Overrated: Nassim Nicholas Taleb | Standpoint

27/03/2015

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Overrated: Nassim Nicholas Taleb

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JAMIE WHYTE

January/February 2011
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You cannot know the chance of very unlikely events by observing how often they
occur. They do not occur often enough for that. But you can still sometimes
know their probability. For example, we know that the probability of 100
consecutive coin tosses landing heads is 1/2100, not because we have seen
this happen, but because we know that the probability of each toss landing
heads is 1/2.

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For many other improbable events, however, the matter is not so simple. Not
only are they too rare to observe their long-run frequency, but we do not
understand their underlying causes well enough. For example, because the
causes of weather and of economic events are so varied and complicated in
their interactions, meteorology and economics remain inexact sciences,
unable to tell us the chances of unlikely, extreme events.
And because we humans are inclined to certain errors of reasoning, such as
seeing patterns where there are none and underestimating the chance of
things we have not previously seen, we get shafted by unlikely events more
often than is strictly necessary.
This is a short version of The Black Swan, the 2007 best-seller by Nassim
Nicholas Taleb, a (now) 50-year-old Lebanese former investment banker. His
Fooled by Randomness, published in 2001, explored similar themes. But it did
not enjoy the same success because its timing was not as good: Black Swan
was published during a financial crisis that Taleb had predicted.
He was quickly propelled to stardom. Bryan Appleyard described him in the
Sunday Times as "the hottest thinker in the world". He has since added a post
at Oxford University's Said Business School to his position at the Polytechnic
Institute of New York University, and he is in great demand on the speaking
circuit.
It is ironic that Taleb should be credited with genius on account of the
coincidence of Black Swan's publication with a financial crisis he had
predicted. It displays exactly the kind of erroneous thinking that he complains
of. If the financial crisis were an unlikely "black swan" event of the kind that
Taleb discusses, then he could not have known its probability.
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Overrated: Nassim Nicholas Taleb | Standpoint

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Taleb's central hypothesis in Black Swan is right. But it is simple and worth
only a chapter rather than an entire book. Taleb inflates its significance with an
absurdly combative and grandiose writing style. It is Taleb versus the corrupt
fools of the financial establishment; Taleb versus the false mathematical
rigour of the academy; Taleb returning us to the wisdom of the ages.
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Tags: Overrated David Cameron

