on 19 June 2009
There are many reviews here already, so I'll keep this short:
- Content: makes insightful points on limitations of our knowledge, human temptation to identify false trends and narratives, follow herd mentality, blindly follow 'experts', and so forth. He calls this 'skeptical empiricism'.
- Style: long-winded and rambling, skipping from personal stories from Lebanon, to parables intended to represent the author, to dull discussions on history of mathematics. I didn't mind it, but some readers hate it.
- Author: massively arrogant and up himself. Thinks he's had the best idea since sliced bread. He's got a good idea, but he's not the first or the only one, just the one with the biggest mouth.
- Other reads: there are better books out there on similar subjects. John Kay (of the FT) writes essays from a similar position, much more concisely and more to the point.
Hope that helps!
on 28 November 2007
Taleb has one good idea, a great idea even, and an infinite number of ways of talking about it. It is essentially the same idea as his last book, Fooled by Randomness: namely that life does not behave with regularity. Those who think it does, he says, will always be tripped up by the unexpected. Black Swan extends that idea, beyond the financial markets he concentrated on in Randomness, to just about all walks of life. He is a magpie for anecdote and stray pieces of supporting evidence wherever he can find them. He calls all this 'skeptical empiricism'.
The qualification is that his big idea is not original, though his numerous examples do help bring home its ubiquity. More problematically, he overstates its usefulness. For when it comes to calling your next move, the unpredictable and the unexpected are, by definition, not things we can anticipate. And though he is right that in the long run there will undoubtedly by high impact improbably events, it is also true, as Keynes said, that in the long run we are all dead: organising your life on the principle that something radical might come along doesn't solve the everyday problem of what to next.
In short, he exaggerates his own insight and the authority it gives him. That's a wicked irony, for the chief target of his ire is those with an exaggerated sense of insight and control over their lives.
Oh, and the tone... Taleb wants to be seen as a radical iconoclast. Every sentence drips righteousness and often irritation. He is the strutting, impatient sage, the rest of us blinkered morons. Apparently he doesn't like his editors trying to change this. A word of advice to the author: if you want your advice heeded, don't shout and sneer at your audience. For this reason, an interesting thesis, but in the end a wearisome read.
on 29 May 2008
I must admit that I approached reading this book with some trepidation. I had read Taleb's earlier book "Fooled By Randomness" and whilst I found that book very interesting I also found it very exasperating. This book was the same, only more so.
The central theme of the book is that unexpected random events are much more likely to have far greater impact than is presumed by traditional statistics . In contrast he shows that there are domains where extreme events or values are more frequent and dominate overall. Taleb's arguments are convincing and he also shows why prediction in general is very difficult and describes human being's desires to post-rationalise events. Because prediction is thus impossible and because the impact of these extreme random events (the 'Black Swans') is so large his argument is that this makes a mockery of much of history, economics and financial theory.
The main problem with the book is the tone of the author. Taleb clearly does not suffer fools gladly and it seems that he considers most people in economics, finance, statistics and academia as fools. He comes across as believing that he is the only one who really gets these ideas. His constant attacks on the 'dark suits' and academics (not to mention several strange jibes at the French) become very wearing. Also his dismissal of the normal distribution is overdone since there are clearly areas where it works well.
All in all a very good book but I wish he would overcome his arrogance before the next one.
on 25 November 2008
As a statistician, the book and its premise struck me as an interesting read, but it is clear after a few chapters that the book itself is meandering nowhere. What is worse is that the evidence is always second hand philosophy and the book is peppered with uninteresting self promotion. If your idea of a good read is to re-read Bertrand Russell or to move towards a footnote where the author feels it important to tell you he doesnt wear a tie in meetings then, please, feel free to lap this up and all the sixth form anarchy that it attempts to promote.
