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| The Black Swan: The Impact of the Highly Improbable | 
 enlarge | Author: Nassim Nicholas Taleb
Publisher: Random House
Category: Book
List Price: $27.00
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Avg. Customer Rating:  (361 reviews)
Sales Rank: 130
Languages: English (Original Language), English (Unknown), English (Published)
Media: Hardcover
Edition: 1
Number Of Items: 1
Pages: 400
Shipping Weight (lbs): 1.5
Dimensions (in): 9.4 x 6.5 x 1.4
ISBN: 1400063515
Dewey Decimal Number: 003.54
EAN: 9781400063512
ASIN: 1400063515
Publication Date: April 17, 2007
Release Date: April 17, 2007
Availability: Usually ships in 1-2 business days
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| Customer Reviews:
 Brilliant and Refreshing September 9, 2008
1 out of 2 found this review helpful
This book reminds us that skepticism and empiricism are virtues that we ignore at great peril. It paints broad strokes so don't expect excessive details since it's meant as general advice and as a warning. It's rich in sarcasm and humor, so if you like your books dry and mirthless you might not like it's style. It's content however, is concise and effective in making its point that something is wrong (decision making madness on a colossal scale) and tips to avoid making those mistakes in your daily life. I think that people who like to make up their own minds (or are often called upon to make them for others) will find this book invaluable for it's timeliness and clarity. Personally, I also loved the fact he has Eco and Mandelbrot in this book.
Very clever book September 9, 2008
1 out of 2 found this review helpful
The book is full of ideas and observations of reality, very clever ones, I enjoy reading it. More when I finish it.
 good ideas but unfair criticism too September 8, 2008
28 out of 31 found this review helpful
As a mathematical statistician I am a little taken aback by Taleb's lack of scholarship in understanding and appreciating what professional statisticians do. He puts down economists, Nobel laureates, philosopher and statisticians among others. There is a degree of unseemly arrogance on his part and I am sure that some of the other 300 or so reviews on amazon take him to task on that.
It is a shame too because for many of us, it spoils the really good main point of the book which is that Black Swans exist, make predictions difficult if not impossible but can be handle in the stock trading business at least by using his barbell approach.
I found the first 1/3 rd of the book very philosophical extremely redundant yet provocative. The rest of the book was much more interesting to me particular the last few chapter which had the most technical discussion and many points to agree with and also to quibble with.
A Black Swan is an extreme event that is very rare but so significant that it creates instability in averages and can ruin predictions and be either castastrophic (the negative Black Swan) or bring great fortune (the positive Black Swan). These Black Swans are real and Taleb cites many examples. Taleb is also right with his point that some economists are blind to the Black Swan or at least the unpredictability of them. I have often seen major declines in the stock market explained after the fact with seemingly logical but very suspicious and dubious rationalizations. Taleb deserves credit for recognizing this and realizing that in the world he calls extremistan where the Black Swans exist they must be accounted for but no should attempt the futile business of predicting them!
He also recognizes that there is another world where the Gaussian distribution and other light-tailed parametric distributions prevail and he calls this the world of mediocrastan. Here, the usual parametric statistics is useful but in Taleb's view it is not very common in practice to be in a mediocrastan world. This is the world of parametric statistics and is the place where most elementary courses in statistics reside. But here is also where I think Taleb makes a big mistake. He assume that this is the world where all statisticians and econometricians live and play and so these teachings are irrelevant to the practical world. Well, in many of the areas he discusses the parametric statistical models do not work. But probabilist, statisticians and econometricians have realized this for at least the past 60 years. In the 1930s and 1940s the field of nonparametric statistics developed through the work of Pitman, Mann and Whitney and Wilcoxon to name a few. Also the theory of extreme value distributions goes back to Fisher and Tippett in 1929 and was rigorously developed by Gnedenko in the 1940s. Nonparametric statistics deals with general distributions that do not have a simple parametric form and includes the heavy-tailed distributions that Taleb cares about. Also the asymptotic theory of extreme values that Fisher and Tippett, Gumbel and Gnedenko discovered showed that the extreme events had systematic behavior based on the three extreme-value types of distributions. So the extremes can be treated using asymptotic statistical theory just as well as the averages can be characterized asymptotically through the central limit theorem and the stable laws (in the case of a heavy-tailed population distribution). So in some ways Taleb is off and out of gas because he doesn't address or perhaps is even ignorant of this theory.
