The Black Swan: The Impact of the Highly Improbable

This experiment inspired a collection of similar tests, of which another example: Subjects were asked which questions to ask to find out whether a person was extroverted or not, purportedly for another type of experiment. It was established that subjects supplied mostly questions for which a “yes” answer would support the hypothesis.

But there are exceptions. Among them figure chess grand masters, who, it has been shown, actually do focus on where a speculative move might be weak; rookies, by comparison, look for confirmatory instances instead of falsifying ones. But don’t play chess to practice skepticism. Scientists believe that it is the search for their own weaknesses that makes them good chess players, not the practice of chess that turns them into skeptics. Similarly, the speculator George Soros, when making a financial bet, keeps looking for instances that would prove his initial theory wrong. This, perhaps, is true self-confidence: the ability to look at the world without the need to find signs that stroke one’s ego.[20]

Sadly, the notion of corroboration is rooted in our intellectual habits and discourse. Consider this comment by the writer and critic John Updike: “When Julian Jaynes … speculates that until late in the second millennium B.C. men had no consciousness but were automatically obeying the voices of gods, we are astounded but compelled to follow this remarkable thesis through all the corroborative evidence”. Jaynes’s thesis may be right, but, Mr. Updike, the central problem of knowledge (and the point of this chapter) is that there is no such animal as corroborative evidence.

Saw Another Red Mini!

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” implies that all nonwhite objects are not swans. What confirms the latter statement should confirm the former. Therefore, 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!”

Not Everything

We are not naive enough to believe that someone will be immortal because we have never seen him die, or that someone is innocent of murder because we have never seen him kill. The problem of naive generalization does not plague us everywhere. But such smart pockets of inductive skepticism tend to involve events that we have encountered in our natural environment, matters from which we have learned to avoid foolish generalization.

For instance, when children are presented with the picture of a single member of a group and are asked to guess the properties of other unseen members, they are capable of selecting which attributes to generalize. Show a child a photograph of someone overweight, tell her that he is a member of a tribe, and ask her to describe the rest of the population: she will (most likely) not jump to the conclusion that all the members of the tribe are weight-challenged. But she would respond differently to generalizations involving skin color. If you show her people of dark complexion and ask her to describe their co-tribesmen, she will assume that they too have dark skin.

So it seems that we are endowed with specific and elaborate inductive instincts showing us the way. Contrary to the opinion held by the great David Hume, and that of the British empiricist tradition, that belief arises from custom, as they assumed that we learn generalizations solely from experience and empirical observations, it was shown from studies of infant behavior that we come equipped with mental machinery that causes us to selectively generalize from experiences (i.e., to selectively acquire inductive learning in some domains but remain skeptical in others). By doing so, we are not learning from a mere thousand days, but benefiting, thanks to evolution, from the learning of our ancestors – which found its way into our biology.

Back to Mediocristan

And we may have learned things wrong from our ancestors. I speculate here that we probably inherited the instincts adequate for survival in the East African Great Lakes region where we presumably hail from, but these instincts are certainly not well adapted to the present, post-alphabet, intensely informational, and statistically complex environment.

Indeed our environment is a bit more complex than we (and our institutions) seem to realize. How? The modern world, being Extremistan, is dominated by rare – very rare – events. It can deliver a Black Swan after thousands and thousands of white ones, so we need to withhold judgment for longer than we are inclined to. As I said in Chapter 3, it is impossible – biologically impossible – to run into a human several hundred miles tall, so our intuitions rule these events out. 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.

Furthermore, the sources of Black Swans today have multiplied beyond measurability.[21] In the primitive environment they were limited to newly encountered wild animals, new enemies, and abrupt weather changes. These events were repeatable enough for us to have built an innate fear of them. This instinct to make inferences rather quickly, and to “tunnel” (i.e., focus on a small number of sources of uncertainty, or causes of known Black Swans) remains rather ingrained in us. This instinct, in a word, is our predicament.

Chapter Six: THE NARRATIVE FALLACY

The cause of the because – How to split a brain – Effective methods of pointing at the ceiling – Dopamine will help you win – I will stop riding motorcycles (but not today) – Both empirical and psychologist? Since when?

ON THE CAUSES OF MY REJECTION OF CAUSES

During the fall of 2004, I attended a conference on aesthetics and science in Rome, perhaps the best possible location for such a meeting since aesthetics permeates everything there, down to one’s personal behavior and tone of voice. At lunch, a prominent professor from a university in southern Italy greeted me with extreme enthusiasm. I had listened earlier that morning to his impassioned presentation; he was so charismatic, so convinced, and so convincing that, although I could not understand much of what he said, I found myself fully agreeing with everything. I could only make out a sentence here and there, since my knowledge of Italian worked better in cocktail parties than in intellectual and scholarly venues. At some point during his speech, he turned all red with anger – thus convincing me (and the audience) that he was definitely right.

He assailed me during lunch to congratulate me for showing the effects of those causal links that are more prevalent in the human mind than in reality. The conversation got so animated that we stood together near the buffet table, blocking the other delegates from getting close to the food. He was speaking accented French (with his hands), I was answering in primitive Italian (with my hands), and we were so vivacious that the other guests were afraid to interrupt a conversation of such importance and animation. He was emphatic about my previous book on randomness, a sort of angry trader’s reaction against blindness to luck in life and in the markets, which had been published there under the musical title Giocati dal caso. I had been lucky to have a translator who knew almost more about the topic than I did, and the book found a small following among Italian