As for the statistics, it is amateur stuff. The Black Swan itself is an improbable event on which the author places far too much emphasis. It soon becomes confused and contradictory. Originally boldly stating that bell curve analysis is all Information (or is it Intellectual?) fraud, in later chapters the author then splits outcomes up into factions, some of which are affected by the black swan and some that are not. It then becomes apparent that the author has taken five chapters to split outcomes into normal and non-normal. Ground breaking stuff, that has, errm, been around for centuries. Essentially this book ends up elaborating on the phrase 'Picking pennies in front of a steam roller' which is so familiar to all that, well, there is a phrase for it. This book is an irrelevance to statisticians. I cannot comment on the philosophy side, but, as far as I can see, there isnt a viewpoint that hasnt been borrowed from someone more famous. In short, this book is a huge disappointment.
It should also be noted that this book is unduly aggressive and self opinionated. I assume that this is to add gravitas to the subject. On this point it fails miserably. Instead it makes the author appear narcissistic, unbalanced, and, yes, a bit stupid. Its likely that many people who start this book will lack the desire to finish it. And that, sad to say, isnt a bad thing.
on 8 January 2009
Never before have I felt the urge to advise amazon buyers not to buy a book. But there's a first time for everything. Sadly, this book is an intellectual and stylistic mess.
In contrast to Mr Taleb's previous book (Fooled by Randomness) Fooled by Randomness: The Hidden Role of Chance in Life and in the Marketswhich I rate as a five star buy this book has nothing new and isn't even funny.
The basic argument is apparent from the title: just because you've never seen it before doesn't mean you won't see it tomorrow. Swans were assumed to be always white, until the discovery of black swans in Australia.
There are lessons to be drawn from this critique of what philosophers call the problem of induction, but not enough to fill a book. Instead, the author lets off a scattershot at several bats in a belfry.
First in the firing line is Plato. (Perhaps it's neo-Platonists, but an argument constructed on terms such as "What I call Platonicity" makes it hard to tell. The level of debate has already descended to the sophistication of a coconut shy.)
Second is the normal distribution. True, a roll of the die shows you one to six with equal probability. But two dice? Now we're talking a bell curve. The author seems to think that noone has wrestled before with the problem of extreme odds-against results, but's that's the future for you: hard to predict. A 95% confidence level is just that: once about every twenty times you're going to get an unexpected result. Surprise? Often. It is argued that these unusual unwelcome results are discounted from conventional thinking, and that the catastrophic consequence makes the tail of the distribution disproportionately important. Very true, but not new. Mountaineers and medical researchers (to name but two) have been confronting this problem for a century.
Not quite argued (but implied) is that all statistics is balderdash. Well, it's a branch of mathematics that deals with uncertainty, so we can't be sure.
Stylistically the book is all over the place. Reminiscence of the author's time as a "quant" (a statistical analyst of financial markets) elbow aside pseudo philosophical discussion, only to give place to some boasting about conferences he's addressed on the strength of his previous book. In between we get some noveletish stuff about "Fat Tony", "Yevgenia" (author of a bestseller that sounds unreadable), and a "fictional" character called Tulip. (Who is surely a direct descendant of Lupin, Mr Pooter's son in diary of a Nobody.)
We just can't predict, is the sum of all this. Indeed not, but we can bet that this book will be out of print just as soon as financial bestsellers go from "whoever would have thought it?" to next year's conspiracy theories.
The author thanks his editor, a certain Will Murphy. Mr Murphy, you didn't do your job, did you?
on 10 September 2009
Nassim Nicholas Taleb, once an ex-trader, is now Professor of the Sciences of Uncertainty (what a job title!).
The basic idea behind the book is that people ignore highly improbable events because they are unpredictable. However some of these event can have a massive impact, and in these cases people then try to suggest that it was after all predictable. The book is topical because it argues that traders and financial markets ignore the unpredictable and don't even learn from past mistakes (however this book is not an analysis of the recent meltdown in financial markets). The author argues that the "unlikely" tail of a distribution of likely events is disproportionately important. I would have thought everyone knew that, even if we tend to be bad at estimating the exact size of "rare" risks.
There are literally 100's of reviews on this book, and opinions are very divergent. My guess is that the more people know about the ideas of uncertainty and predictability the more negative their review. For others, every line and anecdote is a revelation. The most astute reviewers accept that randomness produces unpredictability, but they understand that we must build our lives around a good degree of predicability. We all accept that the author does a reasonably job describing (with lots of repetition) this situation but does nothing to tell us how to cope with and better manage uncertainly and its consequences. Lets face it, we build homes even if they might be struck by lightning, but we try to mitigate their potential impact through good building practices and we also create emergency service to help out when such random and unpredictable events occur (in my opinion what was missing in the recent mess in financial markets was the understanding of good practices enforced through a strong regulator). I also agree with those reviewers who found the authors tone at times irritating, as if he has the word of God and people are just not intelligent enough to listen to him.
