A black swan is a highly improbable event with three principal characteristics: It is unpredictable; it carries a massive impact; and, afterwards, we concoct an explanation that makes the event appear less random and more predictable than it was. The astonishing success of Google was a black swan and so was 9/11.
For Nassim Nicholas Taleb, black swans underlie almost everything about our world – from the rise of religions to events in our personal lives. But because humans are hardwired to learn specifics when they should be focused on generalities, we are unable to truly estimate opportunities and are not open enough to rewarding those who can imagine the “impossible.”
Elegant, startling, and universal in its applications, The Black Swan is a landmark book that will change the way you look at the world.
The revelations in this book explain everything you know about what you don’t know. It offers surprisingly simple tricks for dealing with black swans and benefiting from them.
Here is an excerpt from the book, "The Black Swan: The Impact of the Highly Improbable", by Nassim Nicholas Taleb
THE NARRATIVE FALLACY We fool ourselves with stories that cater to our Platonic thirst for distinct patterns: the narrative fallacy.
We like stories, we like to summarize, and we like to simplify, to reduce the dimension of matters. The fallacy is associated with our vulnerability to over-interpretation and our predilection for compact stories over raw truths. It severely distorts our mental representation of the world. It is particularly acute when it comes to the rare event.
The narrative fallacy addresses our limited ability to look at sequences of events without weaving an explanation into them, or, equivalently, forcing a logical link or an arrow of a relationship, upon them. Explanations bind facts together. They make them all the more easily remembered. They help them make more sense. Where this propensity can go wrong is when it increases our impression of understanding.
There is another, even deeper reason. for our inclination to narrate and it is not psychological. It has something to do with the effect of order on information storage and retrieval in any system, and it’s worth explaining here because of what is considered as the central problems of probability and information theory.
o The first problem is that information is costly to obtain.
o The second problem is that information is also costly to store – like real estate in New York. The more elderly, less random, patterned, and narrated a series of words or symbols are, the easier it is to store that series in one’s mind or jot it down in a book so your grandchildren can read it someday.
o Finally, information is costly to manipulate and retrieve.
We, members of the human variety of primates, have a hunger for rules because we need to reduce the dimension of matters so they can get into our heads. Or, rather sadly, so we can squeeze then into our heads. The more random information is, the greater the dimensionality, and thus, the more difficult it would be to summarize. The more you summarize, the more order you put in and the less randomness it becomes. Hence, the same condition that makes us simplify pushes us to think that the world is less random than it actually is.
And the Black Swan is what we leave out of simplification.
Indeed, many severe psychological disorders accompany the feeling of losing control of – being able to “make sense” of – one’s environment. Platonicity affects us here once again. The very same desire for order, interestingly applies to scientific pursuits – it is just that. Unlike art, the purpose of science is to get to the truth, and not to give you a feeling of organization, or make you feel better. We tend to use knowledge as therapy.
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