The Black Swan

Key Takeaways

Under Consideration — to be added.

Interconnections

Under Consideration — to be added.

Highlights

• It illustrates a severe limitation to our learning from observations or experience and the fragility of our knowledge. One single observation can invalidate a general statement derived from millennia of confirmatory sightings of millions of white swans.
• First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact (unlike the bird). Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.
• Go ask your portfolio manager for his definition of “risk,” and odds are that he will supply you with a measure that excludes the possibility of the Black Swan—hence one that has no better predictive value for assessing the total risks than astrology (we will see how they dress up the intellectual fraud with mathematics). This problem is endemic in social matters.
• The central idea of this book concerns our blindness with respect to randomness, particularly the large deviations: Why do we, scientists or nonscientists, hotshots or regular Joes, tend to see the pennies instead of the dollars? Why do we keep focusing on the minutiae, not the possible significant large events, in spite of the obvious evidence of their huge influence? And, if you follow my argument, why does reading the newspaper actually decrease your knowledge of the world?
• Black Swan logic makes what you don’t know far more relevant than what you do know.* Consider that many Black Swans can be caused and exacerbated by their being unexpected.
• The more unexpected the success of such a venture, the smaller the number of competitors, and the more successful the entrepreneur who implements the idea.
• The payoff of a human venture is, in general, inversely proportional to what it is expected to be.
• What you know cannot really hurt you.
  • “Which thing I had never before supposed.”
• What is surprising is not the magnitude of our forecast errors, but our absence of awareness of it.
• Our inability to predict in environments subjected to the Black Swan, coupled with a general lack of the awareness of this state of affairs, means that certain professionals, while believing they are experts, are in fact not. Based on their empirical record, they do not know more about their subject matter than the general population, but they are much better at narrating—or, worse, at smoking you with complicated mathematical models. They are also more likely to wear a tie.
  • Death of expertise
• The strategy for the discoverers and entrepreneurs is to rely less on top-down planning and focus on maximum tinkering and recognizing opportunities when they present themselves. So I disagree with the followers of Marx and those of Adam Smith: the reason free markets work is because they allow people to be lucky, thanks to aggressive trial and error, not by giving rewards or “incentives” for skill. The strategy is, then, to tinker as much as possible and try to collect as many Black Swan opportunities as you can.
• What are our minds made for? It looks as if we have the wrong user’s manual. Our minds do not seem made to think and introspect; if they were, things would be easier for us today, but then we would not be here today and I would not have been here to talk about it—my counterfactual, introspective, and hard-thinking ancestor would have been eaten by a lion while his nonthinking but faster-reacting cousin would have run for cover. Consider that thinking is time-consuming and generally a great waste of energy, that our predecessors spent more than a hundred million years as nonthinking mammals and that in the blip in our history during which we have used our brain we have used it on subjects too peripheral to matter. Evidence shows that we do much less thinking than we believe we do—except, of course, when we think about it.
• It is the same logic reversal we saw earlier with the value of what we don’t know; everybody knows that you need more prevention than treatment, but few reward acts of prevention. We glorify those who left their names in history books at the expense of those contributors about whom our books are silent.
• Indeed the normal is often irrelevant. Almost everything in social life is produced by rare but consequential shocks and jumps; all the while almost everything studied about social life focuses on the “normal,”
  • Show a chart of common data points and a trend line with one single dot far away from the norm. “This is where history is made.”
• Today academics in abstract disciplines depend on one another’s opinion, without external checks, with the severe occasional pathological result of turning their pursuits into insular prowess-showing contests. Whatever the shortcomings of the old system, at least it enforced some standard of relevance.)
  • Academic research
• You need a story to displace a story. Metaphors and stories are far more potent (alas) than ideas; they are also easier to remember and more fun to read. If I have to go after what I call the narrative disciplines, my best tool is a narrative. Ideas come and go, stories stay.
  • Storytelling
• I also make the bolder (and more annoying) claim that in spite of our progress and the growth in knowledge, or perhaps because of such progress and growth, the future will be increasingly less predictable, while both human nature and social “science” seem to conspire to hide the idea from us.
• a private library is not an ego-boosting appendage but a research tool. Read books are far less valuable than unread ones. The library should contain as much of what you do not know as your financial means, mortgage rates, and the currently tight real-estate market allow you to put there. You will accumulate more knowledge and more books as you grow older, and the growing number of unread books on the shelves will look at you menacingly. Indeed, the more you know, the larger the rows of unread books. Let us call this collection of unread books an antilibrary.
• Let us call an antischolar—someone who focuses on the unread books, and makes an attempt not to treat his knowledge as a treasure, or even a possession, or even a self-esteem enhancement device—a skeptical empiricist.
• It is one thing to be cosmetically defiant of authority by wearing unconventional clothes—what social scientists and economists call “cheap signaling”—and another to prove willingness to translate belief into action.
• I had been told in high school that the planets are in something called equilibrium, so we did not have to worry about the stars hitting us unexpectedly. To me, that eerily resembled the stories we were also told about the “unique historical stability” of Lebanon. The very idea of assumed equilibrium bothered me. I looked at the constellations in the sky and did not know what to believe.
• The human mind suffers from three ailments as it comes into contact with history, what I call the triplet of opacity. They are: the illusion of understanding, or how everyone thinks he knows what is going on in a world that is more complicated (or random) than they realize; the retrospective distortion, or how we can assess matters only after the fact, as if they were in a rearview mirror (history seems clearer and more organized in history books than in empirical reality); and the overvaluation of factual information and the handicap of authoritative and learned people, particularly when they create categories—when they “Platonify.”
• I developed the governing impression that our minds are wonderful explanation machines, capable of making sense out of almost anything, capable of mounting explanations for all manner of phenomena, and generally incapable of accepting the idea of unpredictability. These events were unexplainable, but intelligent people thought they were capable of providing convincing explanations for them—after the fact. Furthermore, the more intelligent the person, the better sounding the explanation. What’s more worrisome is that all these beliefs and accounts appeared to be logically coherent and devoid of inconsistencies.
• Paul Veyne, aptly talked about religions spreading “like bestsellers”—a comparison that indicates unpredictability. These kinds of discontinuities in the chronology of events did not make the historian’s profession too easy: the studious examination of the past in the greatest of detail does not teach you much about the mind of History; it only gives you the illusion of understanding it.
• Funes in the short story by Jorge Luis Borges, “Funes, the Memorious,” who forgets nothing and seems condemned to live with the burden of the accumulation of unprocessed information. (He does not manage to live too long.)
• Surprisingly, the book that influenced me was not written by someone in the thinking business but by a journalist: William Shirer’s Berlin Diary: The Journal of a Foreign Correspondent, 1934–1941. Shirer was a radio correspondent, famous for his book The Rise and Fall of the Third Reich. It occurred to me that the Journal offered an unusual perspective. I had already read (or read about) the works of Hegel, Marx, Toynbee, Aron, and Fichte on the philosophy of history and its properties and thought that I had a vague idea of the notions of dialectics, to the extent that there was something to understand in these theories. I did not grasp much, except that history had some logic and that things developed through contradiction (or opposites) in a way that elevated mankind into higher forms of society—that kind of thing. This sounded awfully similar to the theorizing around me about the war in Lebanon. To this day I surprise people who put the ludicrous question to me about what books “shaped my thinking” by telling them that this book taught me (albeit inadvertently) the most about philosophy and theoretical history—and, we will see, about science as well, since I learned the difference between forward and backward processes.
• The journal was purportedly written without Shirer knowing what was going to happen next, when the information available to him was not corrupted by the subsequent outcomes. Some comments here and there were quite illuminating, particularly those concerning the French belief that Hitler was a transitory phenomenon, which explained their lack of preparation and subsequent rapid capitulation. At no time was the extent of the ultimate devastation deemed possible.
• While we have a highly unstable memory, a diary provides indelible facts recorded more or less immediately; it thus allows the fixation of an unrevised perception and enables us to later study events in their own context. Again, it is the purported method of description of the event, not its execution, that was important.
  • Journalkeeping
• One would suppose that people living through the beginning of WWII had an inkling that something momentous was taking place. Not at all.*
• I noticed that very intelligent and informed persons were at no advantage over cabdrivers in their predictions, but there was a crucial difference. Cabdrivers did not believe that they understood as much as learned people—really, they were not the experts and they knew it. Nobody knew anything, but elite thinkers thought that they knew more than the rest because they were elite thinkers, and if you’re a member of the elite, you automatically know more than the nonelite.
• I also noticed during the Lebanese war that journalists tended to cluster not necessarily around the same opinions but frequently around the same framework of analyses. They assign the same importance to the same sets of circumstances and cut reality into the same categories—once again the manifestation of Platonicity, the desire to cut reality into crisp shapes. What Robert Fisk calls “hotel journalism” further increased the mental contagion.
• Categorizing is necessary for humans, but it becomes pathological when the category is seen as definitive, preventing people from considering the fuzziness of boundaries, let alone revising their categories.
  • Engenderment: the act of engendering / defining something
• Contagion was the culprit. If you selected one hundred independent-minded journalists capable of seeing factors in isolation from one another, you would get one hundred different opinions. But the process of having these people report in lockstep caused the dimensionality of the opinion set to shrink considerably—they converged on opinions and used the same items as causes.
• The best way to prove the arbitrary character of these categories, and the contagion effect they produce, is to remember how frequently these clusters reverse in history. Today’s alliance between Christian fundamentalists and the Israeli lobby would certainly seem puzzling to a nineteenth-century intellectual—Christians used to be anti-Semites and Moslems were the protectors of the Jews, whom they preferred to Christians. Libertarians used to be left-wing. What is interesting to me as a probabilist is that some random event makes one group that initially supports an issue ally itself with another group that supports another issue, thus causing the two items to fuse and unify … until the surprise of the separation.
