The black swan nassim taleb pdf

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was. The astonishing success of Google was a black swan; so was 9/ For Nassim Nicholas. Taleb, black swans underlie almost everything about our world . The Roots of Unfairness: the Black. Swan in Arts and Literature. Nassim Nicholas Taleb1. 2nd. Draft, November Literary Reseach/Recherche Litteraire. PDF | On Feb 1, , Gene Callahan and others published Nassim Nicholas Taleb: The black swan: The impact of the highly improbable.

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The Black Swan Nassim Taleb Pdf

PDF | What constitutes a Black Swan? And under what conditions may a Black Swan be expected to arise? As Nassim Taleb describes it, a Black Swan is an. Nassim Taleb is a famous essayist who spent two decades as a trader before he Taleb asserts how the Black Swan events explain many things that take place. The Black Swan Summary by Nassim Nicholas Taleb - is an insightful classic which sets new boundaries when it comes to understanding life.

Early life and family background[ edit ] Taleb as a student in Paris, c. His grandfather, Fouad Nicolas Ghosn, and his great-grandfather, Nicolas Ghosn, were both deputy prime ministers in the s through the s. His paternal grandfather Nassim Taleb was a supreme court judge and his great-great-great-great grandfather, Ibrahim Taleb Nabbout , was a governor of Mount Lebanon in Taleb considers himself less a businessman than an epistemologist of randomness , and says that he used trading to attain independence and freedom from authority. His business model has been to safeguard investors against crises while reaping rewards from rare events, and thus his investment management career has included several jackpots followed by lengthy dry spells. Taleb reportedly became financially independent after the crash of [21] and was successful during the Nasdaq dive in [33] as well as the financial crisis that began in , [9] a development which he attributed to the mismatch between reality and statistical distributions used in finance. Following this crisis, Taleb became an activist for what he called a "black swan robust society". Frey and Raphael Douady , formed the Real World Risk Institute "to build the principles and methodology for what we call real-world rigor, in decision making and codify a clear-cut way to approach It was originally published in November including only the first four books. The fifth book has not been included in a separate release of the series. His first non-technical book, Fooled by Randomness , about the underestimation of the role of randomness in life, published in , was selected by Fortune as one of the smartest 75 books known. It spent 36 weeks on the New York Times Bestseller list , [51] 17 as hardcover and 19 weeks as paperback, [21] [52] and was translated into 31 languages. It has not yet been included in an updated release of Incerto.

It was originally published in November including only the first four books. The fifth book has not been included in a separate release of the series.

Nassim Nicholas Taleb

His first non-technical book, Fooled by Randomness , about the underestimation of the role of randomness in life, published in , was selected by Fortune as one of the smartest 75 books known. It spent 36 weeks on the New York Times Bestseller list , [51] 17 as hardcover and 19 weeks as paperback, [21] [52] and was translated into 31 languages.

It has not yet been included in an updated release of Incerto. Taleb's non-technical writing style has been described as mixing a narrative, often semi-autobiographical style with short philosophical tales and historical and scientific commentary.

The Black Swan Summary

Taleb disagrees with Platonic i. Based on these and other constructions, he advocates for what he calls a "black swan robust" society, meaning a society that can withstand difficult-to-predict events. He argues that knowledge and technology are usually generated by what he calls " stochastic tinkering" rather than by top-down directed research, [57] [58] and has proposed option-like experimentation as a way to outperform directed research as a method of scientific discovery, an approach he terms convex tinkering.

Discussing the ludic fallacy in The Black Swan, he writes, "The dark side of the moon is harder to see; beaming light on it costs energy. In the same way, beaming light on the unseen is costly, in both computational and mental effort.

He states that statistics is fundamentally incomplete as a field, as it cannot predict the risk of rare events, a problem that is acute in proportion to the rarity of these events. With the mathematician Raphael Douady , he called the problem statistical undecidability Douady and Taleb, Taleb sees his main challenge as mapping his ideas of "robustification" and " antifragility ", that is, how to live and act in a world we do not understand and build robustness to black swan events.

