What do 9/11, the stock market crash of 2008, and a statistics class all have in common? “The Black Swan: The Impact of the Highly Improbable” contains the answer. Originally published in 2007 and reprinted in 2010, it is an argued thesis by self-declared philosopher Nicholas Taleb. Taleb, who made his money applying quantitative models on Wall Street, has dedicated his life to understanding the role of the unpredictable. He argues that “black swans,” or events which cannot be predicted, have a definitive impact on society. He asserts that they can be either beneficial or harmful, depending on how society prepares itself.
Fit for an NHV lecture or human systems discussion, the book demonstrates that predictions made by induction are generally wrong. Taleb makes specific reference to the failures of the Gaussian bell curve. As an example, the book discusses the Wall Street crash of 2008. Taleb argues that the crisis was in part the result of bank and hedge funds using risk models based on the bell curve. These models underestimated the likelihood of catastrophic market losses, which in turn made banks feel comfortable with large amounts of leveraging and unconventional financial engineering. The book provides further examples of “black swans” with an assessment of how to maximize the potential benefit of these unpredictable events.
Taleb writes with a strong argumentative voice, but includes an entertaining mixture of stories and anecdotes to offset the otherwise heavy philosophic analysis. The stories are usually accompanied by a graph or equation, as are the higher-level analyses. This book challenges the reader to change they way he or she thinks, as it uses a formal argumentative approach. Though not a light read, the arguments are interesting and the pages turn quickly.
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