• Categorizing always produces reduction in true complexity.
  • Nuance
• Any reduction of the world around us can have explosive consequences since it rules out some sources of uncertainty; it drives us to a misunderstanding of the fabric of the world. For instance, you may think that radical Islam (and its values) are your allies against the threat of Communism, and so you may help them develop, until they send two planes into downtown Manhattan.
• I then completely gave up reading newspapers and watching television, which freed up a considerable amount of time (say one hour or more a day, enough time to read more than a hundred additional books per year, which, after a couple of decades, starts mounting).
• Why someone with plans to become a “philosopher” or a “scientific philosopher of history” would wind up in business school, and the Wharton School no less, still escapes me. There I saw that it was not merely some inconsequential politician in a small and antique country (and his philosophical driver Mikhail) who did not know what was going on. After all, people in small countries are supposed to not know what is going on. What I saw was that in one of the most prestigious business schools in the world, in the most potent country in the history of the world, the executives of the most powerful corporations were coming to describe what they did for a living, and it was possible that they too did not know what was going on. As a matter of fact, in my mind it was far more than a possibility. I felt in my spine the weight of the epistemic arrogance of the human race.*
  • The most important thing you can do is immerse yourself with the people who are, supposedly, the smartest people in the world and realize that they don’t know anything. Disabuse yourself of the notion that everyone around you knows more than you do. They do not.
• It felt like Lebanon, with a twist: having seen both, I was struck that financial distress could be more demoralizing than war (just consider that financial problems and the accompanying humiliations can lead to suicide, but war doesn’t appear to do so directly).
• I was convinced that I was totally incompetent in predicting market prices—but that others were generally incompetent also but did not know it, or did not know that they were taking massive risks. Most traders were just “picking pennies in front of a streamroller,” exposing themselves to the high-impact rare event yet sleeping like babies, unaware of it. Mine was the only job you could do if you thought of yourself as risk-hating, risk-aware, and highly ignorant.
• (Independence is person-specific: I have always been taken aback at the high number of people in whom an astonishingly high income led to additional sycophancy as they became more dependent on their clients and employers and more addicted to making even more money.) While not substantial by some standards, it literally cured me of all financial ambition—it made me feel ashamed whenever I diverted time away from study for the pursuit of material wealth.
• Once, in the Chicago pits, another trader tried to strangle me and it took four security guards to drag him away. He was irate because I was standing in what he deemed his “territory.” Who would want to leave such an environment? Compare it to lunches in a drab university cafeteria with gentle-mannered professors discussing the latest departmental intrigue.
• I stayed in the quant and trading businesses (I’m still there), but organized myself to do minimal but intense (and entertaining) work, focus only on the most technical aspects, never attend business “meetings,” avoid the company of “achievers” and people in suits who don’t read books, and take a sabbatical year for every three on average to fill up gaps in my scientific and philosophical culture. To slowly distill my single idea, I wanted to become a flâneur, a professional meditator, sit in cafés, lounge, unglued to desks and organization structures, sleep as long as I needed, read voraciously, and not owe any explanation to anybody.
• When people at cocktail parties asked me what I did for a living, I was tempted to answer, “I am a skeptical empiricist and a flâneur-reader, someone committed to getting very deep into an idea,” but I made things simple by saying that I was a limousine driver.
• Niall Ferguson showed that, despite all the standard accounts of the buildup to the Great War, which describe “mounting tensions” and “escalating crises,” the conflict came as a surprise. Only retrospectively was it seen as unavoidable by backward-looking historians. Ferguson used a clever empirical argument to make his point: he looked at the prices of imperial bonds, which normally include investors’ anticipation of government’s financing needs and decline in expectation of conflicts since wars cause severe deficits. But bond prices did not reflect the anticipation of war.
• Yevgenia Nikolayevna Krasnova was an obscure and unpublished novelist, with an unusual background. She was a neuroscientist with an interest in philosophy (her first three husbands had been philosophers), and she got it into her stubborn Franco-Russian head to express her research and ideas in literary form. She dressed up her theories as stories, and mixed them with all manner of autobiographical commentary.
• She had attended a famous writing workshop five years earlier and came out nauseated. “Writing well” seemed to mean obeying arbitrary rules that had grown into gospel, with the confirmatory reinforcement of what we call “experience.” The writers she met were learning to retrofit what was deemed successful: they all tried to imitate stories that had appeared in past issues of The New Yorker—not realizing that most of what is new, by definition, cannot be modeled on past issues of The New Yorker.
  • Da Vinci learning rules to break them
• In these professions, no matter how highly paid, your income is subject to gravity. Your revenue depends on your continuous efforts more than on the quality of your decisions. Moreover, this kind of work is largely predictable: it will vary, but not to the point of making the income of a single day more significant than that of the rest of your life. In other words, it will not be Black Swan driven.
• Now being lazy, considering laziness as an asset, and eager to free up the maximum amount of time in my day to meditate and read, I immediately (but mistakenly) drew a conclusion. I separated the “idea” person, who sells an intellectual product in the form of a transaction or a piece of work, from the “labor” person, who sells you his work.
• If I myself had to give advice, I would recommend someone pick a profession that is not scalable! A scalable profession is good only if you are successful; they are more competitive, produce monstrous inequalities, and are far more random, with huge disparities between efforts and rewards—a few can take a large share of the pie, leaving others out entirely at no fault of their own.
• In pursuits that have a technical component, like being a pianist or a brain surgeon, talent is easy to ascertain, with subjective opinion playing a relatively small part. The inequity comes when someone perceived as being marginally better gets the whole pie.
• Art De Vany, an insightful and original thinker who singlemindedly studied wild uncertainty in the movies. He showed that, sadly, much of what we ascribe to skills is an after-the-fact attribution. The movie makes the actor, he claims—and a large dose of nonlinear luck makes the movie.
• The success of movies depends severely on contagions. Such contagions do not just apply to the movies: they seem to affect a wide range of cultural products. It is hard for us to accept that people do not fall in love with works of art only for their own sake, but also in order to feel that they belong to a community. By imitating, we get closer to others—that is, other imitators. It fights solitude.
• In Extremistan, inequalities are such that one single observation can disproportionately impact the aggregate, or the total. So while weight, height, and calorie consumption are from Mediocristan, wealth is not. Almost all social matters are from Extremistan. Another way to say it is that social quantities are informational, not physical: you cannot touch them. Money in a bank account is something important, but certainly not physical. As such it can take any value without necessitating the expenditure of energy. It is just a number!
• Mediocristan is where we must endure the tyranny of the collective, the routine, the obvious, and the predicted; Extremistan is where we are subjected to the tyranny of the singular, the accidental, the unseen, and the unpredicted.
• I had to stop these pranks as I got deeper into adulthood, of course, but I am often involuntarily hit with such an image when bored out of my wits in meetings with serious-looking businesspersons (dark suits and standardized minds) theorizing, explaining things, or talking about random events with plenty of “because” in their conversation.
• In fact, the entire knowledge-seeking enterprise is based on taking conventional wisdom and accepted scientific beliefs and shattering them into pieces with new counterintuitive evidence, whether at a micro scale (every scientific discovery is an attempt to produce a micro–Black Swan) or at a larger one (as with Poincaré’s and Einstein’s relativity).
• Consider a turkey that is fed every day. Every single feeding will firm up the bird’s belief that it is the general rule of life to be fed every day by friendly members of the human race “looking out for its best interests,” as a politician would say. On the afternoon of the Wednesday before Thanksgiving, something unexpected will happen to the turkey. It will incur a revision of belief.*
• Consider that the feeling of safety reached its maximum when the risk was at the highest! But the problem is even more general than that; it strikes at the nature of empirical knowledge itself. Something has worked in the past, until—well, it unexpectedly no longer does, and what we have learned from the past turns out to be at best irrelevant or false, at worst viciously misleading.
  • The life of a turkey, in a micro data set, goes against the Lindy principle
• Mistaking a naïve observation of the past as something definitive or representative of the future is the one and only cause of our inability to understand the Black Swan.
• It would appear to a quoting dilettante—i.e., one of those writers and scholars who fill up their texts with phrases from some dead authority—that, as phrased by Hobbes, “from like antecedents flow like consequents.” Those who believe in the unconditional benefits of past experience should consider this pearl of wisdom allegedly voiced by a famous ship’s captain: But in all my experience, I have never been in any accident… of any sort worth speaking about. I have seen but one vessel in distress in all my years at sea. I never saw a wreck and never have been wrecked nor was I ever in any predicament that threatened to end in disaster of any sort. E. J. Smith, 1907, Captain, RMS Titanic Captain Smith’s ship sank in 1912 in what became the most talked-about shipwreck in history.*
• In the summer of 1982, large American banks lost close to all their past earnings (cumulatively), about everything they ever made in the history of American banking—everything. They had been lending to South and Central American countries that all defaulted at the same time—“an event of an exceptional nature.” So it took just one summer to figure out that this was a sucker’s business and that all their earnings came from a very risky game. All that while the bankers led everyone, especially themselves, into believing that they were “conservative.” They are not conservative; just phenomenally skilled at self-deception by burying the possibility of a large, devastating loss under the rug. In fact, the travesty repeated itself a decade later, with the “risk-conscious” large banks once again under financial strain, many of them near-bankrupt, after the real-estate collapse of the early 1990s in which the now defunct savings and loan industry required a taxpayer-funded bailout of more than half a trillion dollars. The Federal Reserve bank protected them at our expense: when “conservative” bankers make profits, they get the benefits; when they are hurt, we pay the costs.
