The Black Swan

Learning to Learn Another related human impediment comes from excessive focus on what we do know: we tend to learn the precise, not the general.

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Many keep reminding me that it is important for us to be practical and take tangible steps rather than to “theorize” about knowledge.

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They were too practical and exceedingly focused for their own safety.

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We do not spontaneously learn that we don’t learn that we don’t learn

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The problem lies in the structure of our minds: we don’t learn rules, just facts, and only facts. Metarules (such as the rule that we have a tendency to not learn rules) we don’t seem to be good at getting. We scorn the abstract; we scorn it with passion.

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Our minds do not seem made to think and introspect; if they were, things would be easier for us today, but then we would not be here today and I would not have been here to talk about it—my counterfactual, introspective, and hard-thinking ancestor would have been eaten by a lion while his nonthinking but faster-reacting cousin would have run for cover.

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matter. Evidence shows that we do much less thinking than we believe we do—except, of course, when we think about it.

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He will retire depressed, with a great sense of failure. He will die with the impression of having done nothing useful. I wish I could go attend his funeral,

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See how the silent hero is rewarded: even his own hormonal system will conspire to offer no reward.

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Who gets rewarded, the central banker who avoids a recession or the one who comes to “correct” his predecessors’ faults and happens to be there during some economic recovery?

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Who is more valuable, the politician who avoids a war or the one who starts a new one (and is lucky enough to win)?

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It is the same logic reversal we saw earlier with the value of what we don’t

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know; everybody knows that you need more prevention than treatment, but few reward acts of prevention. We glorify those who left their names in history books at the expense of those contributors about whom our books are silent. We humans are not just a superficial race (this may be curable to some extent); we are a very unfair one.

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If you want to get an idea of a friend’s temperament, ethics, and personal elegance, you need to look at him under the tests of severe circumstances, not under the regular rosy glow of daily life.

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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. Why? Because the bell curve ignores large deviations, cannot handle them, yet makes us confident that we have tamed uncertainty. Its nickname in this book is GIF, Great Intellectual Fraud.

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Platonicity is what makes us think that we understand more than we actually do.

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TOO DULL TO WRITE ABOUT

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This is an essay expressing a primary idea; it is neither the recycling nor repackaging of other people’s thoughts. An essay is an impulsive meditation, not science reporting. I apologize if I skip a few obvious topics in this book out of the conviction that what is too dull for me to write about might be too dull for the reader to read. (Also, to avoid dullness may help to filter out the nonessential.)

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against many of our habits of thought, that our world is dominated by the extreme, the unknown, and the very improbable (improbable according our current knowledge)—and all the while we spend our time engaged in small talk, focusing on the known, and the repeated.

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You need a story to displace a story.

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Ideas come and go, stories stay.

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against many of our habits of thought, that our world is dominated by the extreme, the unknown, and the very improbable (improbable according to our current knowledge)—and all the while we spend our time engaged in small talk, focusing on the known, and the repeated.

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This implies the need to use the extreme event as a starting point and not treat it as an exception to be pushed under the rug.

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Note that the Black Swan comes from our misunderstanding of the likelihood of surprises, those unread books, because we take what we know a little too seriously.

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Eco belongs to that small class of scholars who are encyclopedic, insightful, and nondull. 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

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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.

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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.

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Indeed, the more you know, the larger the rows of unread books. Let us call this collection of unread books an antilibrary.

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People don’t walk around with anti-résumés telling you what they have not studied or experienced (it’s the job of their competitors to do that), but it would be nice if they did.

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Just as we need to stand library logic on its head, we will work on standing knowledge itself on its head. Note that the Black Swan comes from our misunderstanding of the likelihood of surprises, those unread books, because we take what we know a little too seriously.

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History is opaque. You see what comes out, not the script that produces events,

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the generator of history.

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the illusion of understanding, or how everyone thinks he knows what is going on in a world that is more complicated (or random) than they realize;

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the retrospective distortion, or how we can assess matters only after the fact, as if they were in a rearview mirror (history

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seems clearer and more organized in history books than in empirical reality); and the overvaluation of factual information and the handicap of authoritative and learned people, particularly when they create categories—when they “Platonify.”