Taleb introduced the idea of the "fourth quadrant" in the exposure domain. These are deemed by Taleb to be more robust to estimation errors. For instance, he suggests that investing money in 'medium risk' investments is pointless, because risk is difficult, if not impossible to compute. His preferred strategy is to be both hyper-conservative and hyper-aggressive at the same time.

An alternative suggestion is to engage in highly speculative bets with a limited downside.

Taleb asserts that by adopting these strategies a portfolio can be "robust", that is, gain a positive exposure to black swan events while limiting losses suffered by such random events. Jaynes that economic life increases in entropy under regulatory and other constraints.

The Black Swan PDF Summary

Instead of doing steady and moderate exercise daily, he suggests that it is better to do a low-effort exercise such as walking slowly most of the time, while occasionally expending extreme effort.

He claims that the human body evolved to live in a random environment, with various unexpected but intense efforts and much rest.

In other words, studies that ignore the random nature of supply of nutrients are invalid. Praise and criticism[ edit ] In a article in The Times , the journalist Bryan Appleyard described Taleb as "now the hottest thinker in the world". His book, The Black Swan, is an original and audacious analysis of the ways in which humans try to make sense of unexpected events. The magazine offered a mixture of praise and criticism for Taleb's main points, with a focus on Taleb's writing style and his representation of the statistical literature.

Two Types of Improbability To better understand the impact of the unlikely, Nassim Taleb divides human knowledge into two main areas of randomness, separating the two major groups of unlikely effects in our lives. By dividing the improbable into two large groups, it becomes easier to understand how it deceives us and thus proves our inability to make predictions.

The first of them is called by Taleb of Mediochristian, describing a land where averages are the rule. In Mediochristian our sampling of information and data available is very large, and no single fact will change the way the model works.

The data in this context is not scalable, as it has defined a minimum and a maximum limit.

Examples of Mediochristian information are, for example, physical characteristics such as height and body weight, and even IQ. Since the properties of such non-scalable information are certainly limited, it is possible to make relatively accurate predictions about the means. The second territory is the Extremistan, and it is in it that the extremes live.

In Extremistan, the information is so disproportionate that a single observation can dramatically impact our observations and mislead our ability to make predictions. Extremistan brings the nonphysical side, fundamentally abstract things. Examples of data and information emerging from the Far East are far more diverse. Examples include: Deaths in terrorist attacks, book sales by an author, inflation rates. Other than data such as height and weight, wealth distribution and album sales are scalable items.

For example, you can sell your book in digital format through Kindle infinitely, because the digital format does not require you to print a book with each copy sold. Another example is wealth, which is highly scalable: it is possible for a small percentage of the population to own an incredibly large portion of wealth.

And if you analyze the data looking at the average, you can be deceived with a representation of the income distribution that does not accurately reflect the reality of people.

You are a turkey, which is fed daily, well taken care of every day, for years and your life is going ok. But on Thanksgiving, a surprise occurs. You are not fed, you are murdered and eaten by the people who feed you. That is the metaphor that Taleb uses to illustrate how to observe the past to predict the future. It also proves that the Black Swans are relative. For you the turkey , the Thanksgiving dinner is definitely a Black Swan, but for the Thanksgiving dinner cook, there is no surprise in this event.

We often look at our lives as if things were happening in the Mediochristian, when, in fact, life occurs much more in the kingdom of Extremistan. To learn to deal with this, one must accept, embrace and understand the unpredictable nature of the world, rather than ignore it.

That will not make you not be the turkey, but at least it will allow you not to get accustomed to the status quo. Do not Trust Your Brain! Our brains play tricks on us.

We tend to conclude that similar sounding phrases have absurdly different meanings. The lack of proof that something exists does not mean that it does not exist. It is not because there has never been an earthquake in your city, that it will never occur, will it?

There is also the tendency of our brain to seek evidence, the so-called fallacy of confirmation. Our brain is accustomed to searching for evidence that things exist or will occur. But given our ignorance, to seek evidence that what we believe is real can greatly limit our line of thought and make us ignore information that does not support our beliefs. It is often more valuable to search for facts that go against our beliefs than those which support it.