• You realize that you can eliminate a Black Swan by science (if you’re able), or by keeping an open mind. Of course, like the LTCM people, you can create Black Swans with science, by giving people confidence that the Black Swan cannot happen—this is when science turns normal citizens into suckers.
• In general, positive Black Swans take time to show their effect while negative ones happen very quickly—it is much easier and much faster to destroy than to build. (During the Lebanese war, my parents’ house in Amioun and my grandfather’s house in a nearby village were destroyed in just a few hours, dynamited by my grandfather’s enemies who controlled the area. It took seven thousand times longer—two years—to rebuild them. This asymmetry in timescales explains the difficulty in reversing time.)
• Hume wrote with such clarity that he puts to shame almost all current thinkers, and certainly the entire German graduate curriculum. Unlike Kant, Fichte, Schopenhauer, and Hegel, Hume is the kind of thinker who is sometimes read by the person mentioning his work.
• The Pyrrhonian skeptics were docile citizens who followed customs and traditions whenever possible, but taught themselves to systematically doubt everything, and thus attain a level of serenity. But while conservative in their habits, they were rabid in their fight against dogma. Among the surviving works of Sextus’s is a diatribe with the beautiful title Adversos Mathematicos, sometimes translated as Against the Professors. Much of it could have been written last Wednesday night!
• In 1998, when I went out on my own, I called my research laboratory and trading firm Empirica, not for the same antidogmatist reasons, but on account of the far more depressing reminder that it took at least another fourteen centuries after the works of the school of empirical medicine before medicine changed and finally became adogmatic, suspicious of theorizing, profoundly skeptical, and evidence-based! Lesson? That awareness of a problem does not mean much—particularly when you have special interests and self-serving institutions in play.
• Pierre-Daniel Huet wrote his Philosophical Treatise on the Weaknesses of the Human Mind in 1690, a remarkable book that tears through dogmas and questions human perception. Huet presents arguments against causality that are quite potent—he states, for instance, that any event can have an infinity of possible causes.
• Let me insist that erudition is important to me. It signals genuine intellectual curiosity. It accompanies an open mind and the desire to probe the ideas of others. Above all, an erudite can be dissatisfied with his own knowledge, and such dissatisfaction is a wonderful shield against Platonicity, the simplifications of the five-minute manager, or the philistinism of the overspecialized scholar. Indeed, scholarship without erudition can lead to disasters.
• You can see that it is extremely convenient for us to assume that we live in Mediocristan. Why? Because it allows you to rule out these Black Swan surprises! The Black Swan problem either does not exist or is of small consequence if you live in Mediocristan!
• Now, there are other themes arising from our blindness to the Black Swan: We focus on preselected segments of the seen and generalize from it to the unseen: the error of confirmation. We fool ourselves with stories that cater to our Platonic thirst for distinct patterns: the narrative fallacy. We behave as if the Black Swan does not exist: human nature is not programmed for Black Swans. What we see is not necessarily all that is there. History hides Black Swans from us and gives us a mistaken idea about the odds of these events: this is the distortion of silent evidence. We “tunnel”: that is, we focus on a few well-defined sources of uncertainty, on too specific a list of Black Swans (at the expense of the others that do not easily come to mind).
• Clearly you cannot manufacture more information than the past can deliver; if you buy one hundred copies of The New York Times, I am not too certain that it would help you gain incremental knowledge of the future. We just don’t know how much information there is in the past.
• “I never meant to say that the Conservatives are generally stupid. I meant to say that stupid people are generally Conservative,” John Stuart Mill once complained.
• I was once taken aback when a doctor told me after a routine cancer checkup, “Stop worrying, we have evidence of cure.” “Why?” I asked. “There is evidence of no cancer” was the reply. “How do you know?” I asked. He replied, “The scan is negative.” Yet he went around calling himself doctor! An acronym used in the medical literature is NED, which stands for No Evidence of Disease. There is no such thing as END, Evidence of No Disease. Yet my experience discussing this matter with plenty of doctors, even those who publish papers on their results, is that many slip into the round-trip fallacy during conversation. Doctors in the midst of the scientific arrogance of the 1960s looked down at mothers’ milk as something primitive, as if it could be replicated by their laboratories—not realizing that mothers’ milk might include useful components that could have eluded their scientific understanding—a simple confusion of absence of evidence of the benefits of mothers’ milk with evidence of absence of the benefits (another case of Platonicity as “it did not make sense” to breast-feed when we could simply use bottles). Many people paid the price for this naïve inference: those who were not breast-fed as infants turned out to be at an increased risk of a collection of health problems, including a higher likelihood of developing certain types of cancer—there had to be in mothers’ milk some necessary nutrients that still elude us. Furthermore, benefits to mothers who breast-feed were also neglected, such as a reduction in the risk of breast cancer. Likewise with tonsils: the removal of tonsils may lead to a higher incidence of throat cancer, but for decades doctors never suspected that this “useless” tissue might actually have a use that escaped their detection. The same with the dietary fiber found in fruits and vegetables: doctors in the 1960s found it useless because they saw no immediate evidence of its necessity, and so they created a malnourished generation. Fiber, it turns out, acts to slow down the absorption of sugars in the blood and scrapes the intestinal tract of precancerous cells. Indeed medicine has caused plenty of damage throughout history, owing to this simple kind of inferential confusion.
  • “Don’t say ‘this isn’t working, let’s not do it.’ Instead, try and understand it.”
• It is true that a thousand days cannot prove you right, but one day can prove you to be wrong.
• Popper introduced the mechanism of conjectures and refutations, which works as follows: you formulate a (bold) conjecture and you start looking for the observation that would prove you wrong. This is the alternative to our search for confirmatory instances. If you think the task is easy, you will be disappointed—few humans have a natural ability to do this. I confess that I am not one of them; it does not come naturally to me.*
• The following point further illustrates the absurdity of confirmation. If you believe that witnessing an additional white swan will bring confirmation that there are no black swans, then you should also accept the statement, on purely logical grounds, that the sighting of a red Mini Cooper should confirm that there are no black swans. Why? Just consider that the statement “all swans are white” is equivalent to “all nonwhite objects are not swans.” What confirms the latter statement should confirm the former. Therefore, a mind with a confirmation bent would infer that the sighting of a nonwhite object that is not a swan should bring such confirmation. This argument, known as Hempel’s raven paradox, was rediscovered by my friend the (thinking) mathematician Bruno Dupire during one of our intense meditating walks in London—one of those intense walk-discussions, intense to the point of our not noticing the rain. He pointed to a red Mini and shouted, “Look, Nassim, look! No Black Swan!”
• But the sales of a book or the magnitude of social events do not follow such strictures. It takes a lot more than a thousand days to accept that a writer is ungifted, a market will not crash, a war will not happen, a project is hopeless, a country is “our ally,” a company will not go bust, a brokerage-house security analyst is not a charlatan, or a neighbor will not attack us. In the distant past, humans could make inferences far more accurately and quickly.
• The philosopher Victor Brochard mentioned the importance of negative empiricism in 1878, as if it were a matter held by the empiricists to be the sound way to do business—ancients understood it implicitly. Out-of-print books deliver many surprises.
• This confirmation problem pervades our modern life, since most conflicts have at their root the following mental bias: when Arabs and Israelis watch news reports they see different stories in the same succession of events. Likewise, Democrats and Republicans look at different parts of the same data and never converge to the same opinions. Once your mind is inhabited with a certain view of the world, you will tend to only consider instances proving you to be right. Paradoxically, the more information you have, the more justified you will feel in your views.
  • “Beliefs should be a leading indicator of your group membership, not a lagging indicator.”
• The first of the problems of human nature that we examine in this section, the one just illustrated above, is what I call the narrative fallacy. (It is actually a fraud, but, to be more polite, I will call it a fallacy.) The fallacy is associated with our vulnerability to overinterpretation 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.
• It turns out that one of the side effects of L-dopa is that a small but significant minority of patients become compulsive gamblers. Since such gambling is associated with their seeing what they believe to be clear patterns in random numbers, this illustrates the relation between knowledge and randomness. It also shows that some aspects of what we call “knowledge” (and what I call narrative) are an ailment.
• Change metaphors slightly and imagine that your consciousness is a desk in the Library of Congress: no matter how many books the library holds, and makes available for retrieval, the size of your desk sets some processing limitations. Compression is vital to the performance of conscious work.
• The more random information is, the greater the dimensionality, and thus the more difficult to summarize. The more you summarize, the more order you put in, the less randomness. 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.
• Think of the world around you, laden with trillions of details. Try to describe it and you will find yourself tempted to weave a thread into what you are saying. A novel, a story, a myth, or a tale, all have the same function: they spare us from the complexity of the world and shield us from its randomness. Myths impart order to the disorder of human perception and the perceived “chaos of human experience.”*
• Platonicity affects us here once again. The very same desire for order, interestingly, applies to scientific pursuits—it is just that, unlike art, the (stated) purpose of science is to get to the truth, not to give you a feeling of organization or make you feel better. We tend to use knowledge as therapy.
• Consider that we recall events in our memory all the while knowing the answer of what happened subsequently. It is literally impossible to ignore posterior information when solving a problem. This simple inability to remember not the true sequence of events but a reconstructed one will make history appear in hindsight to be far more explainable than it actually was—or is.
