BLACK SWAN 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 Nassim Nicholas Taleb'sThe Black Swan is a fascinating but deeply flawed book.


Black Swan Taleb Pdf

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"Black swans" are highly consequential but unlikely events that are easily Like everyone else, says Taleb, these so-called “experts” fail to appreciate “black. Second, I want to thank Rotchy Barker, who was my first trading mentor. He took me into his Page How the Turtle W. (italics denote quotes from Taleb, boldface denotes my own emphasis). The phrase “Black Swan” (arising earlier in the different context of.

Human knowledge is constantly growing and evolving, and the dogmatic approach we tend to take makes no sense. We cannot be sure of our beliefs, for they make us blind to concepts that are outside what we believe to be true. The Impact of the Highly Unfair… Black swans are the events that cause vast cognitive transformations, whether minor or enormous, such as the destruction of a sector in the stock market or a political crisis. T he effects can profoundly affect some people and others can go practically unharmed.

The only way to be aware of these impacts is information. The more ignorant you are, the more likely you are to be surprised by a swan. The more informed you are, the less likely you will be hit.

A Black Swan can transform the whole modern understanding of science, impacting philosophy, theology, and physics. In the 15th century, when Nicolaus Copernicus proposed that the earth was not the center of the universe, the consequences were immense, at all levels. He challenged religion yes, the Catholic church suffered major impacts , but also paved the way for a cultural change in society and science. Swans like this change cultures and increasingly accelerate change in the world.

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 site 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.

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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.

Who Should Read “The Black Swan”? and Why?

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 will not make you not be the turkey, but at least it will allow you not to get accustomed to the status quo.

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? 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. 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.

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.

Black swan theory

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. 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. 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. For Taleb, serendipity, positive surprises, plays a crucial role in the role of scientific breakthroughs. The traditional model of research and discovery works like this: Therefore, it is important to be open to the possibility of having unplanned results for our activities.

Nassim Nicholas Taleb. The black swan

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. If I expect something to happen by a certain date in the future, I expect this something in the present. 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. 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? That is the point that should take your sleep, not the one which you believe to be most likely with a minor impact. For example, if you invest in stocks, it is better to consider extreme scenarios than usual perceived risk scenarios.

Instead of putting your money in medium-risk investments how do you know the risk is medium? So you do not have to worry about risk management and place yourself partially at the mercy of Black Swans. The goal is to be very exposed to the positive Black Swans and remain paranoid about the negatives. The events with the most significant impacts on your life will be unexpected, the black swans, because of our cognitive biases and our inability to predict these events.

So learning through trial and error matters a lot and our brains have a hard time accepting this. Embracing this process can help you accomplish more. Be mistaken about simple concerns, not complex ones. If the subject is future, you must always be skeptical and open-minded for positive and negative events. One way to keep your mind open to positive cases, for example, would be to increase your exposure to situations where they could happen, such as social events, dinners, and set the stage for unexpected but valuable encounters.

The book has an unusual analytical style that is personal and literary at some point, but his heterodox and unique perspective can sometimes be rigorous and accurate as well. We leave you to find out the details.

Confront facts, research on your own and expand your knowledge 2. Luck matters 3. Different natural phenomena 4. Is forecasting optional or mandatory business activity. In the 17 century, the European schoolboys were taught by their teachers that the swans are white.

The Black Swan Summary

Their theory overlapped with the fact that every swan they examined had a snowy white plumage. Without any previous preparations, Vlamingh started his exploring expedition by searching the continent for wildlife and unique ingredients.

Soon after he discovered creatures that were not familiar to him nor his crew such as kangaroos, teddy bears — koalas, Australian Dingo and would you know it a black feathered bird that looked exactly like the White Swans in Europe.

Detailed observations and investigations were made before Willem de Vlamingh realized that they were Swans just like the ones that he has seen in his homeland, so he challenged the scientists back in Europe to reformulate their beliefs and scientific facts.

If you think about a story any business story, the first thing that comes to our minds would be the challenges that an average businessman faces during his path.

Every story begins in the present or the prosperity that the businessman encounters after so many years of struggle. Afterward, the story takes a step back by reminding us of his humble and penniless beginnings.In the end, this particular Black Swan helped to establish a new beginning for all of European society.

Type 1 thinking is instinctive, fast, immediate, and based on your experience with the world. Reception[ edit ] Mathematics professor David Aldous argued that "Taleb is sensible going on prescient in his discussion of financial markets and in some of his general philosophical thought, but tends toward irrelevance or ridiculous exaggeration otherwise.

Almost everything in social life is produced by rare but consequential shocks and jumps; all the while almost everything studied about social life focuses on the 'normal,' particularly with 'bell curve' methods of inference that tell you close to nothing. Using the past as your guide, there is no reason to expect that tomorrow should be any different. In chapter nine, Taleb outlines the multiple topics he previously has described and connects them as a single basic idea.

The author calls this failure a narrative fallacy.

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