That leads to much more powerful discoveries and allows us not to be blinded. Your Brain Makes Up Stories… Another flaw in our operating system is that we are in the habit of creating stories based on collections of events that occur in our lives. The author calls this failure a narrative fallacy. It is characterized by exploiting our limited ability to analyze sequences of events without adding an explanation to them.

Explanations tie the facts and make them easier to remember, but our brains always seek to tell a story where events are correlated and meaningful. However, by condensing facts into a single narrative, we end up generating a loss of information and have a great tendency to oversimplify things.

We discard the data that makes no sense in our history, and that leaves us at the mercy of the swans. Two Ways to Think… According to cognitive psychologists, we have two kinds of thoughts. Type 1 thinking is instinctive, fast, immediate, and based on your experience with the world.

This system is advantageous for having high speed and helps you react quickly to external stimuli but is also very prone to errors. System 2, on the other hand, is slow, rational and self-aware, much more useful in the classroom not at a time of quick thinking between life and death.

The problem is that we often confuse thoughts from system 1 with system 2 because at level 1 we have no control over them. Often, we believe that the thoughts that come from system 1 are based on analysis rather than reflexes, and this harms our cognition. System 1 leaves us blind to Black Swans and often misinterprets them as well. System 1 considers primarily anecdotal data and based on our experience rather than using statistics or empirical data.

Know your brain. Have you ever dreamt of being a great author or creating a great company in an innovative market?

If this is what you seek, Taleb has an interesting point of view. The human being needs constant, tangible results and rewards to continue to pursue something. A number of small, constant rewards usually bring more happiness and fulfillment than a substantial reward. There are two types of progress. The uniform and linear, and the nonlinear, which tend to occur in large jumps, alternating with stagnation. But while we prefer to believe that the world works in a linear perspective, this is not the right way to approach the problem.

Nonlinear situations are the most constant in life, and linear conditions tend to be the real exception. His learning comes from things so diverse and in many cases random that to believe that the linear model is the best model ends up becoming a fallacy. The linear model is adopted in classrooms and books just because they are easier to understand. Besides, the humans have the limitation that in viewing the past, they select the parts of a process that fit his impressions and ignores the parts that do not conform to his preconceptions.

Our mind creates a record that ignores the facts which do not fit our mental model, and Taleb calls this the silent evidence. For example, humans tend to see authors of famous books as extremely talented and attribute the reason for their success to their talents. Many writers with various works never get to have a book published by a major publisher and become a bestseller.

Therefore, they end up not getting known by the public. As we do not have access to the works of hundreds of thousands of authors who have never had their books published by the major publishers, we tend not to take into account their importance and relevance.

We, as human beings, tend to consider only the Black Swans who have had the right combination of talent and luck to secure their place in the hall of fame. The presence or absence of talent cannot be proven as a cause of success in the publishing world. Silent evidence did not create a black swan and therefore did not receive public attention. Therefore, it is important to be open to the possibility of having unplanned results for our activities.

That can help us advantageously benefit the Black Swans when they appear. There is a law in statistics, called the law of iterated expectations. It states that the expectation of attaining knowledge by itself is equivalent to the knowledge itself.

In practice, Taleb explains that this law acts as follows in our expectations: If I expect something to happen by a certain date in the future, I expect this something in the present. If you know what the discovery will do in the future, you have almost discovered it.

The Black Swan PDF Summary - Nassim Nicholas Taleb | 12min Blog

To understand the future to the point of predicting it, you need to incorporate elements of the future into your present, that is, to add uncertainty components in your experiments. Swans in Practice… If you are ready to embrace your ignorance, here are some practical tips from Taleb to learn how to capture more value from the Black Swans.

The first step is to focus on the potential consequences of the unexpected instead of focusing on the likelihood that the improbable will occur.

The effects of making a mistake in weather forecasting, for example, are often trivial, while the consequences of making mistakes in stock market forecasts can be devastating. For this, the idea is to prioritize their beliefs according to the damage they can cause rather than the chance of them happening. What do you believe could have the most significant impact on your life today?