To conclude, I like the overall idea behind the book, but I was expecting a real analysis and some suggestions as to how to understand and better manage rare and catastrophic events. But sadly all a got was a short article masquerading as a book.
Everybody knows this is a lazy sequel to a succesful book.
But I never read Fooled by Randomness, and I hold a couple math degrees, and I even once took a class from a hydrologist, so I reckon I'm well-equipped to pass judgement.
The main issue with the book is that if you read the inside of the jacket carefully you don't need to read the rest of the book. There's one idea here and it's that you never know if you've looked at enough data. If you presume you do, you run the risk that you'll get a surprise which upsets your world theory. That surprise is a bit like the first time you encounter a black swan. Turning that core idea into a (second!) book is indeed a stretch.
The second issue is that the author appears to be rather conceited / self centered and just keeps repeating how right he's got this idea and how wrong everybody else has got it. It gets tiring. He does not even get that point entirely right either. Lots of people's job description is to project current trends an hour forward. It ain't their fault.
The third issue is that it's a quote a minute from all sorts of sources and after a while you get the feeling the author is kind of trying to convince you he's covered all the bases. Or maybe that he's a truly erudite renaissance man who's done a lot of reading. Hey, maybe he had a word limit. You can't get there just by playing with the margins like we all once did in college.
On the plus side, the book is not as dreadful to read as the critics have it, and THE MAN IS RIGHT about the point (note that I'm not using the plural) he makes.
If you're stuck on a plane and the guy sitting next to you puts down his copy of the Black Swan, don't be afraid to pick it up, it's OK.
on 31 July 2008
This book is for most part engagingly written and full of entertaining stories and provocative ideas. It makes you reconsider things you take for granted in life and reevaluate your own perspective of the future. But at times I couldn't help feeling that the author was just too full of himself, too pleased with his own ideas and too disparaging towards other people's. Not only does this create a negative feeling but it also works against the book's objectivity. How can a theory be impartial and objective when its author is so in love with himself and his own ideas? Nevertheless this book is a very rewarding read.
on 7 September 2007
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.
Enjoying and beguiled by 'Fooled By Randomness' I was keen to read the author's 2nd effort. The first I had found compelling, not least as I found his slightly too confident tone quite attractive; I liked the way I supposed he condescended to City types. The central point is a simple one, made against the background of High Finance believing post 1970, that risk is eliminable in financial markets. He uses a concept known to all readers of Karl Popper's work on science: in the Problem of Induction, if you hypothesise that 'All Swans are White' no matter how many times you observe White Swans, this will only verify your hypothesis, which is not meaningful, he thought. Here Popper introduced his concept of Falsifiabilty: that one sighting of a Black Swan renders all verified white swans insignificant. (That is, no amount of white swans will ever conclusively Verify that they are essentially white; just one sighting of a black one refutes the hypothesis, a.k.a.: Yesterday's tomorrow tells us nothing about any today's tomorrow). For Popper a hypothesis must be Falsifiable to qualify as Scientific: Black Swans therefore denote scientific significance. Thus Taleb, seeing the much vaunted , putatively clear skies of the money markets in the 1990s, presciently noted that the money markets and high finance awaited their inevitable Black Swan. Merton and Black-Scholes etc. notwithstanding, early on Taleb pointed out that risk had NOT been eliminated from trading and crashes are inevitable; a Black Swan was eventually inevitable. He was not alone, but fair play for noticing early the enormous hubris even Alan Greenspan later called "irrational exuberance" and crying havoc.
This book has the jump on 'Randomness' in that the catastrophe has happened; as a thesis it does not develop the idea of the earlier book, although he is spectacularly vindicated by the events of 2007/8. Worth a read, but go to his first book, when he was already a self-confident Cassandra, for a leaner, fitter read.