• Indeed, people tend to fool themselves with their self-narrative of “national identity,” which, in a breakthrough paper in Science by sixty-five authors, was shown to be a total fiction. (“National traits” might be great for movies, they might help a lot with war, but they are Platonic notions that carry no empirical validity—yet, for example, both the English and the non-English erroneously believe in an English “national temperament.”) Empirically, sex, social class, and profession seem to be better predictors of someone’s behavior than nationality (a male from Sweden resembles a male from Togo more than a female from Sweden; a philosopher from Peru resembles a philosopher from Scotland more than a janitor from Peru; and so on).
• The problem of overcausation does not lie with the journalist, but with the public. Nobody would pay one dollar to buy a series of abstract statistics reminiscent of a boring college lecture. We want to be told stories, and there is nothing wrong with that—except that we should check more thoroughly whether the story provides consequential distortions of reality.
• there are two varieties of rare events: a) the narrated Black Swans, those that are present in the current discourse and that you are likely to hear about on television, and b) those nobody talks about, since they escape models—those that you would feel ashamed discussing in public because they do not seem plausible.
• As Stalin, who knew something about the business of mortality, supposedly said, “One death is a tragedy; a million is a statistic.” Statistics stay silent in us.
• Now, I do not disagree with those recommending the use of a narrative to get attention. Indeed, our consciousness may be linked to our ability to concoct some form of story about ourselves. It is just that narrative can be lethal when used in the wrong places.
• The way to avoid the ills of the narrative fallacy is to favor experimentation over storytelling, experience over history, and clinical knowledge over theories.
• Believe me, it is tough to deal with the social consequences of the appearance of continuous failure. We are social animals; hell is other people.
• In a primitive environment, the relevant is the sensational. This applies to our knowledge. When we try to collect information about the world around us, we tend to be guided by our biology, and our attention flows effortlessly toward the sensational—not the relevant so much as the sensational. Somehow the guidance system has gone wrong in the process of our coevolution with our habitat—it was transplanted into a world in which the relevant is often boring, nonsensational.
• These nonlinear relationships are ubiquitous in life. Linear relationships are truly the exception; we only focus on them in classrooms and textbooks because they are easier to understand. Yesterday afternoon I tried to take a fresh look around me to catalog what I could see during my day that was linear. I could not find anything, no more than someone hunting for squares or triangles could find them in the rain forest—or,
• It is my great hope someday to see science and decision makers rediscover what the ancients have always known, namely that our highest currency is respect.
• Thomas Astebro has shown that returns on independent inventions (you take the cemetery into account) are far lower than those on venture capital. Some blindness to the odds or an obsession with their own positive Black Swan is necessary for entrepreneurs to function. The venture capitalist is the one who gets the shekels. The economist William Baumol calls this “a touch of madness.” This may indeed apply to all concentrated businesses: when you look at the empirical record, you not only see that venture capitalists do better than entrepreneurs, but publishers do better than writers, dealers do better than artists, and science does better than scientists (about 50 percent of scientific and scholarly papers, costing months, sometimes years, of effort, are never truly read). The person involved in such gambles is paid in a currency other than material success: hope.
• In other words, you bet either that the Black Swan will happen or that it will never happen, two strategies that require completely different mind-sets.
• Humans will believe anything you say provided you do not exhibit the smallest shadow of diffidence; like animals, they can detect the smallest crack in your confidence before you express it. The trick is to be as smooth as possible in personal manners. It is much easier to signal self-confidence if you are exceedingly polite and friendly; you can control people without having to offend their sensitivity. The problem with business people, Nero realized, is that if you act like a loser they will treat you as a loser—you set the yardstick yourself. There is no absolute measure of good or bad. It is not what you are telling people, it is how you are saying it.
• As drowned worshippers do not write histories of their experiences (it is better to be alive for that), so it is with the losers in history, whether people or ideas. Remarkably, historians and other scholars in the humanities who need to understand silent evidence the most do not seem to have a name for it (and I looked hard). As for journalists, fuhgedaboudit! They are industrial producers of the distortion.
• THE CEMETERY OF LETTERS The Phoenicians, we are often reminded, produced no literature, although they allegedly invented the alphabet. Commentators discuss their philistinism from the basis of this absence of a written legacy, asserting that by race or culture, they were more interested in commerce than in the arts. Accordingly, the Phoenician invention of the alphabet served the lower purpose of commercial record keeping rather than the more noble purpose of literary production. (I remember finding on the shelves of a country house I once rented a mildewed history book by Will and Ariel Durant describing the Phoenicians as the “merchant race.” I was tempted to throw it in the fireplace.) Well, it now seems that the Phoenicians wrote quite a bit, but using a perishable brand of papyrus that did not stand the biodegradative assaults of time. Manuscripts had a high rate of extinction before copyists and authors switched to parchment in the second or third century. Those not copied during that period simply disappeared.
• The neglect of silent evidence is endemic to the way we study comparative talent, particularly in activities that are plagued with winner-take-all attributes. We may enjoy what we see, but there is no point reading too much into success stories because we do not see the full picture.
• The consequence of the superstar dynamic is that what we call “literary heritage” or “literary treasures” is a minute proportion of what has been produced cumulatively. This is the first point. How it invalidates the identification of talent can be derived immediately from it: say you attribute the success of the nineteenth-century novelist Honoré de Balzac to his superior “realism,” “insights,” “sensitivity,” “treatment of characters,” “ability to keep the reader riveted,” and so on. These may be deemed “superior” qualities that lead to superior performance if, and only if, those who lack what we call talent also lack these qualities. But what if there are dozens of comparable literary masterpieces that happened to perish? And, following my logic, if there are indeed many perished manuscripts with similar attributes, then, I regret to say, your idol Balzac was just the beneficiary of disproportionate luck compared to his peers. Furthermore, you may be committing an injustice to others by favoring him. My point, I will repeat, is not that Balzac is untalented, but that he is less uniquely talented than we think. Just consider the thousands of writers now completely vanished from consciousness: their record does not enter into analyses. We do not see the tons of rejected manuscripts because these writers have never been published. The New Yorker alone rejects close to a hundred manuscripts a day, so imagine the number of geniuses that we will never hear about.
• Balzac outlined the entire business of silent evidence in his novel Lost Illusions.
• Success is presented cynically, as the product of wile and promotion or the lucky surge of interest for reasons completely external to the works themselves. Lucien discovers the existence of the immense cemetery inhabited by what Balzac calls “nightingales.” Lucien was told that this designation “nightingale” was given by bookstores to those works residing on the shelves in the solitary depths of their shops.
• I mentioned earlier that to understand successes and analyze what caused them, we need to study the traits present in failures.
• The entire notion of biography is grounded in the arbitrary ascription of a causal relation between specified traits and subsequent events. Now consider the cemetery. The graveyard of failed persons will be full of people who shared the following traits: courage, risk taking, optimism, et cetera. Just like the population of millionaires. There may be some differences in skills, but what truly separates the two is for the most part a single factor: luck. Plain luck.
• I said that taking a “scalable” profession is not a good idea, simply because there are far too few winners in these professions. Well, these professions produce a large cemetery: the pool of starving actors is larger than the one of starving accountants, even if you assume that, on average, they earn the same income.
• A life saved is a statistic; a person hurt is an anecdote. Statistics are invisible; anecdotes are salient.
• Once again, I am not dismissing the idea of risk taking, having been involved in it myself. I am only critical of the encouragement of uninformed risk taking. The überpsychologist Danny Kahneman has given us evidence that we generally take risks not out of bravado but out of ignorance and blindness to probability!
• if it seems too hard to understand it is because we are too brainwashed by notions of causality and we think that it is smarter to say because than to accept randomness.
• But have the integrity to deliver your “because” very sparingly; try to limit it to situations where the “because” is derived from experiments, not backward-looking history.
• In addition to the confirmation error and the narrative fallacy, the manifestations of silent evidence further distort the role and importance of Black Swans. In fact, they cause a gross overestimation at times (say, with literary success), and underestimation at others (the stability of history; the stability of our human species).
• The best noncharlatanic finance book I know is called What I Learned Losing a Million Dollars, by D. Paul and B. Moynihan. The authors had to self-publish the book.
• Silent evidence can actually bias matters to look less stable and riskier than they actually are. Take cancer. We are in the habit of counting survival rates from diagnosed cancer cases—which should overestimate the danger from cancer. Many people develop cancer that remains undiagnosed, and go on to live a long and comfortable life, then die of something else, either because their cancer was not lethal or because it went into spontaneous remission. Not counting these cases biases the risks upward.
• A nerd is simply someone who thinks exceedingly inside the box.
• The think tank had gathered a nonpolitical collection of people they called doers and scholars (and practitioners like me who do not accept the distinction) involved in uncertainty in a variety of disciplines.
• My first surprise was to discover that the military people there thought, behaved, and acted like philosophers—far more so than the philosophers we will see splitting hairs in their weekly colloquium in Part Three. They thought out of the box, like traders, except much better and without fear of introspection. An assistant secretary of defense was among us, but had I not known his profession I would have thought he was a practitioner of skeptical empiricism. Even an engineering investigator who had examined the cause of a space shuttle explosion was thoughtful and open-minded. I came out of the meeting realizing that only military people deal with randomness with genuine, introspective intellectual honesty—unlike academics and corporate executives using other people’s money. This does not show in war movies, where they are usually portrayed as war-hungry autocrats. The people in front of me were not the people who initiate wars. Indeed, for many, the successful defense policy is the one that manages to eliminate potential dangers without war, such as the strategy of bankrupting the Russians through the escalation in defense spending. When I expressed my amazement to Laurence, another finance person who was sitting next to me, he told me that the military collected more genuine intellects and risk thinkers than most if not all other professions. Defense people wanted to understand the epistemology of risk.