In the area of finance as well as in other areas, time series models have been useful in developing forecasts. In the world of mediocrastan the Box-Jenkins ARIMA models are very useful for problems in forecast and stochastic control. This was well established with the very popular book by Box and Jenkins that was first published in 1970. However financial data often falls into the world of extremistan and the stationary distributions when they exist are non-Gaussian and heavy-tailed. It is in this context that ARIMA models fail but the statisticians and econometricians have developed other models including the GARCH models which handle this type of data and allow for better predictions. Taleb mentions the GARCH models but only to make fun of them in a very superficial way that does not discuss any of the mathematics associated with these models. Again, I am not sure if Taleb is ignorant about this body of literature or just dismisses it because he see other models that cannot be used to predict as more appropriate.
Taleb is enamored with Mandelbrot and his theory of fractal geometry and the apparent natural properties of fractals. Well at least fractals look like coastlines on the world globe as well as other common items in our natural environment. But is this enough to say that fractals are the only models relevant to extremistan? I am not yet convinced.
This August I went to the Joint Statistical Meetings in Denver. There was a session on the Black Swan and to his credit Taleb was brave enough to accept the invitation of the statistical community to come to discuss the issues in his book. Unfortunately, I was not able to attend that session. But it got mew curious enough to want to read the book and see what Taleb's premise was all about. I do not yet know much about what came out of that session. I hope that at least Mr. Taleb came out of it with a better appreciation of the intelligence of statisticians and the more sophisticated models that he appears to be ignorant of based on the lack of discussion of them in his book.
Another branch of nonparametric statistics developed in the 1970s that is now called resampling methods. One of the more successful of these methods is the bootstrap. I have done some research into bootstrap methods as well as having authored a text on the topic. I believe that the bootstrap approach to time series analysis is another way that these time series with non-Gaussian innovation distributions or the stationary distributions of the time series model can be handled. I am not yet convinced that in the world of extremistan the hope of some form of forecasting must be abandoned as is Taleb's thesis.
Fantastic perspectives that increase your own horizons September 5, 2008
1 out of 3 found this review helpful
Loved it. Great thinking, fantastic perspectives..like this gem referring to Umberto Eco's library "He is the owner of a large personal library (containing thirty thousand books), and separates visitors into two categories: those who react with "Wow! Signore professore dottore Eco, what a library you have! How many of these books have you read?" and the others -- a very small minority -- who get the point that a private library is not an ego-boosting appendage but a research tool. Read books are far less valuable than unread ones. The library should contain as much of what you do not know as your financial means, mortgage rates, and the currently tight real-estate market will allow you to put there. You will accumulate more knowledge and more books as you grow older, and the growing number of unread books on the shelves will look at you menacingly. Indeed, the more you know, the larger the rows of unread books."..
And that is just one example. See the wealth of other reviews here for more. If you even think you might be interested, don't hesitate!
The author seems to fall into ludic fallacy(page 182) which he wants to dispel September 1, 2008
2 out of 6 found this review helpful
page 14: I still do not understand why the author thinks that an educated person is supposed to guess better than a layman about the outcome of a war. In fact any person is as much expert in that endeavor as any other.
page 21: I still can not see the relationship between war and finance in the context.
for a philosopher examining problems in induction the boundary between true/false is not well drawn.
page 44: I wonder if he is naive. What does he expect in finance business, all reasonable people?. It is finances, it is almost expected that some people take unreasonable risks(with diabolical intentions sometimes) out of greed or out of wishful thinking. These factors are often excluded from his analysis.
I guess he also confuses the word "actuarial science" with "science". He frequently uses the word "science" for "finance" that has no roots in any of pure sciences, nor there are any independent mechanisms connecting the past and present.
