1.

We are very good at predicting the future, except for the surprises – which tend
to be all that matter!
2. The biggest risk is always what no one sees coming, because if no one sees it coming,
no one’s prepared for it; and if no one’s prepared for it, its damage will be amplified
when it arrives.
3. Risk is what’s left over after you think you’ve thought of everything. Risk is
what you don't see coming.

4. Look at the big news stories that move the needle—COVID-19, 9/11, Pearl Harbor,
the Great Depression. Their common trait isn’t necessarily that they were big; it’s that
they were surprises, on virtually no one’s radar until they arrived.
5. The Economist—a magazine I admire—publishes a forecast of the year ahead
each January. Its January 2020 issue does not mention a single word about
COVID-19. Its January 2022 issue does not mention a single word about Russia
invading Ukraine. The biggest news, the biggest risks, the most consequential
events are always what you don’t see coming.
6. There is rarely more or less economic uncertainty; just changes in how ignorant
people are to potential risks. Asking what the biggest risks are is like asking what you
expect to be surprised about. If you knew what the biggest risk was you would do
something about it, and doing something about it would make it less risky. What your
imagination can’t fathom is the dangerous stuff, and its why risk can never be
mastered.
7. Daniel Kahneman says, “The idea that what you don’t see might refute everything
you believe just doesn’t occur to us."

8. It’s impossible to plan for what you can’t imagine, and the more you think you’ve
imagined everything the more shocked you’ll be when something happens that you
hadn’t considered. But two things can push you in a more helpful direction:
a. One, think of risk the way the State of California thinks of earthquakes. It
knows a major earthquake will happen. But it has no idea when, where, or of
what magnitude. Emergency crews are prepared despite no specific forecast.
Buildings are designed to withstand earthquakes that may not occur for a
century or more. Nassim Taleb says, “Invest in preparedness, not in
prediction.” That gets to the heart of it. Risk is dangerous when you think it
requires a specific forecast before you start preparing for it. It’s better to have
expectations that risk will arrive, though you don’t know when or where, than
to rely exclusively on forecasts
b. Two, realize that if you’re only preparing for the risks you can envision,
you’ll be unprepared for the risks you can’t see every single time. So, in
 personal finance, the right amount of savings is when it feels like it’s a little
too much. It should feel excessive; it should make you wince a little. Your
preparation shouldn’t make sense in a world where the biggest historical
events all would have sounded absurd before they happened.
9. People don’t want accuracy. They want certainty.
10. Its very easy to underestimate rare events in a world as large as ours. Human
beings cannot comprehend very large or very small numbers
11. One person winning the lottery twice in a span of 4 months is 1 in a trillion chance –
that is big news ! But that’s only if one person plays the lottery. Where millions play
the lottery every week, the odds of someone winning twice are actually pretty good (1
in 30)
12. With a large enough sample, any outrageous thing is apt to happen. That’s why the
world seems crazy where once in lifetime events seem to happen regularly.
13. There are about eight billion people on this planet. So if an event has a one-in-a-
million chance of occurring every day, it should happen to eight thousand people a
day, or 2.9 million times a year, and maybe a quarter of a billion times during your
lifetime
14. In any normal person’s life, miracles should occur at the rate of roughly one per
month: The proof of the law is simple. During the time that we are awake and actively
engaged in living our lives, roughly for eight hours each day, we see and hear things
happening at a rate of one per second. So the total number of events that happen to us
is about 30,000 per day, or about a million per month. If the chance of a “miracle” is
one in a million, we should therefore experience one per month, on average.
15. Think about one-hundred-year events. One-hundred-year floods, hurricanes,
earthquakes, financial crises, frauds, pandemics, political meltdowns, economic
recessions, and so on endlessly. Lots of terrible things can be called one-hundred-year
events. A one-hundred-year event doesn’t mean it happens every one hundred years.
It means there’s about a 1 percent chance of it occurring in any given year. That
seems low. But when there are hundreds of different independent one-hundred-year
events, what are the odds that one of them will occur in a given year? Pretty good.
16. Bad news gets more attention than good news because pessimism is seductive and
feels more urgent than optimism
17. We need to believe we live in a predictable, controllable world, so we turn to
authoritative-sounding people who promise to satisfy that need.”
18. The inability to forecast the past has no impact on our desire to forecast the future.
Certainty is so valuable that we’ll never give up the quest for it, and most people
couldn’t get out of bed in the morning if they were honest about how uncertain the
future is.
19. Knowing the high odds of something happening loses its meaning when that thing
happening hurts. Probability goes out the window.
20. Lehman Brothers was in great shape on September 10, 2008. Its tier 1 capital ratio—a
measure of a bank’s ability to endure loss—was 11.7 percent. That was higher than
the previous quarter. Higher than Goldman Sachs. Higher than Bank of America. It
was more capital than Lehman had in 2007, when the banking industry was about as
strong as it had ever been. Seventy-two hours later Lehman was bankrupt. The only
thing that changed during those three days was investors’ faith in the company. One
day they believed in the company and bought its debt. The next day that belief
stopped, and so did its funding. That faith is the only thing that mattered. But it was
the one thing that was hard to quantify, hard to model, hard to predict, and didn’t
compute in a traditional valuation model.
21. Surprise has 6 characteristics: Incomplete information, Uncertainty, Randomness /
Chance, Imperfect timing, lack of incentive
22. Marriage is hard. Divorce is hard. Choose your hard. Obesity is hard. Being fit is
hard. Choose your hard. Being in debt is hard. Being financially disciplined is hard.
Choose your hard. Communication is hard. Not communicating is hard. Choose your
hard. Life will never be easy. It will always be hard. But we can choose our hard. Pick
wisely