The Black Swan : The Impact of the Highly Improbable de N. N. Taleb

The book we are presenting this week is Taleb’s best seller The Black Swan: The Impact of the Highly Improbable first published in 2007.

Nassim book-Black-Swan-pbkNicholas Taleb was born in Lebanon in 1960 and became a millionaire during the 2007 crisis thanks to his black swan theory and his expertise in “tail risk hedging” (predictions and insurance against extreme changes in markets). After working for different worldwide and well-known financial groups, he is now a professor in various famous universities and a bestselling author specialized in randomness.

His Black Swan book relies on the idea that our world is dominated by the unknown, the very improbable and all the while we spend our time engaged in small talk, focusing on the known, and the 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.“[1]

His core concept of “black swan” is characterized by three distinctive elements: black swans are unpredictable because they are not following a linear series of historical events; they have extreme impact on our world; and despite their unpredictability, human beings always feel the need to find “rational” explanations for black swans after they occurred.

He also focuses on what make us vulnerable to black swans. We tend to suffer from various fallacies and biases that need to be acknowledged if we want to benefit from changes induced by black swans, instead of being held hostages.

One of the most striking examples of the book is the turkey one. From the turkey’s perspective, life is a linear fact: everyday it is being fed by a friendly owner and based on historical data, there is no reason for it to change in the near future. Although, the closer it gets to Thanksgiving, the shorter its life expectation is; but the turkey, again based in past events, has no reason to see the blast coming. On Thanksgiving morning, the turkey experiences her own black swan. Therefore, we should not chicken out (or better say “turkey out” J) and assume that life will go on as it did yesterday and the days before.

On a similar note, we saw a boom of books on “How to become a millionaire?”, but we tend to forget that only winners get to write history. By only remembering and valuing those who were great conquerors or who made a fortune, we become biased.

In order to cope with extreme changes Taleb proposes several recommendations:

–           He suggests that we stop reading the news, blogs, and other websites that showcase pieces of information selected by writers based on their assumptions and views. Instead, we should focus on raw material or data and analyze it with our own reasoning methods.

–          Do not trust governmental predictions or experts: they are usually wrong and very rarely brought face to face with their past predictions. Therefore, they keep predicting things, even if their accurateness records are, in fact, very low.

–          We have to accept that, as human beings, we are biased. We should not avoid making judgments or predictions but be aware of the fallacies and biases that impact us. However, they should not impede us from benefiting from unpredictable events: we have to focus on high volatility events and embrace change, instead of fighting it to keep things as they are.

[1] Quote from The Black Swan: The Impact of the Highly Improbable, (Penguin Editions, 2007)


Laisser un commentaire

Entrez vos coordonnées ci-dessous ou cliquez sur une icône pour vous connecter:


Vous commentez à l'aide de votre compte Déconnexion /  Changer )

Photo Google+

Vous commentez à l'aide de votre compte Google+. Déconnexion /  Changer )

Image Twitter

Vous commentez à l'aide de votre compte Twitter. Déconnexion /  Changer )

Photo Facebook

Vous commentez à l'aide de votre compte Facebook. Déconnexion /  Changer )


Connexion à %s