of Absence’ in various fields and how people like you and me are tricked into believing that the experts have managed all the risks optimally.
These flawed methods are applied to everything from Cancer detection to risk management by Portfolio managers.
Why we do what we do
We were evolved to find patterns even where there are none in order to survive and make sense of the world around us. We can only hold limited information in our brains so we tend to oversimplify. We also tend to extrapolate past observations to make predictions about the future. The author has argued that the world around is getting increasingly complex, random and chaotic and it’s nearly impossible to predict anything by extrapolation. People with ‘Street smarts’ who expose themselves to gain from Black Swans might be better off than ‘Experts’ with degrees and even Nobel Prizes.
Tha author talks about how Black Swan or outlier events are only bad for ‘suckers’, those who don’t see them coming and the ones who are the least prepared. There are positive black swans too, but they don’t show results as quickly as negative black swans do. Technological advancement is a positive black swan. There are numerous advances and applications of technology that have improved our lives and that were unimaginable until a few years ago.
He talks about how biases affect everyday decision making and even scientific studies. We tend to look for instances that confirm our beliefs (Confirmation Bias) rather than challenge them. We eventually find what we go looking for.
Then there is the Fallacy of Silent Evidence, incidents and ideas that are not accessible to us that makes us rely on accessible evidence for forming our conclusions. Usually, the accessible evidence is like the tip of the iceberg. For instance, we can never find out how the early human societies lived thousands of years ago as most evidence from that time has perished and was not recorded. We can only make inferences from the fraction of artifacts that have survived and have been discovered.
We tend to undermine the role of luck and chance in achieving success and tend to overemphasize the role of talent, skills and hard work (Survivorship Bias). This is evident in Winner-takes-all careers like movies and writing. Often one out of millions make it to the top of these professions and while looking at the journey of top artists, we often retrospectively attribute their success to their hard work and work ethic. There are in fact, millions who might be more talented than the people who reach the top just by sheer dumb luck.
If what we think we know far exceeds what we actually know, we can fall prey to Epistemic Arrogance. It’s when our confidence in our knowledge and skills becomes excessive. This can lead us to get entrenched in our beliefs and ideas and ignore conflicting evidence again leading to dangerous judgement errors. The more we know, the more we realize how much we don’t know.
Guidance for thriving in the professional world 