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History Does Not Crawl, It Jumps

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In his essay “What We See and What We Don’t See,”

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Bastiat offered the following idea: we can see what governments do, and therefore sing their praises—but we do not see the alternative. But there is an alternative; it is less obvious and remains unseen.

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In fact, they engage in what could be labeled as phony “philanthropy,” the activity of helping people in a visible and sensational way without taking into account the unseen cemetery of invisible consequences.

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This idea is often erroneously called Pascal’s wager, after the philosopher and (thinking) mathematician Blaise Pascal. He presented it something like this: I do not know whether God exists, but I know that I have nothing to gain from being an atheist if he does not exist, whereas I have plenty to lose if he does. Hence, this justifies my belief in God.

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More than a decade before Rosen, the sociologist of science Robert K. Merton presented his idea of the Matthew effect, by which people take from the poor to give to the

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more severe. Looking into the outcome of the war, with all my relatives, friends, and property exposed to it, I face true limits of knowledge. Can someone explain to me why I should care about subatomic particles that, anyway, converge to a Gaussian? People can’t predict how long they will be happy with recently acquired objects, how long their marriages will last, how their new jobs will turn out, yet it’s subatomic particles that they cite as “limits of

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Positive advice is usually the province of the charlatan.

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Indeed, I spent twelve years trying to explain that in many instances it was better—and wiser—to have no models than to have the mathematical acrobatics we had.

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The very term iatrogenics, i.e., the study of the harm caused by the healer, is not widespread—I have never seen it used outside medicine.

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The most obvious way to exit the Fourth Quadrant is by “truncating,” cutting certain exposures by purchasing insurance, when available, putting oneself in the “barbell” situation described in Chapter

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Things that have worked for a long time are preferable—they are more likely to have reached their ergodic states. At the worst, we don’t know how long they’ll last.

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Redundancy (in terms of having savings and cash under the mattress) is the opposite of debt.

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Psychologists tell us that getting rich does not bring happiness—if you spend your savings. But if you hide them under the mattress, you are less vulnerable to a Black Swan.

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Overspecialization also is not a great idea. Consider what can happen to you if your job disappears completely. Someone who is a Wall Street analyst (of the forecasting kind) moonlighting as a belly dancer will do a lot better in a financial crisis than someone who is just an analyst.

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Psychologists distinguish between acts of commission (what we do) and acts of omission. Although these are economically equivalent for the bottom line (a dollar not lost is a dollar earned), they are not treated equally in our minds.

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However, as I said, recommendations of the style “Do not do” are more robust empirically. How do you live long? By avoiding death. Yet people do not realize that success consists mainly in avoiding losses, not in trying to derive profits.

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What is fragile should break early, while it’s still small.

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The most obvious way to exit the Fourth Quadrant is by “truncating,” cutting certain exposures by purchasing insurance, when available, putting oneself in the “barbell” situation described in Chapter 13

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Things that have worked for a long time are preferable—they are more likely to have reached their ergodic states. At the worst, we don’t know how long they’ll last.*

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Psychologists tell us that getting rich does not bring happiness—if you spend your savings. But if you hide it under the mattress, you are less vulnerable to a Black Swan.

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Seneca is the one who (with some help from Cicero) taught Montaigne that to philosophize is to learn how to die.

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Seneca is the one who taught Nietzsche the amor fati, “love fate,” which prompted Nietzsche to just shrug and ignore adversity, mistreatment by his critics, and his disease, to the point of being bored by them.

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For Seneca, Stoicism is about dealing with loss, and finding ways to overcome our loss aversion—how to become less dependent on what you have.

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of Danny Kahneman and his colleagues: if I gave you a nice house and a Lamborghini, put a million dollars in your bank account, and provided you with a social network, then, a few months later, took everything away, you would be much worse off than if nothing had happened in the first place.

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And, just as it is harder to have good qualities when one is rich than when one is poor, it is harder to be a Stoic when one is wealthy, powerful, and respected than when one is destitute, miserable, and

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In Seneca’s Epistle IX, Stilbo’s country was captured by Demetrius, called the Sacker of Cities. Stilbo’s children and his wife were killed. Stilbo was asked what his losses were. Nihil perditi, I have lost nothing, he answered. Omnia mea mecum sunt!

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