• Now, go read any of the classical thinkers who had something practical to say about the subject of chance, such as Cicero, and you find something different: a notion of probability that remains fuzzy throughout, as it needs to be, since such fuzziness is the very nature of uncertainty. Probability is a liberal art; it is a child of skepticism, not a tool for people with calculators on their belts to satisfy their desire to produce fancy calculations and certainties. Before Western thinking drowned in its “scientific” mentality, what is arrogantly called the Enlightenment, people prompted their brain to think—not compute. In a beautiful treatise now vanished from our consciousness, Dissertation on the Search for Truth, published in 1673, the polemist Simon Foucher exposed our psychological predilection for certainties. He teaches us the art of doubting, how to position ourselves between doubting and believing. He writes: “One needs to exit doubt in order to produce science—but few people heed the importance of not exiting from it prematurely. … It is a fact that one usually exits doubt without realizing it.” He warns us further: “We are dogma-prone from our mother’s wombs.”
• Furthermore, just as we tend to underestimate the role of luck in life in general, we tend to overestimate it in games of chance.
• You can think about a subject for a long time, to the point of being possessed by it. Somehow you have a lot of ideas, but they do not seem explicitly connected; the logic linking them remains concealed from you. Yet you know deep down that all these are the same idea. Meanwhile, what Nietzsche calls bildungsphilisters,* or learned philistines, blue collars of the thinking business, tell you that you are spread out between fields; you reply that these disciplines are artificial and arbitrary, to no avail. Then you tell them that you are a limousine driver, and they leave you alone—you feel better because you do not identify with them, and thus you no longer need to be amputated to fit into the Procrustean bed of the disciplines. Finally, a little push and you see that it was all one single problem.
• I propose that if you want a simple step to a higher form of life, as distant from the animal as you can get, then you may have to denarrate, that is, shut down the television set, minimize time spent reading newspapers, ignore the blogs. Train your reasoning abilities to control your decisions; nudge System 1 (the heuristic or experiential system) out of the important ones. Train yourself to spot the difference between the sensational and the empirical. This insulation from the toxicity of the world will have an additional benefit: it will improve your well-being. Also, bear in mind how shallow we are with probability, the mother of all abstract notions. You do not have to do much more in order to gain a deeper understanding of things around you. Above all, learn to avoid “tunneling.”
• To be able to focus is a great virtue if you are a watch repairman, a brain surgeon, or a chess player. But the last thing you need to do when you deal with uncertainty is to “focus” (you should tell uncertainty to focus, not us). This “focus” makes you a sucker; it translates into prediction problems, as we will see in the next section. Prediction, not narration, is the real test of our understanding of the world.
• First, we are demonstrably arrogant about what we think we know. We certainly know a lot, but we have a built-in tendency to think that we know a little bit more than we actually do, enough of that little bit to occasionally get into serious trouble.
• Why on earth do we predict so much? Worse, even, and more interesting: Why don’t we talk about our record in predicting? Why don’t we see how we (almost) always miss the big events?
• The 2 percent error rate turned out to be close to 45 percent in the population being tested! It is quite telling that the first sample consisted of Harvard Business School students, a breed not particularly renowned for their humility or introspective orientation. MBAs are particularly nasty in this regard, which might explain their business success. Later studies document more humility, or rather a smaller degree of arrogance, in other populations. Janitors and cabdrivers are rather humble.
• This experiment has been replicated dozens of times, across populations, professions, and cultures, and just about every empirical psychologist and decision theorist has tried it on his class to show his students the big problem of humankind: we are simply not wise enough to be trusted with knowledge. The intended 2 percent error rate usually turns out to be between 15 percent and 30 percent, depending on the population and the subject matter.
• Literally any decision pertaining to the future is likely to be infected by it. Our human race is affected by a chronic underestimation of the possibility of the future straying from the course initially envisioned (in addition to other biases that sometimes exert a compounding effect). To take an obvious example, think about how many people divorce. Almost all of them are acquainted with the statistic that between one-third and one-half of all marriages fail, something the parties involved did not forecast while tying the knot. Of course, “not us,” because “we get along so well” (as if others tying the knot got along poorly).
• The simple test above suggests the presence of an ingrained tendency in humans to underestimate outliers—or Black Swans. Left to our own devices, we tend to think that what happens every decade in fact only happens once every century, and, furthermore, that we know what’s going on.
• The appearance of busyness reinforces the perception of causality, of the link between results and one’s role in them. This of course applies even more to the CEOs of large companies who need to trumpet a link between their “presence” and “leadership” and the results of the company. I am not aware of any studies that probe the usefulness of their time being invested in conversations and the absorption of small-time information—nor have too many writers had the guts to question how large the CEO’s role is in a corporation’s success.
• The more information you give someone, the more hypotheses they will formulate along the way, and the worse off they will be. They see more random noise and mistake it for information.
• When you develop your opinions on the basis of weak evidence, you will have difficulty interpreting subsequent information that contradicts these opinions, even if this new information is obviously more accurate.
• Remember that we are swayed by the sensational. Listening to the news on the radio every hour is far worse for you than reading a weekly magazine, because the longer interval allows information to be filtered a bit.
• The bookmakers were given the ten most useful variables, then asked to predict the outcome of races. Then they were given ten more and asked to predict again. The increase in the information set did not lead to an increase in their accuracy; their confidence in their choices, on the other hand, went up markedly. Information proved to be toxic. I’ve struggled much of my life with the common middlebrow belief that “more is better”—more is sometimes, but not always, better. This toxicity of knowledge will show in our investigation of the so-called expert.
• On one hand, we are shown by a class of expert-busting researchers such as Paul Meehl and Robyn Dawes that the “expert” is the closest thing to a fraud, performing no better than a computer using a single metric, their intuition getting in the way and blinding them. (As an example of a computer using a single metric, the ratio of liquid assets to debt fares better than the majority of credit analysts.) On the other hand, there is abundant literature showing that many people can beat computers thanks to their intuition. Which one is correct?
• There must be some disciplines with true experts. Let us ask the following questions: Would you rather have your upcoming brain surgery performed by a newspaper’s science reporter or by a certified brain surgeon? On the other hand, would you prefer to listen to an economic forecast by someone with a PhD in finance from some “prominent” institution such as the Wharton School, or by a newspaper’s business writer? While the answer to the first question is empirically obvious, the answer to the second one isn’t at all. We can already see the difference between “know-how” and “know-what.” The Greeks made a distinction between technē and epistēmē. The empirical school of medicine of Menodotus of Nicomedia and Heraclites of Tarentum wanted its practitioners to stay closest to technē (i.e., “craft”), and away from epistēmē (i.e., “knowledge,” “science”).
• You cannot ignore self-delusion. The problem with experts is that they do not know what they do not know. Lack of knowledge and delusion about the quality of your knowledge come together—the same process that makes you know less also makes you satisfied with your knowledge.
• And these cumulative errors depend largely on the big surprises, the big opportunities. Not only do economic, financial, and political predictors miss them, but they are quite ashamed to say anything outlandish to their clients—and yet events, it turns out, are almost always outlandish.
• Out of close to a million papers published in politics, finance, and economics, there have been only a small number of checks on the predictive quality of such knowledge.
• The only regularity Tetlock found was the negative effect of reputation on prediction: those who had a big reputation were worse predictors than those who had none.
• These “experts” were lopsided: on the occasions when they were right, they attributed it to their own depth of understanding and expertise; when wrong, it was either the situation that was to blame, since it was unusual, or, worse, they did not recognize that they were wrong and spun stories around it.
• There is another lesson from Tetlock’s experiment. He found what I mentioned earlier, that many university stars, or “contributors to top journals,” are no better than the average New York Times reader or journalist in detecting changes in the world around them. These sometimes overspecialized experts failed tests in their own specialties.
• When an economist fails to predict outliers he often invokes the issue of earthquakes or revolutions, claiming that he is not into geodesics, atmospheric sciences, or political science, instead of incorporating these fields into his studies and accepting that his field does not exist in isolation. Economics is the most insular of fields; it is the one that quotes least from outside itself! Economics is perhaps the subject that currently has the highest number of philistine scholars—scholarship without erudition and natural curiosity can close your mind and lead to the fragmentation of disciplines.
• In fact, the more routine the task, the better you learn to forecast. But there is always something nonroutine in our modern environment.
• As I said earlier, we are too narrow-minded a species to consider the possibility of events straying from our mental projections, but furthermore, we are too focused on matters internal to the project to take into account external uncertainty, the “unknown unknown,” so to speak, the contents of the unread books.
• Perhaps the ease with which one can project into the future by dragging cells in these spreadsheet programs is responsible for the armies of forecasters confidently producing longer-term forecasts (all the while tunneling on their assumptions). We have become worse planners than the Soviet Russians thanks to these potent computer programs given to those who are incapable of handling their knowledge.
• We use reference points in our heads, say sales projections, and start building beliefs around them because less mental effort is needed to compare an idea to a reference point than to evaluate it in the absolute (System 1 at work!). We cannot work without a point of reference.
• Consider forecasts, whether economic or technological, made in 1905 for the following quarter of a century. How close to the projections did 1925 turn out to be? For a convincing experience, go read George Orwell’s 1984. Or look at more recent forecasts made in 1975 about the prospects for the new millennium. Many events have taken place and new technologies have appeared that lay outside the forecasters’ imaginations; many more that were expected to take place or appear did not do so. Our forecast errors have traditionally been enormous, and there may be no reasons for us to believe that we are suddenly in a more privileged position to see into the future compared to our blind predecessors. Forecasting by bureaucrats tends to be used for anxiety relief rather than for adequate policy making.