Philosophy The Bed of Procrustes

Fooled by Randomness
The Black Sw an

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Anonymous

November 9th,
2014
10:11 PM

Daryll

April 23rd, 2014

4:04 PM

Marty Brandon

February 23rd,
2014
3:02 PM
Levi

January 26th,
2014
11:01 PM
Pallab Basu

October 31st,
2013
6:10 AM

jc

October 25th,
2013
12:10 PM

"If the financial crisis w ere an unlikely "black

sw an" event of the kind that Taleb discusses,
then he could not have know n its probability."
W hat? You can still calculate the probability, a
black sw an is a multi-standard deviation event.
Author is obviously not mathematically inclined,
not understands statistics very w ell.
Idiotic. Even if you have tossed the coin 100
times the probability of the next throw is 1/2
even if the previous 100 w ere all heads, and
that's not accounting for dropping the coin
dow n a drain or suffering a sudden aneurism
as a result of living in your left brain instead of
the messy dynamic real w orld. - Doing some
maths about w hat's likely to happen next does
not tell you w hat w ill happen next. The more
w e build upon blocks of false certainty based
on conceptual models the more a collapse is
inevitable - the point of the book to some
degree is that the collapse w s not a black
sw an - it w as entirely predictable because w e
live in a w orld full of people like you lot conditioned by Acadaemia you make the w orld
static, certain and simple to fit into your
reductive categories of comple equivalence. I
think you missed the point spectacularly.
I'd just finished the first tw o chapters of the
The Black Sw an, and had a grow ing feeling of
nauseating postmodernism. Thanks to this
article and the video link posted by Fabian, I
believe I can skip the rest of the book. Thank
you both for saving me a bit of time.
Uh, w hy is Taleb's distinction betw een risk and
uncertainty being attributed to him? University
of Chicago economist Frank Knight w orked all
of this out, and quite famously, back in the
1920's.
W hyte defending science is like pope defending
Islam. W hyte does not have a clue on how
scientific method w orks and w hy Taleb is
against economics. It is very common for
scientists to fall into "action bias", w here
people overdo things to think they are
improving situation, w hen in reality nothing is
chaning. How ever w ith all its error and biases,
modern science is a self-correcting data-driven
mechine, w hich improves over time. An
economists can hardly say the same for his
subject.
I have read both the book by Taleb and some
of the popular w ritings of Jamie W hyte. I am
connsiderably more impressed by Taleb than
W hyte, though can undertsand w hy some
might find Taleb's style not to their tastes. He
uses w ide-ranging analogies in a popular book,
some of w hich can be misconstrued or are
obscure.
How ever,Taleb's
argument
is
considerably more subtle than Jamie W hyte
seems to appreciate. It is partly spelled out in
The Black Sw an but more explicit in Fooled by
Randomness. The idea of a 'black sw an' is an
event w hich comes out of now here and proves
that our previous model of the w orld w as false.
That their should be such things is a severe
challenge to the methods used in financial
markets, w here practitioners use statistical
models of financial behaviour and estimate the
parameters based on past observations. This
is a perfectly valid approach, argues Taleb, if
w hatever is being nmodelled follow s a process
that can be approximated to the Normal
distribution. A great many phenomena can but
Taleb argues, extremely convincingly that
others cannot. Crucially, it is not possible to
determine the parameters of the distribution
how ever many observations one takes as one
single 'black sw an' changes everything. Taleb

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then explains w hy such distributions exist, the

mathematics of them and how they relate to
the real w orld. It seems clear to me that Jamie
W hyte has no appreciation of this-hence his
review . As an aside, I have read some of
W hytes popular articles w here he touts the
merits of a philosophical approach to real w orld
problems. I w as impressed as they seemed an
excellent parody of eroneous reasoning.After a
w hile, it daw ned on me that,far from being
w orks of comedy, W hyte w as for real. Review s
are of course subjective, but I feel Taleb is
more w orthy of detaile reading.
Mark Tsomondo

April 24th, 2013

10:04 PM

Fabian

November 26th,
2012
4:11 PM
nrt1

November 25th,
2012
11:11 AM
Anonymous

November 24th,
2012
7:11 PM

Taleb is courageously onto "something" that

eludes, and perhaps now , offends, guru
prognostications and prescriptions. He w arns
us not to be suckers for naive economic
rationalizations, including new high-sounding
sophistry. In my view , Taleb is a rare thoughtdemocrat, a naked philosopher, w hen it comes
to the appreciation of diverse and often
"unpublishable" native know ledge systems,
including Brooklyn Fat Tony's w isdom. Not
many Geologists that I have met are
comfortable w ith the idea that over 80% of
w hat became the largest gold mines in
Zimbabw e w ere founded on sites of precolonial mining by "native" people, w ho, unenamoured by geological theory, w ent about
the practice of discovering and mining gold for
trade to fend off hunger. Taleb w ould
acknow ledge this pay-off of exchanging gold
for food.
I w holeheartedly agree w ith the author's
sentiment. Just listen to Taleb's 5 minute
stream of bullshit at the said conference in
M e x i c o : http://w w w .youtube.com/w atch?
v=H11t5zBd3fU - it is painful...
For Jamie W hyte to take someone to task for
vanity really is Black Kettle rather than Black
Sw an
Taleb does not argue that the financial crisis
w as a black sw an. He maintains it w as entirely
predictable (just a matter of w hen, not if). But
of course, he's arrogant. Let's count a
management consultant to provide insight;
that's surely a genius move.
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