Black Swan – Review

By vinodnarayan on October 31, 2011 • ( 0 )

Black swan Theory developed by Nassim Nicholas Taleb is a metaphor that is used to classify, unexpected, unpredicted events that have a high impact. Nassim Nicholas Taleb’s Book Black Swan takes you through the concept that unpredictable events that shape the history of mankind are often beyond the realm of normal observation. Though many times in the language of a stock trader he explains the impacts of events on markets, he has written the book for a general reader like me who is nowhere near into trading and stocks but have like many been hit with black swans that lurk unpredicted in the future.

Though at times he sounds pompous in his narration, there is a quirkiness that you will like. If you love books that take you across multiple disciplines in one stretch then you will love this book. From economics to history to physics and mathematics, NTT takes you through various knowledge sects to prove or more aptly explain his concept of black swan. Though I am not sure if he really had to be so aggressive in his comments on some of the people he has mentioned in the book. But it is his book and he says what he has to say.

Another interesting aspect that I liked was his explanation of history and the fact that history is only what we think it could have been and not necessarily a proven set of facts. This would mean many of our assumptions go wrong when we know that the basis of our knowledge had a few too many loose stones in them. I loved thinking into the concept of falsifiability which is the logical possibility that something you know could be contradicted and proven wrong through observation or a physical experiment. It gets even more intriguing when you realize that we have created technology and theories to prove every black swan after it happens, but predicting is not possible and that makes it a black swan. Also there are a few man imposed black swans that are not predictable to the larger population, but very well known to those who did it.

I like him going after the bell curve on which a big chunk of probability theorists live on. Bringing the concepts of mediocristan and extremistan he explains why you should only use a bell curve or Gaussian function in a mediocristan environment. The extremistan environments have black swans that will literally fail the bell curve. This as he says is still debated among the bright minds and I am no one to refute his or their claim. He gives an example of Mediocristan career in Doctors where effort put can be equated to the rewards, more effort more reward up to a limit of effort that can be humanly put. While he also explains an extremistan career where a book writer where one book could make millions while others dont and if you try to analyze the probability of a book’s success through the bell curve you might not get the correct insights. I am not fully sure if that would be correct because books by renowned best selling authors are more predictable than new comers and among new comers also themes can give some insights. But he is true about one book that might become a big hit without really knowing. Was Freakonomics an example of something in the extremistan space. No idea. May be.