Book Review: The Black Swan

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Taleb, Nassim. The black swan : the impact of the highly improbable.
Random House, 2007.

The Black Swan is a follow-up to the author’s 2001 best-seller, Fooled by Randomness, about the role chance plays in life. Fooled was controversial when released and continues to be a classic text in the hedge fund industry. Writing a general-interest book about probability is in itself quite an accomplishment. With Black Swan, it looks like the author (Lebanon-born, Wharton MBA, doctorate in mathematical finance, Wall Street hedge trader) has done it again.

This time, Taleb uses the image of a black swan to describe an event that is highly improbable yet causes a huge impact. Plus, after the event occurs, people concoct explanations for its occurrence in an attempt to make it seem predictable. The terrorist attack of 9/11 is a black swan. So is Black Friday in 1987. So is the development of the internet. Black swans can be either positive or negative, but either way, they have a huge influence on history.

The Black Swan considers fundamental questions about the nature of randomness. The central thesis is that the outliers, not part of the bell curve, are too often ignored by social scientists and these outliers have enormous importance for individuals, government, science and society.

On a personal level, our love for explanations tricks us into thinking we understand how the world works. We tend of overestimate rationality in our lives. In reality, we cannot predict as much as we think we can. In our increasingly uncertain world, what we don’t know is more relevant than what we do know. It is possible to create positive black swans, but to do so requires a focus on trial and error, and an ability to recognize opportunities when they present themselves.

In the end, I have to say that this reviewer found the author’s ideas to be interesting but his writing style made this book a chore to read. Taleb considers himself to be a philosopher and he writes with energy and passion. Unfortunately, his numerous philosophic off-topic comments and irrelevant ramblings distract the reader from the argument he is making. Maybe I’m an outlier on this since other reviews have been very positive — except those by statisticians, who were predictably negative about his numerous insults to their profession.

© Reviewer: Meg Trauner & Ford Library – Fuqua School of Business. All rights reserved.

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