• It is often said that “is wise he who can see things coming.” Perhaps the wise one is the one who knows that he cannot see things far away.
• If you think that the inventions we see around us came from someone sitting in a cubicle and concocting them according to a timetable, think again: almost everything of the moment is the product of serendipity. The term serendipity was coined in a letter by the writer Hugh Walpole, who derived it from a fairy tale, “The Three Princes of Serendip.” These princes “were always making discoveries by accident or sagacity, of things which they were not in quest of.”
• Sir Francis Bacon commented that the most important advances are the least predictable ones, those “lying out of the path of the imagination.” Bacon was not the last intellectual to point this out. The idea keeps popping up, yet then rapidly dying out. Almost half a century ago, the bestselling novelist Arthur Koestler wrote an entire book about it, aptly called The Sleepwalkers. It describes discoverers as sleepwalkers stumbling upon results and not realizing what they have in their hands.
• At the end of the year in which Darwin and Wallace presented their papers on evolution by natural selection that changed the way we view the world, the president of the Linnean society, where the papers were presented, announced that the society saw “no striking discovery,” nothing in particular that could revolutionize science.
• In 1965 two radio astronomists at Bell Labs in New Jersey who were mounting a large antenna were bothered by a background noise, a hiss, like the static that you hear when you have bad reception. The noise could not be eradicated—even after they cleaned the bird excrement out of the dish, since they were convinced that bird poop was behind the noise. It took a while for them to figure out that what they were hearing was the trace of the birth of the universe, the cosmic background microwave radiation. This discovery revived the big bang theory, a languishing idea that was posited by earlier researchers. I found the following comments on Bell Labs’ website commenting on how this “discovery” was one of the century’s greatest advances: Dan Stanzione, then Bell Labs president and Lucent’s chief operating officer when Penzias [one of the radio astronomers involved in the discovery] retired, said Penzias “embodies the creativity and technical excellence that are the hallmarks of Bell Labs.” He called him a Renaissance figure who “extended our fragile understanding of creation, and advanced the frontiers of science in many important areas.” Renaissance shmenaissance. The two fellows were looking for bird poop! Not only were they not looking for anything remotely like the evidence of the big bang but, as usual in these cases, they did not immediately see the importance of their find. Sadly, the physicist Ralph Alpher, the person who initially conceived of the idea, in a paper coauthored with heavyweights George Gamow and Hans Bethe, was surprised to read about the discovery in The New York Times. In fact, in the languishing papers positing the birth of the universe, scientists were doubtful whether such radiation could ever be measured. As happens so often in discovery, those looking for evidence did not find it; those not looking for it found it and were hailed as discoverers.
• In an example of corporate arrogance, after the first moon landing the now-defunct airline Pan Am took advance bookings for round-trips between earth and the moon. Nice prediction, except that the company failed to foresee that it would be out of business not long after.
• We build toys. Some of those toys change the world.
• Just as Karl Marx wrote, in great irritation, a diatribe called The Misery of Philosophy in response to Proudhon’s The Philosophy of Misery, Popper, irritated by some of the philosophers of his time who believed in the scientific understanding of history, wrote, as a pun, The Misery of Historicism (which has been translated as The Poverty of Historicism).*
• There is actually a law in statistics called the law of iterated expectations, which I outline here in its strong form: if I expect to expect something at some date in the future, then I already expect that something at present.
• But there is a weaker form of this law of iterated knowledge. It can be phrased as follows: to understand the future to the point of being able to predict it, you need to incorporate elements from this future itself. If you know about the discovery you are about to make in the future, then you have almost made it.
• Auguste Comte, the founder of the school of positivism, which is (unfairly) accused of aiming at the scientization of everything in sight, declared that mankind would forever remain ignorant of the chemical composition of the fixed stars. But, as Charles Sanders Peirce reported, “The ink was scarcely dry upon the printed page before the spectroscope was discovered and that which he had deemed absolutely unknowable was well on the way of getting ascertained.”
• Prediction requires knowing about technologies that will be discovered in the future. But that very knowledge would almost automatically allow us to start developing those technologies right away. Ergo, we do not know what we will know.
• Monsieur le professeur Henri Poincaré. Somehow they stopped making this kind of thinker.
• Poincaré became a prolific essayist in his thirties. He seemed in a hurry and died prematurely, at fifty-eight; he was in such a rush that he did not bother correcting typos and grammatical errors in his text, even after spotting them, since he found doing so a gross misuse of his time. They no longer make geniuses like that—or they no longer let them write in their own way.
• When mathematicians say “hand-waving,” disparagingly, about someone’s work, it means that the person has: a) insight, b) realism, c) something to say, and it means that d) he is right because that’s what critics say when they can’t find anything more negative.
• Hayek attacked socialism and managed economies as a product of what I have called nerd knowledge, or Platonicity—owing to the growth of scientific knowledge, we overestimate our ability to understand the subtle changes that constitute the world, and what weight needs to be imparted to each such change. He aptly called this “scientism.” This disease is severely ingrained in our institutions. It is why I fear governments and large corporations—it is hard to distinguish between them. Governments make forecasts; companies produce projections; every year various forecasters project the level of mortgage rates and the stock market at the end of the following year. Corporations survive not because they have made good forecasts, but because, like the CEOs visiting Wharton I mentioned earlier, they may have been the lucky ones. And, like a restaurant owner, they may be hurting themselves, not us—perhaps helping us and subsidizing our consumption by giving us goods in the process, like cheap telephone calls to the rest of the world funded by the overinvestment during the dotcom era. We consumers can let them forecast all they want if that’s what is necessary for them to get into business. Let them go hang themselves if they wish.
• In reality, languages grow organically; grammar is something people without anything more exciting to do in their lives codify into a book. While the scholastic-minded will memorize declensions, the a-Platonic nonnerd will acquire, say, Serbo-Croatian by picking up potential girlfriends in bars on the outskirts of Sarajevo, or talking to cabdrivers, then fitting (if needed) grammatical rules to the knowledge he already possesses.
• One great underestimated thinker is G.L.S. Shackle, now almost completely obscure, who introduced the notion of “unknowledge,” that is, the unread books in Umberto Eco’s library.
• The idea, as promoted by the philosopher Daniel Dennett, is as follows: What is the most potent use of our brain? It is precisely the ability to project conjectures into the future and play the counterfactual game—“If I punch him in the nose, then he will punch me back right away, or, worse, call his lawyer in New York.” One of the advantages of doing so is that we can let our conjectures die in our stead. Used correctly and in place of more visceral reactions, the ability to project effectively frees us from immediate, first-order natural selection—as opposed to more primitive organisms that were vulnerable to death and only grew by the improvement in the gene pool through the selection of the best. In a way, projecting allows us to cheat evolution: it now takes place in our head, as a series of projections and counterfactual scenarios.
• Recall from Chapter 4 how Algazel and Averroës traded insults through book titles. Perhaps one day I will be lucky enough to read an attack on this book in a diatribe called The White Swan.
  • The healthy desire for debate
• All that off hot air: you only fit the linear segment of the series. Always remember that “R-square” is unfit for Extremistan; it is only good for academic promotion.
• To me utopia is an epistemocracy, a society in which anyone of rank is an epistemocrat, and where epistemocrats manage to be elected. It would be a society governed from the basis of the awareness of ignorance, not knowledge.
• Once in a while you encounter members of the human species with so much intellectual superiority that they can change their minds effortlessly.
• A few weeks after you drive your new car out of the showroom, it will become dull. If you had expected this, you probably would not have bought it. You are about to commit a prediction error that you have already made. Yet it would cost so little to introspect!
• This predicament is called “anticipated utility” by Danny Kahneman and “affective forecasting” by Dan Gilbert. The point is not so much that we tend to mispredict our future happiness, but rather that we do not learn recursively from past experiences.
• According to Trivers’s theory of self-deception, this is supposed to orient us favorably toward the future. But self-deception is not a desirable feature outside of its natural domain. It prevents us from taking some unnecessary risks—but
• Helenus, unlike other seers, was able to predict the past with great precision—without having been given any details of it. He predicted backward. Our problem is not just that we do not know the future, we do not know much of the past either. We badly need someone like Helenus if we are to know history.
• The empirical doctor’s approach to the problem of induction was to know history without theorizing from it. Learn to read history, get all the knowledge you can, do not frown on the anecdote, but do not draw any causal links, do not try to reverse engineer too much—but if you do, do not make big scientific claims. Remember that the empirical skeptics had respect for custom: they used it as a default, a basis for action, but not for more than that. This clean approach to the past they called epilogism.*
• What Is History? by Edward Hallett Carr.
• Know how to rank beliefs not according to their plausibility but by the harm they may cause.
• My colleague Mark Spitznagel understood that we humans have a mental hang-up about failures: “You need to love to lose” was his motto. In fact, the reason I felt immediately at home in America is precisely because American culture encourages the process of failure, unlike the cultures of Europe and Asia where failure is met with stigma and embarrassment. America’s specialty is to take these small risks for the rest of the world, which explains this country’s disproportionate share in innovations. Once established, an idea or a product is later “perfected” over there.
• Likewise, while technology can carry a great payoff, paying for the hyped-up story, as people did with the dot-com bubble, can make any upside limited and any downside huge. It is the venture capitalist who invested in a speculative company and sold his stake to unimaginative investors who is the beneficiary of the Black Swan, not the “me, too” investors.
