The Black Swan: The Impact of the Highly Improbable

repeated. This implies the need to use the extreme event as a starting point and not treat it as an exception to be pushed under the rug. 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.

Chapters Map

The sequence of this book follows a simple logic; it flows from what can be labeled purely literary (in subject and treatment) to what can be deemed entirely scientific (in subject, though not in treatment). Psychology will be mostly present in Part One and in the early part of Part Two; business and natural science will be dealt with mostly in the second half of Part Two and in Part Three. Part One, “Umberto Eco’s Antilibrary”, is mostly about how we perceive historical and current events and what distortions are present in such perception. Part Two, “We Just Can’t Predict”, is about our errors in dealing with the future and the unadvertised limitations of some “sciences” – and what to do about these limitations. Part Three, “Those Gray Swans of Extremistan”, goes deeper into the topic of extreme events, explains how the bell curve (that great intellectual fraud) is generated, and reviews the ideas in the natural and social sciences loosely lumped under the label “complexity”. Part Four, “The End”, will be very short.

I derived an unexpected amount of enjoyment writing this book – in fact, it just wrote itself – and I hope that the reader will experience the same. I confess that I got hooked on this withdrawal into pure ideas after the constraints of an active and transactional life. After this book is published, my aim is to spend time away from the clutter of public activities in order to think about my philosophical-scientific idea in total tranquillity.

Part 1: UMBERTO ECO’S ANTILIBRARY, OR HOW WE SEEK VALIDATION

The writer Umberto Eco belongs to that small class of scholars who are encyclopedic, insightful, and nondull. He is the owner of a large personal library (containing thirty thousand books), and separates visitors into two categories: those who react with “Wow! Signore professore dottore Eco, what a library you have! How many of these books have you read?” and the others – a very small minority – who get the point that 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.

We tend to treat our knowledge as personal property to be protected and defended. It is an ornament that allows us to rise in the pecking order. So this tendency to offend Eco’s library sensibility by focusing on the known is a human bias that extends to our mental operations. People don’t walk around with anti-resumes telling you what they have not studied or experienced (it’s the job of their competitors to do that), but it would be nice if they did. Just as we need to stand library logic on its head, we will work on standing knowledge itself on its head. Note that the Black Swan comes from our misunderstanding of the likelihood of surprises, those unread books, because we take what we know a little too seriously. 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.

The chapters in this section address the question of how we humans deal with knowledge – and our preference for the anecdotal over the empirical. Chapter 1 presents the Black Swan as grounded in the story of my own obsession. I will make a central distinction between the two varieties of randomness in Chapter 3. After that, Chapter 4 briefly returns to the Black Swan problem in its original form: how we tend to generalize from what we see. Then I present the three facets of the same Black Swan problem: a) The error of confirmation, or how we are likely to undeservedly scorn the virgin part of the library (the tendency to look at what confirms our knowledge, not our ignorance), in Chapter 5; b) the narrative fallacy, or how we fool ourselves with stories and anecdotes (Chapter 6); c) how emotions get in the way of our inference (Chapter 7); and d) the problem of silent evidence, or the tricks history uses to hide Black Swans from us (Chapter 8). Chapter 9 discusses the lethal fallacy of building knowledge from the world of games.

Chapter One: THE APPRENTICESHIP OF AN EMPIRICAL SKEPTIC

Anatomy of a Black Swan – The triplet of opacity – Reading books backward – The rearview mirror – Everything becomes explainable – Always talk to the driver (with caution) – History doesn’t crawl; it jumps – “It was so unexpected” – Sleeping for twelve hours

This is not an autobiography, so I will skip the scenes of war. Actually, even if it were an autobiography, I would still skip the scenes of war. I cannot compete with action movies or memoirs of adventurers more accomplished than myself, so I will stick to my specialties of chance and uncertainty.

ANATOMY OF A BLACK SWAN

For more than a millennium the eastern Mediterranean seaboard called Syria Libanensis, or Mount Lebanon, had been able to accommodate at least a dozen different sects, ethnicities, and beliefs – it worked like magic. The place resembled major cities of the eastern Mediterranean (called the Levant) more than it did the other parts in the interior of the Near East (it was easier to move by ship than by land through the mountainous terrain). The Levantine cities were mercantile in nature; people dealt with one another according to a clear protocol, preserving a peace conducive to commerce, and they socialized quite a bit across communities. This millennium of peace was interrupted only by small occasional friction within Moslem and Christian communities, rarely between Christians and Moslems. While the cities were mercantile and mostly Hellenistic, the mountains had been settled by all manner of religious minorities who claimed to have fled both the Byzantine and Moslem orthodoxies. A mountainous terrain is an ideal refuge from the mainstream, except that your enemy is the other refugee competing for the same type of rugged real estate. The mosaic of cultures and religions there was deemed an example of coexistence: Christians of all varieties (Maronites, Armenians, Greco-Syrian Byzantine Orthodox, even Byzantine Catholic, in addition to the few Roman Catholics left over from the Crusades); Moslems (Shiite and Sunni); Druzes; and a few Jews. It was taken for granted that people learned to be tolerant there; I recall how we were taught in school how far more civilized and wiser we were than those in the Balkan communities, where not only did the locals refrain from bathing but also fell prey to fractious righting. Things appeared to be in a state of stable equilibrium, evolving out of a historical tendency for betterment and tolerance. The terms balance and equilibrium were often used.

Both sides of my family came from the Greco-Syrian community, the last Byzantine outpost in northern Syria, which included what is now called Lebanon. Note that the Byzantines called themselves “Romans” – Roumi (plural Roum) in the local languages. We originate from the olive-growing area at the base of Mount Lebanon – we chased the Maronite Christians into the mountains in the