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3.4 out of 5 stars
339
3.4 out of 5 stars
The Black Swan: The Impact of the Highly Improbable
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TOP 100 REVIEWERon 14 April 2017
I will summarise the book in one paragraph and then give positive and negative comment and a more serious critique of his message.

Summary:

Forecasting is extremely difficult and usually little better than guessing. Most experts in social sciences, especially finance and economics, overrate themselves, proclaiming abilities they simply don't have (he uses the word "fraudster" many times). Risk analysis, and indeed all statistical work that relies on Gaussian assumptions, doesn't work because Gaussian assumptions don't hold in most real world situations, which are subject to "unknown unknowns". He cites the example of a casino which used mathematics to control its losses to gamblers but still lost a lot of money when an irreplaceable performer in their main show was maimed by a tiger, and when the owner's daughter was kidnapped. it nearly lost its licence when an irresponsible employee hid a bunch of tax returns instead of filing them. These, of course, are the black swans of the title.

The positive:

It is easy to read and entertaining, with an engaging human touch. Its insights are largely valid and important. It is a useful provocative challenge to conventional thinking and a slap in the face to self-important economists who take themselves too seriously.

The negative:

It is repetitive and could have been written in 50 pages. By the mid-point, the constant rubbishing of the entire scientific and mathematics community as fraudsters felt like a tiresome rant. Towards the end it felt like listening to the charismatic leader of a religious sect explaining that only he knew the truth and all those who didn't listen to him were damned. Indeed, the author is even more arrogant than those he attacks.

Critique:

The world of finance has known for a long time that its models don't allow for black swans. The question is whether to use existing models which work most of the time, or some alternative. Taleb isn't clear about what his alternative is though he quickly dismisses other peoples' attempts to allow for black swans in existing models. He says his method "develops intuitions from practice", relies on "skepticism", and "sophisticated craft", "seeks to be approximately right across a broad set of eventualities", "respects those who have the guts to say I don't know", and uses "messy mathematics and computational methods". None of this is specified, it is just motherhood and apple pie.

He gives a hint of what he means for investing. "I worry far more about the 'promising' stock market, particularly the 'safe' blue chip stocks, than I do about speculative ventures - the former represent invisible risks, the latter offer no surprises since you know how volatile they are and can limit your downside by investing smaller amounts."

It is worth taking a good look at this logic. He is saying he invests in risky assets but because they are risky, he doesn't put much money in them. Where does he put the rest of it then? Presumably in the safe blue chip stocks which he just said he doesn't like. Notice the comment "you know how volatile they are". He spends most of the book preaching that you never know how volatile things are. What he means here is that he knows they are very volatile. Reading carefully, his strategy amounts to this. The market generally undervalues some risks and overvalues others and, using his intuition, he does the opposite in order to benefit from other peoples' errors. This is a sound approach. It is also a common and well known one. The hard part is how to identify the errors. He thinks you can do it by allowing for black swans, since most trading models don't allow for them. But that means he is actually relying on all those existing models, albeit in a contrarian manner. If everybody stopped using them, his strategy would disappear. He has made the case that black swans are important and difficult to account for. It does not follow that the market would work better if existing methods were ditched.

Finally, his rude dismissal of all maths that uses Gaussian distributions is crass. For example he points out that words are distributed according to a power law, not Gaussian. That is true, and yet speech recognition, and all the language based artificial intelligence that is rapidly becoming powerful and useful, is based on mathematics that uses Gaussian distributions at its core.
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on 4 September 2016
There's probably a point in here, and I learned a little about the levant, but too ranty and roundabout. Didn't motivate me to finish. Still don't know what it's saying apart from "big, unexpected things have big, unexpected consequences"
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on 16 November 2015
This book makes an excellent point about the inherent unpredictability of future events – so called “black swans” like a stock market crash or a sudden decent into war. As such the author calls in to question the ability to truly predict anything with definite certainty that something sudden and unexpected could happen.