• Many people do not realize that they are getting a lucky break in life when they get it. If a big publisher (or a big art dealer or a movie executive or a hotshot banker or a big thinker) suggests an appointment, cancel anything you have planned: you may never see such a window open up again. I am sometimes shocked at how little people realize that these opportunities do not grow on trees. Collect as many free nonlottery tickets (those with open-ended payoffs) as you can, and, once they start paying off, do not discard them. Work hard, not in grunt work, but in chasing such opportunities and maximizing exposure to them. This makes living in big cities invaluable because you increase the odds of serendipitous encounters—you gain exposure to the envelope of serendipity. The idea of settling in a rural area on grounds that one has good communications “in the age of the Internet” tunnels out of such sources of positive uncertainty. Diplomats understand that very well: casual chance discussions at cocktail parties usually lead to big breakthroughs—not dry correspondence or telephone conversations. Go to parties! If you’re a scientist, you will chance upon a remark that might spark new research. And if you are uninterested in social life, send your associates to these events.
• It is ineffective to moan about unpredictability: people will continue to predict foolishly, especially if they are paid for it, and you cannot put an end to institutionalized frauds. If you ever do have to heed a forecast, keep in mind that its accuracy degrades rapidly as you extend it through time.
• This idea is often erroneously called Pascal’s wager, after the philosopher and (thinking) mathematician Blaise Pascal. He presented it something like this: I do not know whether God exists, but I know that I have nothing to gain from being an atheist if he does not exist, whereas I have plenty to lose if he does. Hence, this justifies my belief in God.
• Dan Gilbert showed in a famous paper, “How Mental Systems Believe,” that we are not natural skeptics and that not believing required an expenditure of mental effort.
• Random outcomes, or an arbitrary situation, can also explain success, and provide the initial push that leads to a winner-take-all result. A person can get slightly ahead for entirely random reasons; because we like to imitate one another, we will flock to him. The world of contagion is so underestimated!
• More than a decade before Rosen, the sociologist of science Robert K. Merton presented his idea of the Matthew effect, by which people take from the poor to give to the rich.* He looked at the performance of scientists and showed how an initial advantage follows someone through life.
• Failure is also cumulative; losers are likely to also lose in the future, even if we don’t take into account the mechanism of demoralization that might exacerbate it and cause additional failure.
• For an anecdotal example read Fire the Bastards!, whose author, Jack Green, goes systematically through the reviews of William Gaddis’s novel The Recognitions. Green shows clearly how book reviewers anchor on other reviews and reveals powerful mutual influence, even in their wording.
  • #Memetics #[[Global Knowledge Graph]]
• The mechanisms he described were as follows: the more you use a word, the less effortful you will find it to use that word again, so you borrow words from your private dictionary in proportion to their past use. This explains why out of the sixty thousand main words in English, only a few hundred constitute the bulk of what is used in writings, and even fewer appear regularly in conversation.
• Some ideas will prove contagious, but not others; some forms of superstitions will spread, but not others; some types of religious beliefs will dominate, but not others. The anthropologist, cognitive scientist, and philosopher Dan Sperber has proposed the following idea on the epidemiology of representations. What people call “memes,” ideas that spread and that compete with one another using people as carriers, are not truly like genes. Ideas spread because, alas, they have for carriers self-serving agents who are interested in them, and interested in distorting them in the replication process. You do not make a cake for the sake of merely replicating a recipe—you try to make your own cake, using ideas from others to improve it. We humans are not photocopiers. So contagious mental categories must be those in which we are prepared to believe, perhaps even programmed to believe. To be contagious, a mental category must agree with our nature.
  • #Memetics
• I have said that nobody is safe in Extremistan. This has a converse: nobody is threatened with complete extinction either. Our current environment allows the little guy to bide his time in the antechamber of success—as long as there is life, there is hope.
  • Your only job is to not get knocked out of the game
• I spoke about globalization in Chapter 3; it is here, but it is not all for the good: it creates interlocking fragility, while reducing volatility and giving the appearance of stability. In other words it creates devastating Black Swans. We have never lived before under the threat of a global collapse. Financial institutions have been merging into a smaller number of very large banks. Almost all banks are now interrelated. So the financial ecology is swelling into gigantic, incestuous, bureaucratic banks (often Gaussianized in their risk measurement)—when one falls, they all fall.* The increased concentration among banks seems to have the effect of making financial crisis less likely, but when they happen they are more global in scale and hit us very hard. We have moved from a diversified ecology of small banks, with varied lending policies, to a more homogeneous framework of firms that all resemble one another. True, we now have fewer failures, but when they occur … I shiver at the thought. I rephrase here: we will have fewer but more severe crises. The rarer the event, the less we know about its odds. It means that we know less and less about the possibility of a crisis.
  • Contagion risk; big capital agglomerators
• What is poorly understood, or denied (owing to its unsettling implications), is the absence of a role for the average in intellectual production. The disproportionate share of the very few in intellectual influence is even more unsettling than the unequal distribution of wealth—unsettling because, unlike the income gap, no social policy can eliminate it.
• Many people accepted my Black Swan idea but could not take it to its logical conclusion, which is that you cannot use one single measure for randomness called standard deviation (and call it “risk”); you cannot expect a simple answer to characterize uncertainty. To go the extra step requires courage, commitment, an ability to connect the dots, a desire to understand randomness fully. It also means not accepting other people’s wisdom as gospel.
• I have said that we seem naturally inclined to Platonify, and to think exclusively in terms of studied material: nobody, whether a bricklayer or a natural philosopher, can easily escape the enslavement of such conditioning. Consider that the great Galileo, otherwise a debunker of falsehoods, wrote the following: The great book of Nature lies ever open before our eyes and the true philosophy is written in it. … But we cannot read it unless we have first learned the language and the characters in which it is written. … It is written in mathematical language and the characters are triangles, circles and other geometric figures.
• Mark Buchanan’s Ubiquity, Philip Ball’s Critical Mass, and Paul Ormerod’s Why Most Things Fail.
• We don’t have the luxury of sitting down to read the equation that governs the universe; we just observe data and make an assumption about what the real process might be, and “calibrate” by adjusting our equation in accordance with additional information. As events present themselves to us, we compare what we see to what we expected to see. It is usually a humbling process, particularly for someone aware of the narrative fallacy, to discover that history runs forward, not backward.
• This tells me the following: I can make inferences about things that I do not see in my data, but these things should still belong to the realm of possibilities. There is an invisible bestseller out there, one that is absent from the past data but that you need to account for.
• In the last fifty years, the ten most extreme days in the financial markets represent half the returns. Ten days in fifty years. Meanwhile, we are mired in chitchat.
• Meanwhile, the Modern Portfolio Theory started spreading. I will repeat the following until I am hoarse: it is contagion that determines the fate of a theory in social science, not its validity.
• Merton wrote that before portfolio theory, finance was “a collection of anecdotes, rules of thumb, and manipulation of accounting data.” Portfolio theory allowed “the subsequent evolution from this conceptual potpourri to a rigorous economic theory.” For a sense of the degree of intellectual seriousness involved, and to compare neoclassical economics to a more honest science, consider this statement from the nineteenth-century father of modern medicine, Claude Bernard: “Facts for now, but with scientific aspirations for later.” You should send economists to medical school.
• Being on the receiving end of angry insults is not that bad; you can get quickly used to it and focus on what is not said.
• Now, elegant mathematics has this property: it is perfectly right, not 99 percent so. This property appeals to mechanistic minds who do not want to deal with ambiguities. Unfortunately you have to cheat somewhere to make the world fit perfect mathematics; and you have to fudge your assumptions somewhere.
• I cannot accept a pretense of science. I much prefer a sophisticated craft, focused on tricks, to a failed science looking for certainties.
• sake. A theory is like medicine (or government): often useless, sometimes necessary, always self-serving, and on occasion lethal. So it needs to be used with care, moderation, and close adult supervision.
• People can’t predict how long they will be happy with recently acquired objects, how long their marriages will last, how their new jobs will turn out, yet it’s subatomic particles that they cite as “limits of prediction.” They’re ignoring a mammoth standing in front of them in favor of matter even a microscope would not allow them to see.
• Philosophers like to practice philosophical thinking on me-too subjects that other philosophers call philosophy, and they leave their minds at the door when they are outside of these subjects.
• you cannot go from books to problems, but the reverse, from problems to books. This approach incapacitates much of that career-building verbiage. A scholar should not be a library’s tool for making another library,
• The following remark is one reason I have inordinate respect for Karl Popper; it is one of the few quotations in this book that I am not attacking. The degeneration of philosophical schools in its turn is the consequence of the mistaken belief that one can philosophize without having been compelled to philosophize by problems outside philosophy. … Genuine philosophical problems are always rooted outside philosophy and they die if these roots decay. … [emphasis mine] These roots are easily forgotten by philosophers who “study” philosophy instead of being forced into philosophy by the pressure of nonphilosophical problems.
• I am most often irritated by those who attack the bishop but somehow fall for the securities analyst—those who exercise their skepticism against religion but not against economists, social scientists, and phony statisticians. Using the confirmation bias, these people will tell you that religion was horrible for mankind by counting deaths from the Inquisition and various religious wars. But they will not show you how many people were killed by nationalism, social science, and political theory under Stalinism or during the Vietnam War. Even priests don’t go to bishops when they feel ill: their first stop is the doctor’s. But we stop by the offices of many pseudo-scientists and “experts” without alternative. We no longer believe in papal infallibility; we seem to believe in the infallibility of the Nobel, though,
• my antidote to Black Swans is precisely to be noncommoditized in my thinking. But beyond avoiding being a sucker, this attitude lends itself to a protocol of how to act—not how to think, but how to convert knowledge into action and figure out what knowledge is worth.
