same bar, so consider this a pure thought exercise. I will ask each of them a question and compare their answers.
NNT (that is, me): Assume that a coin is fair, i.e., has an equal probability of coming up heads or tails when flipped. I flip it ninety-nine times and get heads each time. What are the odds of my getting tails on my next throw?
Dr. John: Trivial question. One half, of course, since you are assuming 50 percent odds for each and independence between draws.
NNT: What do you say, Tony?
Fat Tony: I’d say no more than 1 percent, of course.
NNT: Why so? I gave you the initial assumption of a fair coin, meaning that it was 50 percent either way.
Fat Tony: You are either full of crap or a pure sucker to buy that “50 pehcent” business. The coin gotta be loaded. It can’t be a fair game. (Translation: It is far more likely that your assumptions about the fairness are wrong than the coin delivering ninety-nine heads in ninety-nine throws.)
NNT: But Dr. John said 50 percent.
Fat Tony (whispering in my ear): I know these guys with the nerd examples from the bank days. They think way too slow. And they are too commoditized. You can take them for a ride.
Now, of the two of them, which would you favor for the position of mayor of New York City (or Ulan Bator, Mongolia)? Dr. John thinks entirely within the box, the box that was given to him; Fat Tony, almost entirely outside the box.
To set the terminology straight, what I call “a nerd” here doesn’t have to look sloppy, unaesthetic, and sallow, and wear glasses and a portable computer on his belt as if it were an ostensible weapon. A nerd is simply someone who thinks exceedingly inside the box.
Have you ever wondered why so many of these straight-A students end up going nowhere in life while someone who lagged behind is now getting the shekels, buying the diamonds, and getting his phone calls returned? Or even getting the Nobel Prize in a real discipline (say, medicine)? Some of this may have something to do with luck in outcomes, but there is this sterile and obscurantist quality that is often associated with classroom knowledge that may get in the way of understanding what’s going on in real life. In an IQ test, as well as in any academic setting (including sports), Dr. John would vastly outperform Fat Tony. But Fat Tony would outperform Dr. John in any other possible ecological, real-life situation. In fact, Tony, in spite of his lack of culture, has an enormous curiosity about the texture of reality, and his own erudition – to me, he is more scientific in the literal, though not in the social, sense than Dr. John.
We will get deep, very deep, into the difference between the answers of Fat Tony and Dr. John; this is probably the most vexing problem I know about the connections between two varieties of knowledge, what we dub Platonic and a-Platonic. Simply, people like Dr. John can cause Black Swans outside Mediocristan – their minds are closed. While the problem is very general, one of its nastiest illusions is what I call the ludic fallacy – the attributes of the uncertainty we face in real life have little connection to the sterilized ones we encounter in exams and games.
So I close Part One with the following story.
LUNCH AT LAKE COMO
One spring day a few years ago, I was surprised to receive an invitation from a think tank sponsored by the United States Defense Department to a brainstorming session on risk that was to take place in Las Vegas the following fall. The person who invited me announced on the phone, “We’ll have lunch on a terrace overlooking Lake Como”, which put me in a state of severe distress. Las Vegas (along with its sibling the emirate of Dubai) is perhaps one place I’d never wish to visit before I die. Lunch at “fake Como” would be torture. But I’m glad I went.
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. And they symbolically picked a major casino as a venue.
The symposium was a closed-doors, synod-style assembly of people who would never have mixed otherwise. 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.
In the group was a gentleman who ran a group of professional gamblers and who was banned from most casinos. He had come to share his wisdom with us. He sat not far from a stuffy professor of political science, dry like a bone and, as is characteristic of “big names”, careful about his reputation, who said nothing out of the box, and who did not smile once. During the sessions, I tried to imagine the hotshot with a rat dropped down his back, putting him in a state of wriggling panic. He was perhaps good at writing Platonic models of something called game theory, but when Laurence and I went after him on his improper use of financial metaphors, he lost all his arrogance.
Now, when you think of the major risks casinos face, gambling situations come to mind. In a casino, one would think, the risks include lucky gamblers blowing up the house with a series of large wins and cheaters taking away money through devious methods. It is not just the general public that would believe so, but the casino management as well. Consequently, the casino had a high-tech surveillance system tracking cheaters, card counters, and other people who try to derive an advantage over them. Each of the participants gave his presentation and listened to those of the others. I came to discuss Black Swans, and I intended to tell them that the only thing I know is that we know precious little about them, but that it was their property to sneak up on us, and that attempts at Platonifying them led to additional misunderstandings. Military people can understand such things, and the idea became recently prevalent in military circles with the expression
What is the
I was hoping that the representatives of the casino would speak before me so I could start harassing them by showing (politely) that a casino was precisely the venue