Unfortunately this is all the author really says – you could read the first chapter of this book and stop really since the same message is constantly repeated. The other major problem is the authors style of rambling on, and the egotistical way in which he claims to have life figured out and isn’t like the rest of you cattle. It was a good idea to start with, but the resulting book is actually quite a tediously repetitive read with a deeply unlikeable narrator.
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on 22 July 2016
The central themes of this book hold considerable interest. These include: the human tendency to seek explanations for events through a process of what's sometimes called confabulation (when it's about seeking explanations for your own actions where you want desperately to find a basis on which they make sense); the tendency of luck to play a large part in life (particularly in markets, where we tend to set success down more to skill etc); the difference between 'scalable' areas of life (where inequality rules) and 'non-scalable' areas (such as human height, where you have rather a bell curve distribution of outcomes); finally the Black Swan itself - the event that's unexpected (maybe in principle, maybe just to you) and which you haven't planned for. Taleb also has some useful advice: invest 80-90% of your money very safely; then spread widely the rest across investments that are high risk/high return; adopt a 5:2 diet (he is ahead of his time on this; was ahead of his time in seeing a bank collapse was possible; and also that an apparently secure dictatorship like Syria might collapse). One final piece of wisdom based on the memoirs of Casanova - Casanova feels he was always certain to bounce back from his many reverses in life - but note that someone is arithmetically certainly to be the person who lucks out in life over a series of reverses...

This very considerable upside to the book should be weighed by the potential reader against the downside - it's really quite long and quite repetitive. And while Taleb comes across as a likeable and larger than life character with an enormously wide range of interests, I did feel myself that I had perhaps had enough of his company well before reaching the end of the book.

Worth reading though for the unusual and really quite deep insights into life.
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on 28 February 2017
I am not qualified to comment on the maths and philosophical competence of the author. But he appears to know his stuff. I am reassured by the fact that he made money by trading using his abilities.

As such, it is a refreshing change from the superficial books expressing amazement by journalists or people who have never actually tested their theories in reality.

Assuming he is right, much of modern finance and indeed thinking about highly improbable (but not impossible) events is frighteningly wrong.

For anyone involved in business, investing (stocks, FX, bonds etc) -even if that is just your own pension -this is essential reading.

One of the most thought provoking books I've read for a long time.
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on 30 December 2016
There are two main issues with this book.
The first is the author's inexplicable arrogance and sense of superiority.
The second is the endless trail of anecdotes, both real and fictional, that only seem to serve the purpose of diluting the content.
The author assigns himself a very easy task: to prove that many theoretical frameworks are not perfect based on sporadic errors. He then assumes that this observation justifies the complete dismissal of whole branches of academia without offering any substantial alternative account. He constantly dismisses ill-defined groups such as "economists", "historians", or even just all "academics" (!) with little more than anecdotal evidence, without ever engaging with the opposing views.
I imagine in the current climate of anti-intellectualism this book will resonate with many, but anybody who has dealt with the matter in any serious setting or is simply familiar with basic scholarly practice will find this quite lacking.
I did appreciate the frequent references to the much preferable book Thinking Fast and Slow by Kahneman, which focuses on the cognitive aspect of statistical reasoning and its failings. For anyone interested more in the shortcomings of predictive models, I would possibly recommend Weapons of Math Destruction by O'Neil.
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on 1 February 2016
Pretentious and dull
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on 14 September 2014
Arrogant , pretentious and boasting author . Read first 50 pages then left it. Style is boring, topics are random ( personal issues, finance, rats in restaurants .. ) , not wast of money as its 1p but waste of time.
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on 31 March 2017
An interesting but ultimately frustrating book which covers the same basic premise multiple times, multiple different ways.

He writes in a way which says "I'm smarter than you" trying to convince you of something he successfully convinced you of at the start.

As a shorter book, or part of a bigger work this would've been great but it's not, it's 300 pages long (excluding acknowledgments, glossary, notes, biblography...). OK, maybe it gets better at the end, as I gave up in part 3 chapter 14 (over 200 pages in...)
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on 14 August 2017
This book is seminal. The idea of the outlier wasn't new, something he makes clear, in fact he makes a point of telling us that most of the wisdom in this book isn't new. What he's done that is so good, is like taken what many people have said over history, which we've forgotten, brings it to the surface and knits together and makes it relevant.

I love the guy's books and though I warm to his high paced conversational rambling style, I take one star for it as it's not for everyone.
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