The Black Swan [Book Review]

So this is the book review that I dreaded typing up for a variety of reasons. The book is on a great topic, but the layout and style of writing was not only hard to follow at times, but it almost contradicts its seriousness.

Imagine meeting a stranger in a bar, and he/she is telling you his/her experiences (startup/relationship/travel/etc) that you DO find interesting. However, that person, while being quite intoxicated, incorporates a lot of unfamiliar and dark sarcasm, goes off on multiple side tangents, and never tells his experiences a temporally cohesive way (from start -> finish ).

That’s this book……….The Black Swan, on the Impact of the Highly Improbable. As an ex-stock/bond/money trader, when Nassim Taleb’s (the author) career was “thrown under the bus” (or liberated in his terms) due to the stock market crash in 1987 (?), he switched his pursuits to the study of philosophy and its correlations to modern economics. This has resulted in the creation of his Incerto, a 4 book set (5 if you count the technical companion) on these specific topics.

The Black Swan is about how unforeseen, yet significant effects have drastic effects on the marketplace, social trends, and scientific advancements. The term black swan comes from a time when no one could possibly imagine there ever being black swans. It’d be like locals in Africa believing in pink elephants. But then they did find black swans in Australia! Who saw that one coming?

Well, the difference between these swans and Taleb’s economic black swans is its level of impact. Let’s be serious here, dark birds isn’t making anyone rich anytime soon.

For Taleb personally, it was the stock market crash during his early career. No one saw it coming, and his company went under as a result. In 24 hours, he went from feeling like he had a stable job to being completely lost, career-wise. You can lose your home to an unforeseen storm, break a bone due to a tree root out-of-sight, or catch your perfect spouse having an affair. All these things could be perceived, but those involved don’t consider such occurrences until after the event, when they can finally see them in hindsight. And then become over-protective for a time period afterwards.

Truthfully, most black swans don’t just happen overnight. However, their impact is never felt until it’s too late for the affected parties.

The people on wall street don’t trade like the stock market’s going to crash tomorrow. Do they have a plan if it does? Do all marriages sign prenuptial agreements? Does every house come with a bomb shelter? There is this realization that we limit the commitments on the way our world works, focus on the close possibilities, and ignore the possible extremes.

Black swan events can also be positive (for most parties). The invention of penicillin was a positive black swan, causing a sweeping effect in modern medicine not initially foreseen. In fact, most scientific discoveries were found through mistakes. Kevlar was an accidental discovery while DuPont was creating materials for other applications. Microwaves from the cosmic background of the universe were found when builders of a microwave detector found “unwanted noise” in every direction they pointed it at. Even recent discoveries, including CRISPR-related proteins (discussed in my previous book review) wasn’t found directly due to gene-manipulation research.

Thus, this book highlights some unique ideas on the topic of black swans:

  • You can’t predict WHEN a black swan incident will occur. If you could, it’s not a black swan. People would prepare for it, and it would have no drastic effects. You can’t determine the next stock market crash from the last two years of data. Like a turkey can’t predict from experiences in its caged (or “cage-free”) environment when it’ll become a family-cherished meal.
  • Black swan occurrences are often “under-predicted” by most “experts” (a term that the author likes to truly emphasize on). Most economists utilize standard textbook probabilities, the most popular being the Gaussian curve. While it is useful for physical limitations (body shape, particle physics occurrences, etc), it does not apply to economic limitations (personal salary, book/movie sales, stock prices, etc.).
  • Luck plays a major role in winners and losers. While you can study all the successful start-up big-shots and CEO multi-millionaires of the world, no one studies the graveyard of millions of untold stories from failing enterprises and garage band enthusiasts. And if you studies both, you would find the same characteristics in both parties. Confidence. Determination. Charisma. I’ve read many excellent books in my lifetime, but why did Harry Potter get so much attention? In most cases, it’s about being in the right place at the right time which separates success and failure.
  • Beyond Harry Potter, there isn’t a long list of books that even come close to its level of popularity. In the world of global commerce and digitization, the market has become a winner-takes-all concept. One person/group gets all the sales, while the others flounder. Writers, musicians, actors, (starving) artists? And once in the system, advertisement can keep the momentum and drown all others out except for a few major competitors (Coca Cola vs. Pepsi / Starbucks vs. Tim Hortons / NSync vs Backstreet Boys [yes, it’s kind of a stretch]).

The book is divided into thirds. The first part is mostly focused on mental and psychological theories that drive the massive impacts black swans have (due to their unexpectedness). However, this was the section that I remember the LEAST about. Due to his philosophical background, the writing style was personally hard to follow. With addition to the additional sarcasm and relatively boisterous approach (in terms of both word selection and objectives), I spent the first 100 pages calibrating to this style, learning to absorb his work efficiently.

The second and third sections deal more with business theory and practice with some overflow of ideas from the first segment. The lines between each section were quite gray (like it didn’t have specific chapters or sections). But more importantly, it personally felt like there wasn’t much of a flow in general. It felt more apparent as I approached the end of the book, so I believe its there is one IF you look deep enough. But you can easily be misguided into feeling like you’ve bought a book on random though exercises.

It’s as if you’re looking at a reflection of an object from collection of broken mirror shards. Due to the randomness of the mirror shard orientations, it takes a bit to take in the information before one can imagine the full picture.

But this is what makes the book unique. The author doesn’t write in a style that editors would desire, in order to help maximize book sales. If he did, he would be selling his soul to those believing in Mediocristan (the world of black swan non-believers) and contradict the main point of his book entirely.

So while you may never be able to truly prepare for a black swan, the best way to strive living in the world of Extremistan (our world with black swans) is to keep your eyes open and stay flexible. Become familiar with what you truly have control of and don’t become too dependent on external factors.

And don’t run for trains. In the case of life’s possible outcomes, it’s only painful if you’re chasing an almost improbable expectation to catch a ride on.

-KK

Note: I plan to read at least one more book of his in the future (Antifragile). It’s also a bigger book, so it’ll be an experience. Hopefully, I’ll have a better understanding of the author and his method or writing afterwards.

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