From a person guarding against certainty it is ironical to see evolutionary psychology in use on page 53.
page 56: While talking about negative empiricism Taleb says "If I see someone kill I can be practically certain that he is a criminal". No, by no definition of "criminal/crime", killing necessarily implies crime (e.g. self-defense), all the while ignoring the gender bias. I do not want to be a killjoy here, but when accusing people of faulty logic in one paragraph, one can not afford to make an incorrect implication right in the next paragraph.
It is weird for a self-declared skeptical empiricist to resort to psychology while attacking mathematicians.
The references are not cited in the text, though listed in bibliography, which means its not clarified which piece is taken from which reference.
When the author generally ridiculed "fitting equations to something happened in the past" he swept all of cosmology into irrelevance with one stroke of pen.
page 87: We are social animals; hell is other people. // Nice quote
page 97: Got it wrong about hippo campus. This is where short term memory is translated into long term one.
He wants to attack actuarial mathematicians most of the time but ends up generalizing to all mathematicians. As a self-declared skeptical empiricist he is skeptical about truth in mathematics, what he does not understand is that even pure mathematics has engineering applications (e.g. control of hard drive motor). Nature does, to some extent, follow mathematics. This shows lack of depth in analysis.
page 107: Taleb criticizes "hardened by the gulag": The report is probably talking about psychological hardening which is supported by a neurobiological process described in "In search of Memory" by Eric Kandel. The author assumes it to be physiological hardening and refutes it with the rat example. In the next paragraph he calls himself philosopher.
page 129: In what Taleb describes "scientific mentality that is arrogantly called Enlightenment" agrees with Samuel Huntington's claims in The Clash of Civilizations that "the orthodox people do not share with the West the principles of Enlightenment".
page 129: He shouts "Life stands outside Platonic fold". No. pretty much all of engineering and many of pure sciences lie within and are verifiable and/or testable at the same time. These fields pretty much changed the society/culture for almost a century now.
page 154: Towards the end of the page - the author's question has geography in it and it is not surprising that the answers had that too, yet he complains about it.
page 182: He wanted to dispel Ludic fallacy and here is one instance he falls right into it. Talking about left and right handedness of people he brings Plato into picture, ridicules him and then says that the left and right handedness of molecules (stereo isomerism) matters considerably in this. There is no known evidence that stereo isomerism plays a role in this and he does not present any.
What he fails to realize is that for people money is not the most important aspect of life. It is important but only after family and relationships, so even if his analysis is right(I think it is) his calls may go unheeded.
He also does not realize that people, whatever profession they are in are partly there due to financial security and not always to do their jobs perfectly. If the system is staying afloat with Guassian approach they would not need to change it. If they are shown tangible benefits with some results of the fractal analysis they may listen to the author. After all, at least some are after money.
chapter 18: He complains why philosophers are not questioning financial experts when they invest their money. A philosopher's job is not about figuring out details of finance, it is about figuring out details in philosophy which may or may not interfere with finance. A philosopher need not necessarily act upon his/her own arguments.
page 296: If what the author says about uncertainty is assumed to be truth about uncertainty(I do), even then in the authors own words towards the end of book, people may not necessarily heed his advice, especially as author says he put lots of things like culture, before truth, let alone acting on the truth.
As the author puts earlier, the Black Swan helps in getting rid of a big player and benefiting masses; so why fight (even negative) Black Swan in the first place, (for nationalists) as long the money stays within the country.
The author really does not make it clear early in the book the boundary between what he is attacking and what he is defending. Since the author mentions Richard Dawkins' book The Blind Watchmaker, he can take a cue from Dawkins' books about defining the boundary strictly and at the beginning so that the reader stays focused during the reading. Only after reading half the book was the boundary clear to me.
He claims himself to be humble at times but there are times where he delivers unreasonable and unfair criticism, sometimes just jumping to conclusions, like the on page 107.
By generalizing his attacks on Platonic ideas including mathematics, Taleb ignores much of physics. Mathematics still is useful in physics, the most rigorous science.
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