• I worry less about small failures, more about large, potentially terminal ones. I worry far more about the “promising” stock market, particularly the “safe” blue chip stocks, than I do about speculative ventures—the former present invisible risks, the latter offer no surprises since you know how volatile they are and can limit your downside by investing smaller amounts.
• I worry less about embarrassment than about missing an opportunity.
• My classmate in Paris, the novelist-to-be Jean-Olivier Tedesco, pronounced, as he prevented me from running to catch a subway, “I don’t run for trains.” Snub your destiny. I have taught myself to resist running to keep on schedule. This may seem a very small piece of advice, but it registered. In refusing to run to catch trains, I have felt the true value of elegance and aesthetics in behavior, a sense of being in control of my time, my schedule, and my life. Missing a train is only painful if you run after it! Likewise, not matching the idea of success others expect from you is only painful if that’s what you are seeking. You stand above the rat race and the pecking order, not outside of it, if you do so by choice. Quitting a high-paying position, if it is your decision, will seem a better payoff than the utility of the money involved (this may seem crazy, but I’ve tried it and it works). This is the first step toward the stoic’s throwing a four-letter word at fate. You have far more control over your life if you decide on your criterion by yourself.
• It is more difficult to be a loser in a game you set up yourself.
• I am sometimes taken aback by how people can have a miserable day or get angry because they feel cheated by a bad meal, cold coffee, a social rebuff, or a rude reception.
• We are quick to forget that just being alive is an extraordinary piece of good luck, a remote event, a chance occurrence of monstrous proportions.
• Then, through a chain of friends of friends, cappuccinos, dessert wines, and security lines at airports, I got to partake of and understand the potency of oral knowledge, as discussions are vastly more powerful than just correspondence. People say things in person they would never put in print.
• Most people, alas, walk too fast, mistaking walking for exercise, not understanding that walking is to be done slowly, at such a pace that one forgets one is walking—so
• They are also the only group of people to use philosophy for anything useful. They proposed historia: maximal recording of facts with minimal interpretation and theorizing, describing of facts without the why, and resisting universals.
• The central things the old teachers communicate to you are, to use religious terms, dogmas (rules you need to execute without necessarily understanding them) not kerygmas (rules you can understand and that have a purpose clear to you).
• Mother Nature does not like anything too big.
• Mother Nature does not limit the interactions between entities; it just limits the size of its units. (Hence my idea is not to stop globalization and ban the Internet; as we will see, much more stability would be achieved by stopping governments from helping companies when they become large and by giving back advantages to the small guy.)
• To those who say “We have no proof that we are harming nature,” a sound response is “We have no proof that we are not harming nature, either;” the burden of the proof is not on the ecological conservationist, but on someone disrupting an old system. Furthermore we should not “try to correct” the harm done, as we may be creating another problem we do not know much about currently.
• Nathan Myhrvold, the type of person I wish were cloned so I could have one copy here in New York, one in Europe, and one in Lebanon. I started meeting with him regularly; every single meeting has led to a big idea, or the rediscovery of my own ideas through the brain of a more intelligent person—he could easily claim co-authorship of my next book.
• Our psychology conspires: people like to go to a precise destination, rather than face some degree of uncertainty, even if beneficial. And research itself, the way it is designed and funded, seems to be teleological, aiming for precise results rather than looking for maximal exposures to forking avenues.
• I will only very briefly discuss the crisis of 2008 (which took place after the publication of the book, and which was a lot of things, but not a Black Swan, only the result of fragility in systems built upon ignorance—and denial—of the notion of Black Swan events. You know with near certainty that a plane flown by an incompetent pilot will eventually crash).
• The corollary is obvious: since there is nothing new about the crisis of 2008, we will not learn from it and we will make the same mistake in the future.
• Reducing volatility and ordinary randomness increases exposure to Black Swans—it creates an artificial quiet.
• My dream is to have a true Epistemocracy—that is, a society robust to expert errors, forecasting errors, and hubris, one that can be resistant to the incompetence of politicians, regulators, economists, central bankers, bankers, policy wonks, and epidemiologists. We cannot make economists more scientific; we cannot make humans more rational (whatever that means); we cannot make fads disappear.
• One useful trick, I discovered, is to avoid listening to the question of the interviewer, and answer with whatever I have been thinking about recently. Remarkably, neither the interviewers nor the public notices the absence of correlation between question and answer.
• The center of the problem is that none of them knew the center of the problem.
• Organisms need, to use the metaphor of Marcus Aurelius, to turn obstacles into fuel—just as fire does.
• If you deprive an organism of stressors, you affect its epigenetics and gene expression—some genes are up-regulated (or down-regulated) by contact with the environment. A person who does not face stressors will not survive should he encounter them. Just consider what happens to someone’s strength after he spends a year in bed, or someone who grows up in a sterile environment and then one day takes the Tokyo subway, where riders are squeezed like sardines.
• I lack what the biologist Robert Sapolsky calls the beneficial aspect of acute stress, compared to the deleterious one of dull stress—another barbell, for no stress plus a little bit of extreme stress is vastly better than a little bit of stress (like mortgage worries) all the time.
• Preventing small forest fires sets the stage for more extreme ones; giving out antibiotics when it is not very necessary makes us more vulnerable to severe epidemics—and perhaps to that big one, the grand infection that will be resistant to known antibiotics and will travel on Air France.
• The argument often heard about primitive people living on average less than thirty years ignores the distribution around that average; life expectancy needs to be analyzed conditionally. Plenty died early, from injuries; many lived very long—and healthy—lives. This is exactly the elementary “fooled by randomness” mistake, relying on the notion of “average” in the presence of variance, that makes people underestimate risks in the stock market.
• I know few people who would board a plane heading for La Guardia airport in New York City with a pilot who was using a map of Atlanta’s airport “because there is nothing else.” People with a functioning brain would rather drive, take the train, or stay home. Yet once they get involved in economics, they all prefer professionally to use in Extremistan the measures made for Mediocristan, on the ground that “we have nothing else.”
• Professional readers, less genuine, either read too quickly or have an agenda. When reading for “work” or for the purpose of establishing their status (say, to write a review), rather than to satisfy a genuine curiosity, readers who have too much baggage (or perhaps not enough) tend to read rapidly and efficiently, scanning jargon terms and rapidly making associations with prepackaged ideas.
• In addition to playing into our mental biases, and telling people what they want to hear, these “idea books” often have an abhorrent definitive and investigative tone to their messages, like the reports of management consultants trying to make you believe that they told you more than they actually did.
• I was lucky that it only took a couple of years (and a severe financial crisis) for the Republic of Letters to realize that The Black Swan was a philosophical tale.
• Not the intellectual vindication of winning an argument, no: academia, I discovered, does not change its mind voluntarily, except perhaps in some real sciences such as physics. It was a different feeling: it is hard to focus on a conversation, especially when it is mathematical, when you have just personally earned several hundreds of times the annual salary of the researcher trying to tell you that you are “wrong,” by betting against his representation of the world.
• For example, the curator of a conference known as TED (a monstrosity that turns scientists and thinkers into low-level entertainers, like circus performers) complained that my presentation style did not conform to his taste in slickness and kept my lecture on Black Swans and fragility off the Web. Of course, he subsequently tried to claim credit for my warnings voiced before the crisis of 2008.*
• I needed connection to the real world, something real and applied, instead of focusing on winning arguments and trying to convince people of my point (people are almost always only convinced of what they already know).
• When you walk the walk, whether successful or not, you feel more indifferent and robust to people’s opinion, freer, more real.
• I have spent considerable time away from the weight-lifting room repeating that a Black Swan for the turkey is not a Black Swan for the butcher.
• Indeed, the Latin poet Lucretius, who did not attend business school, wrote that we consider the biggest object of any kind that we have seen in our lives as the largest possible item: et omnia de genere omni / Maxima quae vivit quisque, haec ingentia fingit.
• Recall that skepticism is costly, and should be available when needed.
• Few understand that there is generally no such thing as a reachable long run except as a mathematical construct to solve equations; to assume a long run in a complex system, you need to also assume that nothing new will emerge.
• One has to have a mental problem to think that probabilities of future events are “measurable” in the same sense that the temperature is measurable by a thermometer.
• Since Plato only philosophers have spent time discussing what Truth was, and for a reason: it is unusable in practice. By focusing on the True/False distinction, epistemology remained, with very few exceptions, prisoner of an inconsequential, and highly incomplete, 2-D framework. The third missing dimension is, of course, the consequence of the True, and the severity of the False, the expectation.
• The more remote the event, the less we can get empirical data (assuming generously that the future will resemble the past) and the more we need to rely on theory.
• So the rarer the event, the less we know about its role—and the more we need to compensate for that deficiency with an extrapolative, generalizing theory. It will lack in rigor in proportion to claims about the rarity of the event. Hence theoretical and model error are more consequential in the tails; and, the good news, some representations are more fragile than others.
• Consider that we are suckers and will gravitate toward those variables that are unstable but that appear stable.
• Seneca is the one who (with some help from Cicero) taught Montaigne that to philosophize is to learn how to die. Seneca is the one who taught Nietzsche the amor fati, “love fate,” which prompted Nietzsche to just shrug and ignore adversity, mistreatment by his critics, and his disease, to the point of being bored by them.
• Seneca ended his essays (written in the epistolary form) with vale, often mistranslated as “farewell.” It has the same root as “value” and “valor” and means both “be strong (i.e., robust)” and “be worthy.” Vale.