framedsheep

Quite by chance, as I was finding a book for my girlfriend, I came across ‘The Black Swan: The Impact of the Highly Improbable‘ by Nassim Nicholas Taleb [link]

Excerpt:

Before the discovery of Australia, people in the old world were convinced that all swans were white, an unassailable belief as it seemed completely confirmed by empirical evidence. The sighting of the first black swan might have been an interesting surprise for a few ornithologists (and others extremely concerned with the coloring of birds), but that is not where the significance of the story lies. It illustrates a severe limitation to our learning from observations or experience and the fragility of our knowledge. One single observation can invalidate a general statement derived from millennia of confirmatory sightings of millions of white swans. All you need is one single (and, I am told, quite ugly) black bird.

I push one step beyond this philosophical-logical question into an empirical reality, and one that has obsessed me since childhood. What we call here a Black Swan (and capitalize it) is an event with the following three attributes.

First, it is an outlier, as it lies outside the realm of regular expectations, because nothing in the past can convincingly point to its possibility. Second, it carries an extreme impact. Third, in spite of its outlier status, human nature makes us concoct explanations for its occurrence after the fact, making it explainable and predictable.

I stop and summarize the triplet: rarity, extreme impact, and retrospective (though not prospective) predictability. A small number of Black Swans explain almost everything in our world, from the success of ideas and religions, to the dynamics of historical events, to elements of our own personal lives. Ever since we left the Pleistocene, some ten millennia ago, the effect of these Black Swans has been increasing. It started accelerating during the industrial revolution, as the world started getting more complicated, while ordinary events, the ones we study and discuss and try to predict from reading the newspapers, have become increasingly inconsequential.

Excerpt lifted from The New York Times, that carries the first chapter of this book over here.

Oh, what the heck, let me further entice you with another snippet.

The central idea of this book concerns our blindness with respect to randomness, particularly the large deviations: Why do we, scientists or nonscientists, hotshots or regular Joes, tend to see the pennies instead of the dollars? Why do we keep focusing on the minutiae, not the possible significant large events, in spite of the obvious evidence of their huge influence? And, if you follow my argument, why does reading the newspaper actually decrease your knowledge of the world?

It is easy to see that life is the cumulative effect of a handful of significant shocks. It is not so hard to identify the role of Black Swans, from your armchair (or bar stool). Go through the following exercise. Look into your own existence. Count the significant events, the technological changes, and the inventions that have taken place in our environment since you were born and compare them to what was expected before their advent. How many of them came on a schedule? Look into your own personal life, to your choice of profession, say, or meeting your mate, your exile from your country of origin, the betrayals you faced, your sudden enrichment or impoverishment. How often did these things occur according to plan?

What You Do Not Know

Black Swan logic makes what you don’t know far more relevant than what you do know. Consider that many Black Swans can be caused and exacerbated by their being unexpected.

Think of the terrorist attack of September 11, 2001: had the risk been reasonably conceivable on September 10, it would not have happened. If such a possibility were deemed worthy of attention, fighter planes would have circled the sky above the twin towers, airplanes would have had locked bulletproof doors, and the attack would not have taken place, period. Something else might have taken place. What? I don’t know. Isn’t it strange to see an event happening precisely because it was not supposed to happen? What kind of defense do we have against that? Whatever you come to know (that New York is an easy terrorist target, for instance) may become inconsequential if your enemy knows that you know it. It may be odd to realize that, in such a strategic game, what you know can be truly inconsequential.

So here we have a black swan. It was thought improbable to exist. That was until it was proven that it did actually exist, as explained above. What however does this mean to us though?

‘Black Swans’ challenge conventional thinking by allowing for unknown factors, we might call them unknown variables in some or another respect, to enter in to the field of the known, thereby transforming what is known in to something else. The effect of these changes can be on a grand change causing scale, out of the blue or they can be gradual, developing over time.

I have started to hold the thought that perhaps the expectations which we hold about almost every facet or element of our life, with the view to using these expectations as measures or a means to measure specific outcomes, are rather, well, to put it mildly, weak and therefore in some instances, dangerous. That is to say, that making too many assumptions about what we know or what we think we know, can often make us more ignorant with knowledge to back our assumptions up, rather than keeping an open mind and allowing for more dynamic factors to enter in to play to show us what there really is.

Therefore, if we abandon absolute assumptions and resist historical analysis based on assumptions, we might actually learn more through being ignorant. This is not so much taking the point of view of “thinking outside the box” - but rather asking - “Is there a box [container] anyway?”

This kind of thinking is going to be problematic because it requires an abstract perspective. To me at least, I think that my recent posting on The Madness and Wisdom of Crowds demonstrates something of a ‘Black Swan’ incident.

In my posting, I mentioned that the annual migration of animals took place, based on the instinctual knowledge [instinctual assumption] that better grazing was to be found after a long and arduous trek that necessitated a river crossing. At the point where the river crossing was to occur, I made mention of an incident where an unwitting predator spooked a herd of wildebeest, causing what should have been a safe passage in large numbers, across the river, to stampede to a less than ideal crossing point, where many animals died. [Where an event changed the wisdom of crowds to the madness of crowds.]

That to my mind, is a good example of a Black Swan incident. The same might be said of the events leading up to WW 2. Why did the French with their Maginot Line, not conceive that their best defense, was their greatest weakness, and in effect, added to their disbelief that the Germans would actually invade them, did nothing more to protect themselves? They assumed incorrectly. Just think about any other instance from history, even your own personal history, where the improbable became the actual or the real, and you never saw it coming.

Sometimes certain events lead up to other events that no one expected them to lead up to. Assumptions may have been wrong or certain facts may have been ignored, having been taken as a statistical given or a general rule of thumb common sense idea. When things change, what happens next and then how do we really view the past?

To some, this can be shaky territory to work from, however to others, and I include myself here, it seems that there is something quite fascinating to keep an open mind and see if I [we] can actually learn something here. I don’t particularly know where this is all going to go, if anywhere, however I’m sure that there is something of value here.

Keep you posted if I think of anything else.