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The Black Swan: The Impact of the Highly Improbable (Paperback)

[book review]

I'm surprised that there are so many negative reviews for this book, I was expecting more positive reviews but they appear to be fairly evenly distributed over the ratings. This main idea in this book is the Black Swan which (as other reviewers point out) are unpredictable but high impact events. There are other related topics which are used mainly as support but are relevant as they illustrate why prediction in general is difficult and why it is difficult to prepare for such events. There are several nods to psychology (mainly Kahneman) as well as to philosophy (often to Russell but others too). There is an enjoyable narrative here which is peppered with many contentious comments that will enrage some and make others scratch their head. It isn't always obvious how much we should take literally and how much we need to simply take the meaning and then think on it ourselves. It is hard to distil difficult topics into a concise text: there will always be something overlooked.

What we have is an interesting narrative (ooh the irony) that depicts the failure of poor/ naive risk management over the last three decades of his professional career. He lambastes the use of Gaussian statistics and points out where such statistics are appropriate (games) and where they are not (real life). If you consider his position of living, nay... surviving, in an industry for 30 years where your view is that of an outsider then I think you should be able to understand the aggressive tone. Given this context you will see why the tone is not aggressive for the sake of being aggressive, unfortunately people who don't understand how far apart Taleb's thinking is from the conventional ways then the style and (perhaps) content will be unfairly dismissed as puerile. In an interview the author states that he has fought against the prevailing value-at-risk models. The structure of the book is fairly light as it wanders from topic to topic, it would be unfair to say incoherent as that isn't the case but rather the book is not highly structured like a textbook but rather like a novel.

There is little offered in the way of protecting oneself against a Black Swan, nor is there a strong explanation of how society can prevent/ resist Black Swans. However, I don't think that is quite the point of the book, the first step is learn how to understand what a Black Swan is then learn how to identify potential sources (hence become Grey Swans). Much of the book is epistemological (concerned with knowledge) rather than practical, it isn't a how-to guide for living.

I also think people that are unfamiliar with the financial lingo or economics terms may struggle to understand the author's use of particular anecdotes and references. Also his political or philosophical preferences won't be to everyone's taste which is another source of disagreement, Taleb states his preference for a society that allows failure, and one where a free market exists. Naturally, there is a lot of criticism of poor prediction at the within government and corporations, the author believes that such errors are compounded by over centralization in the related power structures where a small error can produce a large crack (a fragile entity: this doubtlessly upsets some readers who are keen central planners).

Readers who are not from a maths/ physics background may struggle with the copious use of mathematical terms. The book really isn't dense nor abstruse; I found it highly readable and at no point was I stuck but I'm coming from a maths/physics background, and I can see this being a problem for others. The concept of standard deviation is referred to but only loosely explained. A keen reader while search the internet to figure it out while the lazy or disgruntled (perhaps ideologically opposed to the book's content) will come to Amazon and write a one star review. The author could have made a bigger effort to explain these terms such that the book can have a wider readership.